Across a continent that sees itself as the cradle of Western science and civilization, many political and business leaders have reached the alarming conclusion that Europe is rapidly losing ground to the United States in the growth industries of the future.
Just as the NATO bombing campaign in Kosovo revealed a huge disparity in military capabilities between the Old and New Worlds, the merger between America Online and Time Warner has raised fears among Europeans that the United States is surging ahead in locking up an enormous commercial bonanza through future control of the Internet and other technologies.
While Europe has scored a notable success with its mobile telephones, many leaders now acknowledge a basic policy failure of the past decade--subsidizing dying industries in an effort to preserve jobs--has contributed to the overwhelming superiority of the United States in such booming sectors as computers, Internet services, biotechnology and even investment banking.
"In Europe we are being left behind, for we have not been capable of reproducing the successes achieved on the other side of the Atlantic in the 1990s," said Spanish Prime Minister Jose Maria Aznar at a meeting of European officials this week in Madrid aimed at stimulating growth of the high-tech sector. "Our problem is not the lack of a scientific or technical base. It is the lack of stimulus for business initiatives, which is key to North America's success."
What astounds many Europeans is the sheer scale of the AOL-Time Warner merger--the combined value of both companies represents about 30 percent of Spain's gross national product. "This is the kind of bold and ambitious way of doing things we need in Europe," said Spanish Industry Minister Josep Pique.
But given that technological advances tend to produce rapid innovation, the wide, popular access of computers and the Internet in the United States is expected to accelerate American predominance for years to come. While around 50 percent of U.S. homes are hooked up to the World Wide Web, only 12 percent of families among the 15 nations of the European Union have similar access.
Similarly, Europe lags well behind in the use of the Web for online shopping. Last year, according to the European Union, revenue from electronic commerce among the 15 EU nations grew substantially to $18 billion, but it still amounted to only about one-third of similar income generated in the United States.
"We need a wake-up and a shake-up at the European level," Erkki Liikanen, the European Union's commissioner who oversees information technology, said at the Madrid meeting. "The role and impact of digital technology is still being widely underestimated in Europe."
Liikanen said many European countries have pledged to spend several billion dollars to open up access to the Internet over the next three years. They also want to provide new tax incentives to spur growth in information technologies and encourage immigration of workers with Internet skills.
But many politicians and businessmen acknowledge that Europe will only achieve a real breakthrough in new technologies when the state's role as ultimate provider and protector is changed so that a premium is placed on individual initiative.
"The state is still regarded as the savior of last resort in Europe," Friedbert Pflueger, a Christian Democratic member of the German Parliament who heads its committee on European affairs, said in an interview. "But there is a young generation coming along that no longer believes business should always get this kind of protection. Governments can no longer afford to keep bailing out companies."
There is broad agreement that Europe's failure to capitalize on new technologies is not due to a shortfall of scientific accomplishments. Research centers in Britain, Scandinavia, France, Germany and Switzerland are doing cutting-edge work in medical, nuclear and genetic technologies. Many modern processes and inventions are developed in Europe, only to be harnessed for commercial use in the United States.
"We Brits invented radar, the internal combustion engine and even the World Wide Web, yet we can't really claim we've developed first-class industries from any of those discoveries," said Roger Liddle, a top policy planner for British Prime Minister Tony Blair. "It's hard to explain the reasons for this kind of short circuit, but it definitely needs to be fixed."
In explaining Europe's lag in the commercial exploitation of new technologies, experts often point to a cultural aversion to risk and innovation. Banks prefer to stick with well-established firms and loathe taking a gamble on a promising idea by a bold entrepreneur--just the kind of person who, by contrast, can find plenty of venture capital in the United States.
Among computer and Internet companies, Europe's high communications costs inhibit consumers who would like to surf the Web for hours on end.
In addition, many of the giant telephone monopolies in Europe are being dismantled very slowly, with former state-run companies in Germany, France and Italy still using their traditional ties to governments to block competitors or any further deregulation.
"Europe just doesn't get the message," said Thomas Middelhoff, chief executive of Bertelsmann AG, which is Europe's largest media conglomerate, in an interview. "Governments are still trying to protect the old industrial structure. They don't seem to understand that the best way to deal with high unemployment is to put money into developing new technologies, not preserving old ones."
In the best of circumstances, Middelhoff said it will take at least four years for Europe to reach the 50 percent level of computer penetration now found in the United States. "We need to get computers into schools in a big way so that a new generation grows up feeling comfortable with the Internet," he said. "Right now there are just a few projects that amount to window dressing."
Even if Europeans do acquire much greater access to the Internet, they will find that about 75 percent of Internet content originates in the United States. The news that America Online was hooking up with Time Warner stirred fear in France and elsewhere that the United States will secure an even greater cultural sway in the future by determining what Europeans will be able to see over the new medium.
But Middelhoff said cultural wars should really belong to the past. Today, media and communications have gone global--with English as the dominant language. More than 95 percent of online content is in English, and that is not expected to change even if Europeans gain more of a voice in shaping the kind of material that is available.
"English is now the language of Bertelsmann, even though the company's headquarters is still in Germany," Middelhoff said. "We send our e-mails to each other in English because it is a practical thing to do for a global company with commercial interests in 60 countries."
The AOL-Time Warner merger places Bertelsmann in a unique relationship with the new American communications behemoth. The German company maintains a 50 percent partnership in AOL Europe but also sees Time Warner as a media rival. As a result, Middelhoff said he will probably have to resign from his board seat with AOL to avoid conflicts of interests--but he still wants to keep his old ties with his friends.
"We will stick with AOL Europe and there could be other possibilities to cooperate in the future," he said. "The Internet has a lot to do with democracy, so it's no surprise the biggest gains were made so far in the United States. But there is a new kind of competition out there in this global economy. Europe needs to respond to this challenge by becoming fully engaged, not intimidated."
Indeed, some experts say the American ascendancy in the new technologies of the 1990s could become the galvanizing threat that pulls Europe together. Fears about the takeover of European industry through massive direct American investments in the 1960s--as described at the time in his best-selling book "The American Challenge" by French author Jean-Jacques Servan Schreiber--provided an impetus for closer integration and the eventual expansion of the common market that formed the nucleus of the European Union.
"There is a growing political will across Europe to reestablish a more equal partnership with the United States," said Konrad Seitz, a former German ambassador and author of several books about the technological rivalry among the United States, Europe and Japan. "There is a wealth of talent that needs to be properly harnessed, if only governments will think more in terms of the broader European interests rather than narrow national ones."
CAPTION: EU Commissioner Erkki Liikanen said at a conference in Madrid that European countries will spend several billion dollars to open up access to the Internet.