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David Bach will be appointed dean of IMD Business School in Switzerland in September, where he is professor of strategy and political economy at Nestlé.
It is common knowledge that Europe is an economic powerhouse past its prime, overshadowed by the steady progress of the United States and the meteoric rise of China. Critics cite Europe’s shrinking share of global GDP, overregulation and weak investment as evidence of a “competitiveness crisis”. But this story obscures a deeper truth. That is, Europe is full of untapped potential that, if fully exploited, could dramatically change the global economic landscape.
Europe’s strengths in competitiveness, talent, innovation and sustainability, if integrated into a unified capital market, could fundamentally change its economic trajectory.
While many focus on the challenges of Europe’s economic giants, it is smaller countries such as Denmark, Finland, the Netherlands and Switzerland that are showing promise. According to IMD’s Global Competitiveness Rankings, these countries consistently outperform their global peers, revealing the power of their strong commitment to developing talent and human capital through cross-border mobility and education. .
European business school rankings
This is an earlier version of the ranking report published on Monday, December 2nd
Only 1 percent of American students and 2 percent of Chinese students study abroad, compared to 15 percent of European students. A focus on global learning fosters a more interconnected workforce that embodies the spirit of integration essential to future success. Indeed, the number of EU nationals living in other Member States has increased by 60% over the past 20 years, a testament to Europe’s commitment to developing true global citizens.
Its impact is evident at the highest levels of business. Half of the CEOs of Europe’s 20 largest companies are not nationals of the country where they are headquartered. This compares to 20% in the US and zero in China. This diverse leadership puts Europe in a unique position to navigate today’s geopolitical complexities.
Europe’s leadership in the energy transition also provides a blueprint for prosperity. The country is a world leader in generating about 40% of its electricity from renewable sources, ahead of China and the United States, which generate 30% and 21% respectively. Public support for green investment remains strong and partisan divisions are low, reducing the risk of major policy changes after the election. If anything, Europe’s efforts to become the first net-zero continent are accelerating as a result of Russia’s invasion of Ukraine.
Artificial intelligence is another area where Europe can claim influence. The idea that Europe will regulate while the US and China innovate is a common criticism, but Europe’s cautious approach, exemplified by the EU AI Act, could set global standards. Data privacy regulations provide a precedent. US tech companies blame Europe’s strict rules, but comprehensive data privacy standards now protect three-quarters of the world’s population. And they are not hindering European business. Can Europe do the same in establishing responsible AI practices globally?
History shows that Europe has been on the decline, but has risen again, often when least expected. This was evident with the implementation of the Single European Act in 1986, which launched the single market in response to increased competition from the United States and Japan. Similarly, the creation of the euro and the region’s recovery from the global financial crisis demonstrate a resilient spirit. Today, Europe stands at a new tipping point as geopolitical tensions shift and the United States becomes increasingly unpredictable.
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So how can Europe seize this moment? Leverage competitive small-scale economies, promote inclusive and comprehensive approaches to sustainability and AI, and build global leadership in talent. We champion strong leadership. Mario Draghi’s report on the future of European competitiveness makes a number of recommendations, including ambitious investments amounting to €800 billion. But the most important step may be deceptively simple: a single European capital market.
What differentiates American and Chinese companies from their European counterparts is that they have greater access to capital, allowing them to scale up innovation and aggressively expand their markets. Without deeper financial integration, Europe risks leaving much of its potential untapped. Creating an integrated European capital market would streamline access to finance and empower innovative companies across the continent, enabling them to scale up and compete effectively on the world stage.
The benefits of this capital market are manifold. It will facilitate cross-border investment, increase liquidity, reduce costs and improve the overall efficiency of resource allocation. By creating a conducive environment for investment, Europe can develop domestic champions and attract foreign investment to drive growth.
Furthermore, enhanced access to capital will enable European start-ups and SMEs to grow and innovate in areas such as clean energy, digital technologies and advanced manufacturing. This, in turn, will strengthen the continent’s position as a global leader in sustainability and technology.
But Europe is at a crossroads, with the potential to redefine its global standing. Without deeper financial integration, there is a risk that that potential will remain untapped. By getting this one key area right, Europe will be able to leverage its strengths and compete much more effectively than it currently does.
