The week of October 14, 2024: Brussels vs. Musk, housing, labor, healthcare, and electric vehicles.
The week of October 14, 2024: Brussels vs. Musk, housing, labor, healthcare, and electric vehicles.
The sight of Starship’s rocket booster landing between the mechanical arms of the tower built to welcome it home offered what may be a glimpse of spacefaring’s second heroic age. It was a triumph for SpaceX, a triumph for Elon Musk, an American triumph, and a reminder of what, given the opportunity, enterprise, ingenuity, and the free-market system can achieve.
Naturally I thought of Karl Marx.
There’s a passage in The Communist Manifesto, in which Marx and Engels describe the world capitalist “bourgeoisie” was remaking. Amid the insults, there was this:
The bourgeoisie has disclosed how it came to pass that the brutal display of vigor in the Middle Ages, which reactionaries so much admire, found its fitting complement in the most slothful indolence. It has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.
Well, yes.
Next, I thought of how news of SpaceX’s feat would be received in Brussels.
Oh dear.
The EU has long regarded itself as a rival to the U.S., economically as well as politically, a contest in which it is not doing so well.
The Economist:
In 1990 America accounted for about two-fifths of the overall GDP of the G7 group of advanced countries; today it is up to about half…. On a per-person basis, American economic output is now about 40% higher than in western Europe.
The overall numbers are bad enough. But some areas of underperformance are more galling to Brussels than others. Europe’s tech sector has failed to keep up, despite the EU taking the trouble in 2000 to establish an agenda, the Lisbon agenda, to head off such a fate.
At the time, the EU Council (broadly speaking, the EU institution comprising the leaderships of its member states) had determined that the bloc was:
[C]onfronted with a quantum shift resulting from globalization and the challenges of a new knowledge-driven economy. These changes are affecting every aspect of people’s lives and require a radical transformation of the European economy. The Union must shape these changes in a manner consistent with its values and concepts of society…
Those words reflect the essence of the Brussels technocracy, top-down and overbearing. Rather than leave the peoples of the EU free to exploit the opportunities and deal with the challenges posed by this shift, it wanted to “shape” a response compatible with the EU’s “values and concepts of society,” a fancy, if clumsy way to describe the ideological preoccupations of its ruling class. The result was a narrowing of vision and with it a narrowing of opportunity.
The EU was to have a “new strategic goal” for the next decade (the years up to 2010):
[T]o become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.
How did that work out?
The EU’s inability to keep up with the U.S. in this area has infuriated its leaders. Rather than trying to fix what has gone wrong (mainly by getting out of the way), Brussels has been waging a campaign of protectionist lawfare (often camouflaged as antitrust) designed to rein in (and loot) the tech companies that America had birthed but the EU could not. A part of this strategy involved the EU appointing itself a “regulatory superpower.” Others create services, products, and technologies, the EU makes rules.
Then there’s Musk. Tesla was bad enough, an innovative manufacturer of electric vehicles that people chose to buy. And Tesla has been followed by SpaceX.
Jonathan Miller, writing in the Spectator:
France’s Arianespace has this year managed to launch just one of the new Ariane 6 rockets made by its ArianeGroup umbrella company. It came four years late and hundreds of millions of euros over budget. SpaceX has already completed ninety-six launches this year, recovered and reused almost all of them, and expects to reach 148 launches by the end of December. Even if Arianespace can get the new rocket to work properly, it has planned to launch no more than nine missions a year, of which four will be institutional missions, such as reconnaissance satellites, and only five commercial missions.
Why would a private business even want what Arianespace has to offer?
Miller:
European failure to embrace reusable rockets has made it completely uncompetitive. The estimated cost of a launch using the already obsolete Ariane 6, when it becomes operational, perhaps next year, is more than $100 million. The cost of a comparable launch on SpaceX is around $70 million. And Europe has nothing in the pipeline to match the SpaceX Starship, which will be able to launch payloads of 100 tons or more.
Access to space is the sine qua non of a credible space program. Without it, the scientific and commercial applications of space technology are impossible.
As Miller points out, the EU’s Galileo satellite system, designed to compete with America’s GPS has — how to put this — got a ways to go. OneWeb, Europe’s private sector competitor to Musk’s Starlink, sends its satellites into orbit using rockets from India and, awkwardly, SpaceX.
Miller:
Europe’s space agency (the UK remains a member) is an example of European hubris at its absolute worst, its failures a masterclass in how not to be globally competitive, while spending billions on institutional grandiosity. The European Space Agency, which presides over Europe’s failed efforts, has a budget of $8.5 billion and a staff of around 2,500. ArianeGroup, which is subsidized by ESA, employs 8,300 people. Between them, they are unlikely to produce a reusable rocket before 2030.
And what is the EU going to do about this shortfall?
I think you can guess.
Not content with regulating fertilizers, cars and cheeses, Brussels is looking to create an EU Space Label it could soon slap on rockets and satellites as part of efforts to force companies to use orbit responsibly.
