Wanted: an EU-wide reform strategy for ageing and digital disruption

Frankly Speaking

Digital & Data Governance

Picture of Giles Merritt
Giles Merritt

Founder of Friends of Europe

Giles Merritt calls on the new EU Commission to confront demographic change and digital upheaval with an ambitious reform strategy

It has taken us more than forty years to awaken fully to climate change, and now there’s less than half that time before huge demographic shifts begin to bite just as hard. Europe’s socio-economic landscape is going to be changed almost beyond recognition, and if we don’t reform adequately, we’ll face steep decline and social disruption harsh enough to threaten chaos.

The most striking aspect of digital and demographic turmoil is the contrast between the speed of both and our sluggish response to them. Rather than merely being slow to consider appropriate reforms, we have been inert. Although far-reaching reforms are needed, these are wholly absent from political debate throughout Europe.

‘Reform’ is arguably one of the most over-used and under-applied terms in the political lexicon. Shaping them has also been a relatively unhurried process. Representatives of different strands of society have tried to reconcile stability with the disruptive changes created by technological innovation and major geopolitical shifts. Tomorrow’s threats, on the other hand, still lie over the horizon and are invisible to voters.

There is a little breathing space before demographic change pushes itself to the top of political agendas

Gradual reform was par for the course in most European countries during the second half of the 20th century, other than those within the former Soviet bloc. But today the accelerating digital revolution and the snowballing effects of ageing mean sweeping revisions are urgently needed.

No one can foretell with certainty the impact of Artificial Intelligence (AI) on labour markets and economies, but the experts’ consensus is that it will be dramatic. Digitalisation has so far failed to deliver the promised productivity bonuses, but it seems that at a minimum AI will accentuate the gaps between ‘knowledge elites’ and the less skilled.

That, along with the shrinkage of the active workforces whose members are the chief taxpayers, raises huge questions about the future of fiscal policies and social benefits. How to reform long-established societal structures, and in what direction, is a conundrum that politicians of all colours are reluctant to address; unsurprisingly, because it’s a sure-fire vote loser.

There is a little breathing space before demographic change pushes itself to the top of political agendas. That cannot be said, however, for the immediate reform demands needed to handle the digital revolution. How to tax global internet platforms whose very nature puts them beyond the reach of national authorities is a challenge that governments are reluctant to address.

Issues as far-reaching as demographic change and digital disruption cannot be addressed in a limited ad hoc manner

This is no more than the tip of the iceberg. Today’s ‘4th industrial revolution’ is starting to introduce wild cards that go far beyond changes in the workplace. The birth of 5G telecoms is rendering obsolete familiar industrial structures, while at the same time destabilising our geopolitics. Global cooperation is being weakened by rising technological rivalries and security tensions, notably between the United States and China but involving Europe too.

The answer to these dangers is the creation of structured reform agendas, both at EU and international level. National governments of course see challenges in terms of their own electoral mandates, and hesitate to raise longer-term concerns that may perturb voters. Witness the hostility that France’s President Emmanuel Macron, like his predecessors, is facing over fairly modest pension reforms.

Issues as far-reaching as demographic change and digital disruption cannot be addressed in a limited ad hoc manner. They require ambitious, consensual measures giving political cover to vulnerable national governments.

The new EU Commission led by Ursula von der Leyen took office just a week ago, so it’s far too soon to know whether it intends to shape such a reform strategy. But it will not be enough to repeat the warnings of previous commissions that within 20 years Europe will be digitally backward and have two rather than the present four workers per pensioner. Concerted EU-wide reforms to address structural change should be its leitmotif.

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