Members of the European Union have different positions on matters of digital openness, and those differences typically reflect how the digital sector sit in national economies and the relative size of digital endowments. In this paper, we work with three groups of countries – digital managerialists, digital frontrunners, and digital convergers. These groups have gradually emerged over time and they think differently about the politics of reforms to open the digital economcy to faster change. This paper lays a focus on their stances on digital-policy reform and on their own understanding of the costs and benefits of the growth of the digital economy. The paper also suggests new ways for countries to cooperate in current or new constellations, which will allow them to profit from other countries’ experiences, and to fully develop their own policy preferences as well as a clear understanding of appropriate digital reforms for them.
Digitisation has the potential to support growth in many different sectors and the growing digital economy will make positive contributions to the productivity of non-ICT sectors as well. This is especially true for the services sector. However, countries with smaller digital endowments (e.g. digital infrastructure like networks) often believes that they do not stand to profit as much from digitization as countries with bigger endowments. That is a profound misconception. Here, it is crucial to note that economic success in the digital economy is actually not merely the absolute level of digital endowments, but rather the way in which these endowments are effectively employed.
Reaping the rewards in the digital economy is based on an exchange that exploits the comparative advantages of countries and here, digital frontrunners, but also digital convergers, are performing well. Digital convergers are well established in international value chains and they create significant output from their digital endowments. They have an interest in improved regulatory conditions as a result of their trade and economic integration that is shared with frontier economies.
The future task for digital convergers lies in both increasing their output from accumulated digital capital via climbing the value chains of the digital economy, as well as increasing their digital endowments. In order to do so, digital convergers require better market conditions and increased investment in digital capacities and skills. The ability of digital convergers to profit from digital value chains also depends on their trading partners and on their proximity to these frontier economies. Digital convergers can thus profit from a more rapid pace of digital economy growth by tying themselves closer to frontrunner economies.
In addition, they can profit from the experience of digital frontrunners in developing their digital economies both for benefiting from lessons learned in their process of doing so, but also for further identifying and clarifying their own policy needs and position. Accordingly, this paper suggests that digital convergers could join more closely in cooperation with digital frontrunners and potentially form a D16 group to articulate their policies and priorities, and to devise strategies to shape EU digital policy.
In this paper, we will examine how various countries in the European Union performs in various benchmarks of digital readiness and performance, and how groups of countries typically position themselves on issues regarding digital policy reform. There is a long history of analysis about why countries tend be more or less open to reforms that increases trade and competition. While there is a pattern throughout history that smaller countries generally are more open than larger countries, it is equally clear that the size of a country’s “endowments” – in this case, the relative size of digital endowments like digital infrastructure or digital human capital – informs choices of policy. In stylized terms, positions of openness tend to favour those factors of production that are in abundance – and harm production of factors that are scarce, and vice versa (Rogowski 1990). Following that logic, if data and digital endowments are considered factors of production, it should be natural that countries where the relative size of these factors are abundant (vis-à-vis other factors of production) are more open to digital competition and, in Europe, reforms that knock down barriers to a digital single market.
This approach holds in comparisons of how countries in Europe weigh up the costs and benefits of digital openness – although with some nuances. There is three categories of countries in the EU, and the positions of these groups often reflect which sectors that are influential in the respective economies, the policy tradition of economic openness, the relative size of their digital endowments. In this paper, we will work with these three groups: digital managerialists, digital frontrunners, and digital convergers. The focus is particularly on the latter two.
Table 1: Digital Frontrunners, Managerialists and Convergers in the Digital Economy and Society Index (DESI)
Source: European Commission
The first group, digital managerialists, is defined by its desire to balance a positive attitude to digital opportunities for societies with defensive economic interests that fear the competition that digitization encourage. Their digital endowments are comparably small. In addition, both attitudes are wrapped up in digital dirigisme, a general disposition and temperament supporting more rather than less regulation of the digital economy.
Members of the second group, digital frontrunners, are generally small and open economies that rely heavily on trade and that have high digital readiness, or endowments, defined by ICT infrastructure, digital skills, and digital use. This group tends to be on the side of the argument that favours deregulation rather than regulation of the digital economy – partly because of own economic interests; partly because of a political culture in those countries that embrace openness to new ideas, technology and societal change.