“With each passing day, space is becoming more like the Wild West, and it’s time to have European rules,” said Christophe Grudler, a member of the European Parliament from France who is leading legislative work on IRIS2, the EU’s [public sector] answer to SpaceX’s Starlink satellite communications system…
According to documents seen by POLITICO, the bloc’s diplomats have been briefed on plans to create an EU Space Label that will be used to designate companies that play by the new rules on sustainability and security, much in the same way that the bloc uses eco-labels to certify washing machines or televisions.
If space companies want to do business with the bloc, they’ll have to abide by the rules, said Niklas Nienaß, an MEP with the German Greens who has long pushed the Commission to set rules for space, adding the draft was shaping up to create “one single market in space.”
The answer to that is simple enough. If the EU passes a space law (its plans for one have been delayed), U.S. companies should consider giving that market a miss. Leave Europe’s companies to rely on Russia (it worked so well with gas!), China, or India.
Lionel Laurent, writing in Bloomberg:
Musk’s rivals from Jeff Bezos to China are far behind, but it’s Europe where space especially looks like a theater of cruelty. The continent that once dominated commercial satellite launches with its Ariane program — a symbol of industrial policy akin to Airbus SE — has lost its lead after initially mocking Musk and has even had to rely on SpaceX for blastoffs in recent years.
And if Musk’s role as a personification of EU’s technological shortcomings was not enough, there’s also X. The EU’s “values and concepts of society” never had room for America’s expansive notion of free speech, but with the progressive authoritarians of the Brussels establishment on edge after Europe’s recent swing to the populist right, it was inevitable that the EU’s lawyers would come after X, a vector for heresy.
This helps explain an outburst from Věra Jourová, the EU official responsible for “leading the Commission’s work on values and transparency.” That a governmental (or, in the EU’s case, quasigovernmental) institution should be “working” on “values” is troubling enough, but Jourová’s responsibilities also include “countering disinformation and fake information.” But who decides what is “fake” and how? And what, for that matter, what is meant by “countering”? Arguing back is one thing, censorship quite another. There is a problem, albeit in many cases exaggerated, with disinformation circulated by the Kremlin and its allies, but there is a danger that this threat will be used to take Brussels’ digital police into areas that they should not go.
The EU Commission stresses that, in countering disinformation, Jourová takes care to preserve “freedom of expression, freedom of the press and media pluralism,” a claim that would be more believable were it not for the pathway to censorship contained within the EU’s Digital Services Act (DSA), something I touched upon in a recent article for National Review:
The Digital Services Act is not meant to criminalize any new categories of speech. What is illegal under the law of an individual EU member-state or under EU law will remain illegal. Any amendments to legislation in that area will be left to national parliaments or to the EU’s legislative process. The DSA’s broad language could easily be used to impose de facto censorship on all sorts of theoretically legal speech, in the interest of preventing “harms” that exist only in the progressive imagination and that are hinted at in, among other places, the law’s preamble, but also elsewhere. Thus on its website the EU Commission warns of the dangers of “climate disinformation.” Tackling that is, it states, incorporated within its general approach to disinformation, including making it “more difficult for disinformation actors to misuse online platforms.”
Jourová was a critic of Musk’s decision to loosen “moderation” (censorship) practices after his acquisition of Twitter (now X), but, as she heads for the exit (she will not be serving a third term at the Commission), she has ratcheted up her criticism of Musk. X is “the main hub for spreading anti-Semitism.” Musk is “not able to recognize good and evil,” and is a promoter of the latter. Evil.
Meanwhile Germany’s Der Spiegel, a widely read left-of-center (and sometimes grotesquely anti-American) news magazine has labeled Musk “public enemy number 2” (after Trump), set on undermining liberal democracy, and compared him with Alfred Hugenberg, a German industrialist turned media baron, who used his media empire to advance the nationalist hard right during the Weimar Republic, and played no small part in bringing the Nazis into the political mainstream. Nazi.
Musk is capable of weathering insults, but the mood in the EU establishment does not bode well for X’s prospects in its battle with the Commission. With more than 45 million users per month in the EU, X could be (and was) categorized as a very large online platform (VLOP) for the purposes of the DSA, and that gives Brussels its opportunity.
As I explained in my article for NR, as a VLOP, X is:
[R]equired, among many other obligations, to undertake an annual assessment of “systemic” risks arising out of, to oversimplify, the way its operations are set up and the use that is made of its services. Some risks are obvious (dissemination of illegal content), but others are extraordinarily broad (“any actual or foreseeable negative effects on civic discourse and electoral processes”). The VLOP must then explain how it “mitigates” those risks. It is clearly envisaged that the appropriate response to “illegal hate speech” is to remove it, but the overall requirement is that mitigation should be “reasonable, proportionate, and effective.” In the hands of an aggressive regulator, that could mean anything. The EU Commission has already notified X of its preliminary finding that the company is in breach of various provisions of the Digital Services Act. X will push back, and Musk has said that X is looking forward to battling this in court. Another EU Commission investigation into X is still under way.
