Beware of protectionism

The Barcelona City Council, with the Barcelona Knowledge Hub of the European Academy (managed by the Catalan Foundation for Research and Innovation), annually awards the Barcelona Hypatia European Science Prize to a researcher based in Europe (not necessarily in the EU-27). The existence of the prize responds to a strategic choice by a city council interested in highlighting its city's scientific capital. Prizes give recognition and credit to those who receive them, but also to those who give them. There are many scientific prizes in the world, but they are typically international, national, or sub-national in scope. There are very few European ones. It is a surprising lack (the EU had them but, I don't know why, abolished them) and an opportunity for the Hypatia prize, which has already covered six editions, to establish itself as a European benchmark. The reputation of a prize is given by the list of its recipients. And here the prize's trajectory has been very good. In all six cases, the jury has chosen well. Among the awardees, László Lovász later received the Abel Prize (the Nobel Prize in Mathematics), Nancy Cartwright the BBVA Prize, and in September 2025 the jury conferred it to Philippe Aghion, a French economist, who a month later received the Nobel Prize. A positive side effect of the prize is that the awardees strengthen their ties with Catalonia. Thus, Aghion received the prize on June 15 in a solemn ceremony at the Saló de Cent, and on the 16th he gave a presentation at the Cercle d’Economia and on the 17th another, more academic, at the Summer Forum of the Barcelona School of Economics.

When the Swedish Academy awarded the Nobel Prize to Aghion – with Peter Howitt – for his contribution to the economics of innovation based on the concept of creative destruction, I already published an article (19-10-25) reporting on it. At the Saló de Cent and the Cercle, he defended a couple of ideas for European economic policy that follow from his vision. These are the ones I will discuss today.

The first is that, to guarantee a good innovation dynamic, Europe needs competition policy. That is to say, rules and actions aimed at containing monopoly power which, among other harmful effects, can slow down, due to not amortizing installed capital, the incorporation of new and better technologies. However, Aghion tells us, it is advisable to do so without condemning European companies to be unable to exploit the economies of scale that would make them competitive in the world. Here, then, is the dilemma: allowing companies of a very high dimension in relation to the European market and at the same time avoiding monopoly prices and little innovative brilliance. His formula: keeping our market open to international competition. Shunning protectionism while avoiding tariffs or regulations that shield the domestic market for our own companies, no matter how large they are. It is not an easy recipe, because the imagination of large – and influential – companies when it comes to justifying protective measures that inflate their profits is notorious. But if we do not resist them, we will have a Europe of high prices and little innovation, a trap from which it will be difficult to escape.

The second idea is that both innovation policy and strategic autonomy, indispensable today, require Europe not to be timid in the practice of industrial policy. I agree, but I believe it is advisable to maintain some caution.

One of these precautions stems from Aghion's first idea. Strategic autonomy can be invoked – indeed, without much imagination – to demand protectionist measures that generate monopoly power. In my opinion, if we do not exercise industrial policy with great care, we may succumb, in the name of Europe's autonomy, to a variety of protectionism that condemns it to miss the innovation train and, with it, prosperity. The disastrous consequences of the German decision to entrust Russia with energy supply may, in turn, lead to a doctrine of extreme prudence that denies Europe the opportunities offered by the international division of labor. I would say that the strategic autonomy policy should be guided by the following principle: Europe should keep its markets open to international competition and investment and, therefore, accept the possibility of disruptive situations, but at the same time it must have the capacity to restore or replace the breakdown of economic ties in a relatively short time, thus limiting the cost of disruption. As I will explain in a forthcoming article, the implications of this principle are by no means minor.