Finally, countries in the last group – digital convergers – are catching up on other EU members, in terms of both economic prosperity and digital performance. While their ICT infrastructure is generally good, these countries are still trailing others in digital skills – and, with substantial digital inequality, broad-based economic benefits from digitization are held back. Furthermore, a good part of their economy is based on the production of parts, components and services to multinational firms – and many digital convergers are uncertain about where in the digital value chain they stand and if greater openness to growth, competition and experimentation in the digital economy can allow them to climb that value chain at a faster rate.
While the policy character of these groups has gradually been articulated, it is less clear what two of the groups – the digital frontrunners and digital convergers – actually want to achieve in EU policy on the digital economy. It is obvious to any observer of digital politics where the source of resistance can be found and how the digital managerialists have maneuvered to slow down the pace of policy change. It is equally obvious why some of the countries in this group feel that things should slow down: they are articulating the politics of defensive corporate interests that want more time to adjust to new technologies and patterns of digital competition, and their economies have smaller digital endowments.
However, it less obvious what the digital frontrunners are trying to achieve, other than a general stance in favour of openness. While they are clearly supportive of a policy that releases the forces of growth in the digital economy, they are seldom taking positions that stake out future ambitions or set a path for where Europe’s digital economy should go. Until recently, they have been somewhat hesitant to seek coalitions with other countries. Generally, their strategy seems to have been focused at supporting most initiatives launched by the European Commission. Similarly, it is unclear what the convergers want to achieve, other than general ambitions to expand their ICT capacity. On matters of EU-based market and regulatory policy for the digital economy, they are often sitting on the fence, without a clear idea of where their own economic interest lies. While they often go along with soft digital reforms, they do not seem to have a policy for how they want to use EU policy to support their digital growth. It is true that, as of late, several digital convergers have been warming up to the frontrunners, but it is not at all clear if this is a lasting development.
The purpose of the paper is to put light on the politics, economics and political economy of digital-economy reform in Europe – and to delineate what should be the policy positions of various groups of countries. The paper will consider their stances on digital-policy reform and suggest various ways for countries to work with each other in current or new constellations – all with the purpose of reinforcing the understanding of their costs and benefits of the growth of the digital economy, and what should be appropriate digital reforms for them.
While it gradually has become clear what digital managerialists fear, it is less obvious what digital frontrunners and digital convergers desire – or what they want from new policy at the European level. Frontrunners usually give their support to efforts by the European Commission to cut the barriers to digitization and digital commerce in Europe, but they seem to take for granted that most proposals conform to that agenda and that there is not a need to raise the level of ambition for what the EU should aim for and at what speed. Moreover, few of the frontrunners seem to have an idea of what defines a Digital Single Market and how current proposals score in that context. Importantly, digital frontrunners do not carry an idea for how their group could expand – and how they could join forces with digital convergers that aspire to become frontrunners.
In the next two chapters, we will examine how countries define (or not) their policy strategy and form coalitions in matters related to digital policy. While digital managerialists can exercise influence by virtue of their economic size (and voting power), digital frontrunners and digital convergers do not come with the same economic and political power, and consequently have a greater need for policy collaboration. The question is – are they acknowledging that need for greater collaboration and, if not, what should they do about it?
These chapters address two essential questions. First, they aim at answering why certain countries form coalitions in matters related to digital policy? What is the purpose of forming such coalitions for the countries involved in them? Second, they address the question of how different groups of countries can make use of such coalitions and related initiatives to exert influence and to promote their interests regarding digital policy. These questions are relevant both for the group of digital frontrunners as well as for the digital convergers. The analysis of these questions for both of these groups is structured in two parts: narrative and initiative. It firstly focuses on the narrative of the country groups, how they are positioned within the digital economy of Europe and how they could benefit from greater integration in and openness towards it. Secondly, it drafts ideas for specific initiatives and forms of collaboration going forward.
 Digital managerialists have, for example, supported platform regulation and the breakup of US tech firms, and they have been skeptical of – if not hostile to – digital single-market reforms like the free flow of data. They are also hesitant about creating a single market for services in Europe that would allow for more digital competition in non-digital sectors.