The EC Opts for Creative Destruction

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Going back to the importance of consumers, it is their ability to vote with their feet and to make choices regarding their consumption that forces companies to stay on the ball, to pay attention to market trends, and to deliver top performance. That is why a focus on producers rather than consumers makes absolutely no sense—not politically because there are more consumers, i.e., voters, than producers, and not economically, because companies shielded from competition deliver consistently worse products and services. This applies across all industries.

Wake-up call

Economic evidence demonstrates that intense competition forces firms to increase productivity in order to generate profits and stay in business. The gains in productivity come both from increasing the value to the consumer of the goods and services produced and from decreasing the resources needed to produce the goods and services, thereby lowering their prices.

In an age of limited natural resources, and given Europe's rapidly ageing and even declining population, productivity will be vital to meeting the challenges of the future. But there is little incentive to increase productivity and innovation in companies and sectors that are shielded from competition. That is why business as usual is not an option.

Europe in general, and its consumers in particular, can no longer afford to subsidize under-performing, overcharging companies, let alone entire sectors that are so critical to long-term economic performance. And it is quite an irony that so often those who are most critical of the market will be the first to protect and give an easy ride to so many companies. For sure, the old boys' network is still alive and well in Europe, but reality has set in, thanks largely to the leadership from Brussels, which has delivered a much-needed wake-up call and shift in policy.

Europe doesn't need more monopolies, economic patriotism, or protection of economic incumbents; it needs a healthy dose of competition, empowered consumers, and a level playing field for new market entrants, entrepreneurs, and innovators. That's the only way to deliver on the growth and jobs agenda, and it's the politically smart response to Europe's consumers, who have too often been forced to pay excessive prices to protected providers.

Ann Mettler is executive director and co-founder of The Lisbon Council, an advocacy group and policy network committed to raising European competitiveness, encouraging economic growth, promoting structural reform, creating jobs, and working toward a better, more prosperous future. William W. Lewis is director emeritus of the McKinsey Global Institute.