A decade ago, bankers were not merely the masters of Davos, but the ‘masters of the universe’. No one calls them that any more. It is a mark of how far the global economy has shifted that the market capitalisation of Goldman Sachs was this week overtaken by that of Netflix, the online entertainment company. The world’s five largest companies are now all in the field of technology and the internet: Apple, Google, Microsoft, Amazon and Facebook. Ten years ago, none of them made the top five: the masters, then, were Exxon, Walmart, China National Petroleum and the Industrial and Commercial Bank of China.
We are in a period of unparalleled innovation, where ideas rather than large amounts of capital or manpower can create (and fell) commercial giants in a very short space of time. But one other factor unites the top five high-fliers of the corporate world: they are all American. And it is not just the top five. A decade ago, there were 35 US companies and 41 European in the top hundred. Now 55 are from the US, and just 22 from Europe. The emergence of China as an economic superpower is one of the great stories of our age, but so too is the great progress of the US in the digital sphere. And America will continue to thrive this year, thanks to dramatic tax cuts passed by Congress, which show its faith in the force of innovation.
As American leaders realise, technology companies need freedom, not protection, in order to thrive. It is because of sheer innovation that the likes of Apple, Microsoft and Google have grown so large and powerful. It could have happened anywhere, so why did it happen in America? Or, more to the point, why not in Britain? Rather than worry about whether Goldman Sachs might move to Frankfurt, why don’t our leaders think about how the next Netflix can be created here?
The EU’s main reaction to the development of search-engine technology has been one of panic in the face of American innovation: our continent has produced Spotify, but not much else. Brussels has imposed on Google the ‘right to be forgotten’ — whereby rogues and criminals have been able to hide their past lives from view. It’s hard to issue government edicts to catch up with tech. Long after the world was happily surfing the web, the French government persisted with Minitel — a primitive, state-run IT system which, by the time it was finally put to rest in 2012, was as obsolete as a Betamax video. Minitel was once technologically impressive, but the internet fared better because innovation was open to all, rather than only engineers working for a state-run company.
We can see the same approach with GM food, Uber, fracking and many other things: pioneers are seen as threats, then almost legislated to death. This is an issue our own government needs to focus on as it continues to hone its strategy on Brexit. A global-minded Brexit means forging strong bonds with our European partners: while Boris Johnson’s proposed bridge is impractical, the sentiment behind it is admirable. We need to be reaching out, not turning in. We need to be open: to trade, to immigrants, to those discriminated against under current EU rules. Britain should encourage innovation at home.
There is little point in leaving the EU, with all the upheaval that entails, if we are not prepared to forge a more open country and take advantage of the freedom we will gain — freedom from the EU’s protectionist instincts on trade with the outside world and freedom from the suffocating, vested-interest nature of EU rule-making. As Michael Gove has said, we are in danger of creating a VHS economy. We need flexibility with the ability to diverge.
It is inevitable that our exporters will have to conform to EU standards when exporting to EU countries, yet, with the exception of Gove’s remarks, we hear little else from the government on how the culture of regulation might change after Brexit. Nor, in recent weeks, have we heard much from the international trade secretary on how we might seize the opportunity to open up our economy to the rest of the world: to China, to India and the other fast-growing economies with which the EU has failed to cut trade deals. Disturbingly, we have heard suggestions that the Prime Minister might even be considering staying in a customs union with the EU — a move which would stop us doing our own comprehensive trade deals and so eliminate one of the chief advantages of leaving.
It would be depressing if Britain were to lose heart and be sucked into the protectionism advocated by Donald Trump and the EU. As the US takes even slight backward steps away from open markets, an opportunity arises for Britain: to become the un-ashamed international champion of free trade.
There are some who prefer a Little England or a fortress Europe, who are fearful at the idea of an open economy, who seem to think that low regulation means no regulation. It’s an understandable instinct, but it’s the wrong one. It would be tragic if, when we rewrite our own rules and regulations, we end up with a set fit only for the last century. Of course we need rules, but we need smart ones which are allowed to change as technology changes — and as the country changes with it.