Although Thierry Breton, the EU Commissioner who had feuded with Musk over X’s DSA obligations, had just resigned, I warned that Musk should not expect Brussels to ease up. That wasn’t a hard forecast to make, but recent reports of how any fine imposed might be calculated show just how far the EU is prepared to go in order to muzzle X. The DSA comes with very heavy penalties — up to 6 percent of an offending company’s global revenue for breach of its provisions. It is now being suggested that this number might be boosted by including revenue from some of Musk’s other ventures, including SpaceX, the Boring Company, xAI, and Neuralink (but not Tesla, a public company where Musk has less control).
On the face of it, such a move goes against the principle of limited corporate liability that underpins corporation law on both sides of the Atlantic. If a company is found guilty of breaking a law, that’s where the liability for that offense is generally supposed to rest: Shareholders may see the value of their shares reduced to zero, but that’s the end of it. To suggest that liability should somehow extend to other businesses with the same dominant shareholder would make a nonsense of this principle, and a mockery of the EU’s (dubious) claim that it stands for the rule of law.
Writing (before this extra twist) about the legal threat to X, I argued that the potential size of a fine could prove to be an:
[I]rresistible inducement for Musk to try to cut a deal with the commission and, for that matter, to find a safe haven in a compliance regime staffed with European counterparts of the “content moderators” (censors) he fired from Twitter. Ignoring Brussels would not work. There would be cripplingly hefty fines for that too. If Americans’ online speech is to avoid the EU’s censorship, U.S. social-media companies will have to set up systems to ensure that their customers in the EU see only fare sanitized to Brussels’s standards.
That continues to be the case, and the inducement for Musk to settle may well have increased. But there is something else. If it looks as if the EU might “fine” SpaceX too, a battle over free speech will then start to have ramifications for America’s national security, its space program, and its leading position in the commercialization of space.
Washington’s failure to retaliate against the EU’s protectionist lawfare has been a puzzling and costly omission. The administration can start to put that right by warning Brussels that any attempt to drag SpaceX into its war with X will be met with a very fierce response. Trump, meanwhile, has recently claimed that Apple’s CEO, Tim Cook, had called to complain about two massive bills (totaling $17 billion) that Apple had received from Brussels. Trump said that he had told Cook that, if elected, he would not let the EU “take advantage of our companies.” Harris should deliver the same message.
The Capital Record
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, makes use of another medium to deliver Capital Matters’ defense of free markets. Financier and National Review Institute trustee, David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by the National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.
In the 192nd episode, David is joined once again by Steve Moore of the Committee to Unleash Prosperity for a thorough discussion of what to expect out of the upcoming election, what the economic stakes are, what to expect in terms of policy, and perhaps most importantly, what to expect in terms of personnel.
The Capital Matters week that was . . .
Housing
Rather than addressing the structural drivers of housing shortages and rising prices, the Biden administration and its California allies are increasingly targeting purported culprits such as rental-pricing algorithms while proposing politically appealing yet fiscally questionable subsidies. Although these measures may resonate with some voters in an election year, they risk diverting attention from the long-term structural issues at the core of the current housing crisis…
Rent-regulation schemes proposed by the Biden-Harris administration and the Harris campaign have already been tried by progressives in Argentina. The predictable result was high rents and less choice for tenants.
Labor
The strike launched by officials of the International Longshoremen’s Association (ILA) across America’s East and Gulf Coast ports reminded Americans just how much destruction union bosses are willing to cause to get what they want.
ILA officials ludicrously demanded a halt on automation at U.S. ports, including the automated gates that allow vehicles to enter and exit port facilities.
A temporary agreement has ended the strike for now, but the ILA remains a threat because it has “sectoral bargaining” power — the ability for one union to negotiate for workers across an entire industry…
Harold Daggett, president of the International Longshoremen’s Association (ILA) that struck ports from the Gulf Coast to Maine, said that he would teach Americans “what a strike is,” employing extortionate tactics based on ILA members’ position at a choke point of the supply chain to “cripple” the American economy and get otherwise-impossible demands fulfilled…
Electric Vehicles
Kazmin goes on to sketch out the extent of the threat posed by Fiat’s woes to Italy’s government and the country’s “fragile” finances, points well worth making. If Italy should run into major financial difficulties, there’s a good chance that those difficulties may unsettle the eurozone. Maintaining a shoddily constructed currency union is not easy. What’s more, if Italy’s government does run into trouble thanks to the problems arising out of the coerced switch to EVs, it won’t be the last to do so…
Healthcare
Employers are projected to face a nearly 8 percent jump in costs for providing health insurance to employees in 2025, marking the highest increase in their health-care spending in over a decade. Since 2017, the costs of employer-sponsored health insurance have increased by a cumulative 50 percent, driven by inflation, rising prescription drug costs, the increasing burden of treating chronic conditions such as cancer and cardiovascular disease, and the cost of regulations. These costs hit workers and consumers hard…
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