Scale is all we need
#36 | On why we need more Europe, not less
Report after report, whenever experts are asked how to make Europe competitive again, the answer is always scale. I’m not an expert, but I agree with them. Here’s why.
“The reactionary forces have capable men and leaders, trained to govern and who will fight relentlessly to maintain their supremacy. […]
They will try to play on the restoration of the nation state. This will allow them, in turn, to play on the most widespread feeling among the population, a feeling so damaged by recent events and so easily manipulated to reactionary ends: patriotism. In this way they can even hope to confuse their opponents’ minds more easily, since the only political experience to date for the popular masses has been within the national context and, therefore, it is relatively easy to channel both them and their more short-sighted leaders into the reconstruction of the states destroyed in the storm. If they succeed in this, the forces of reaction will have won. […]
Once the demarcation of the Old Continent is superseded, and all of humanity is united in one common design, it will become increasingly obvious that the European Federation is the only conceivable guarantee for peaceful cooperation in American-Asian relations.”
As contemporary as it can sound, the Ventotene Manifesto was written by Altiero Spinelli, Ernesto Rossi and Eugenio Colorni in 1941, during their period of internment for opposing the Fascist regime.
The authors of this manifesto were politicians and idealists, but also pragmatic enough to understand something fundamental about the modern world: scale is all you need.
Scale is the driving force of the modern world. Capitalism is built on it. Modern supply chains have been shaped around it. Scale is the reason behind specialization, it is what makes some economies more attractive than others and what makes some countries more powerful than others.
But why is that? Does it really need to be that way, or is it just something that we became so used to that we stopped questioning it?
That’s certainly what some people in power today believe, pushing for a Europe of the States as opposed to a unified European Federation. After a long period of equilibrium, things are breaking, and the reactionary forces have started again to fight relentlessly to maintain their supremacy. If they succeed in convincing some short-sighted leaders that a fragmented Europe is what Europeans need, the forces of reaction will have won.
This is why it is so important today to fight for a unified Europe. Because scale is all we need.
Most of what is possible today and was not possible in our fathers’ world is thanks to scale.
If we can buy smartphones for a few hundred bucks, if we can cover our roofs with solar panels, if we can drive 1000 KM in an EV, if we can ask our friendly AI model to spin up a website in minutes, if the banking system doesn’t feel like Venice in the 1500s anymore, if a startup can book a ride to the LEO as if it were an Uber drive, if we can print nanometer-sized structures on chips made of sand, it’s only thanks to scale.
There are several reasons why scale is such a magic enabler.
For one, scale enables depth. Deep capital markets move money to where it most efficiently creates value, aligning incentives between value creation and personal ambitions. Deep demand makes long-term investment viable and financially sustainable. This is why R&D spending and infrastructure buildout can exist without immediate financial payback. In this sense, scale enables scale.
For another, scale sets standards. Modern manufacturing is built on standardized components, making a global-scale supply chain possible, decreasing cost, and increasing safety. We don’t need to worry about our toaster catching fire anymore, because scale made standards and regulations necessary, and standards and regulations save lives.
But scale is not only about making things cheaper, faster, and better. Scale is a balancing tool that creates stability and peace, much like mutually assured destruction prevented nuclear apocalypse.
Scale, in fact, also creates leverage and optionality.
Leverage strengthens bargaining power in markets, procurement, and geopolitics. Big dogs will bark at you but won’t bite, because your decisions move such a mass that they can’t afford to stop with their own strength.
Optionality means that your system can choose to wait, absorb shocks, and decide when to act. Optionality is what moves the needle in negotiations, and thus is a game-changer both in business and politics.
The best way to achieve scale is through specialization, and in an interconnected world different kinds of specializations don’t need to happen in the same place. That’s how we ended up with the US being the experts in scale in financial systems and services, and China being the experts in scale in manufacturing and raw material processing, among other things.
The defining component of this kind of global scale is the world “global”, a free and interconnected world where everyone plays their own role without leveraging the fragility of the system for their own profit. That’s not the kind of world we live in anymore, and that’s why we, the Europeans, need to look for scale somewhere else. We need to find scale within our borders.
Where do we start, if not from fighting fragmentation?
How can 27 different nations with their rules, laws, capital markets, governments, armies, declining populations, and geographical constraints compete with the scale other parts of the world have achieved in each one of the above-mentioned sectors?
How can we not see that we need continental-scale capital markets for our companies to compete, that we need a continental-scale economy for R&D to make a difference, that we need continental-scale inertia to withstand the impact of punches from the big boys, that we need continental-scale momentum to push back and keep our seat at the table?
Europe cannot choose otherwise. Scale is all we need.