IN 1984 A besuited 20-something American executive on a visit to France offered Europeans a few tips for corporate success. Entrepreneurs needed to be given a second chance if they failed and government bureaucrats made for lousy investors, he told a television interviewer. His advice was sage. But European companies ruled the global corporate roost alongside those of America and, occasionally, Japan. Why should they take advice from this uppity Californian newcomer?
Nearly four decades later the company founded by that young upstart, Steve Jobs, is worth more than the 30 firms in the German blue-chip DAX index combined. Its value is not far off that of all 40 companies in France’s CAC index. Apple’s success has been notable, but it is the decline of corporate Europe that is truly striking. At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are (see chart 1).
When it comes to business, Europe used to pack a punch. In recent decades companies such as Nokia, Nestlé or BP have been among the world’s ten biggest firms by market capitalisation. Now only on occasion does Europe have a firm in the top 20 globally. In 2000 nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits. In just 20 years those figures have fallen by almost half. Europe is a place for companies such as Amazon and TikTok to find customers, not a base for local firms to conquer the world.
Some of Europe’s lost stature is down to the rise of China. But American firms have reinforced their position at the vanguard of global business. European ones, alongside those from Japan, have not. In 2000 Europe had a share of corporate wealth commensurate with its roughly one-third of the world economy. That is no longer true (see chart 2).
Some Europeans might ask: et alors? Many on the continent are ambivalent about big business, preferring a dense collection of midsized firms, such as the German Mittelstand, to corporate goliaths. But if it continues, the waning of Europe’s business will bring consequences. Big firms invest in innovation, which boosts economic growth. Left to regulate only foreign groups, Europe’s ability to shape global business norms—on privacy, say, or the uses of artificial intelligence—will look weak. European policymakers’ cries for “strategic autonomy” will come to nothing without corporate backing.
Plenty of European companies still make consumers swoon. LVMH of France flogs Louis Vuitton handbags from Beijing to Buenos Aires; German cars and Swiss pharmaceuticals are sought-after around the world; and homes are…
Read More: Europe is now a corporate also-ran. Can it recover its footing?