Philippe Haguillon: Europe has lagged behind in the field of breakthrough technologies, but it has a chance
Europe is lagging behind in the development of modern technologies, despite the presence of strong scientists, this is a kind of paradox, said Philippe Haguillon, Nobel Prize winner in Economics, in an interview with Le Monde. He gave his explanation for this phenomenon and suggested how the global economy would develop further.
The conversation was recorded by Pascal Riché
Philippe Haguillon, a French scientist and professor at the College de France, has just been awarded the 2025 Nobel Prize in Economics, along with Joel Mokir, an American-Israeli, and Peter Howitt, a Canadian, for their work on the impact of new technologies on economic growth. On this occasion, we are re-posting an interview that Philippe Haguillon gave to Le Monde newspaper, which was published on October 10, 2025.
Philippe Haguillon is a French economist, born in 1956. He is a specialist in economic growth and innovation. As a professor at the Collège de France, INSEAD and the London School of Economics, he developed the theory of Schumpeterian growth. His research highlights the importance of competition, as well as investment in education and environmental transition.
— How do you define economic power today?
— Economic power is based on several elements, including currency, the ability to borrow funds from the rest of the world, and weight in global trade... But, in my opinion, technological leadership is the key factor today more than ever. If the American economy is so strong, it's because the United States is the most innovative country. They dominate other countries in the field of breakthrough innovations and in high-tech sectors: digital technologies, artificial intelligence (AI), biotechnology. This allows them to control value chains, assert their trading power, and ensure the supremacy of the dollar by attracting foreign savings to finance their debt.
If everyone is willing to lend them money — this is their famous "excessive privilege" — it is largely because it is in this country that savings are most effectively channeled into innovation. In the 19th century and up to the 1920s, when Great Britain was the world's technological leader, it was the British pound that dominated the world. Hence the urgent need for France and Europe to stop their technological lag behind the United States in order to regain their place in the community of leading powers.
— Is the decline of European and French power a structural phenomenon, or is it possible to hope for a revival?
— This is a fundamental question that Draghi's report on European competitiveness is trying to answer. The European Union (EU) is a market with a population of 447 million people, accounting for 21.7% of global gross domestic product (GDP), ranking second after the United States (24.3%) and ahead of China (15%).
However, GDP per capita in France and the European Union is declining compared to the United States and China. And this is happening despite our undeniable advantages: our mathematicians, engineers, and IT specialists are among the best in the world. In addition, we maintain leadership in areas such as aircraft manufacturing, nuclear energy, and luxury goods. Finally, France has played a fundamental role in the development of artificial intelligence (AI), thanks in large part to such outstanding scientists as Jan Lecun. So we are not doomed to decline at all!
— Why, despite all these advantages, is France in decline?
— During the "glorious thirty years", France experienced rapid economic growth, but to a large extent it was growth due to imitation and catch-up technological development. Thanks to the Marshall Plan and the educational systems that worked effectively at that time, we were able to restore our stock of physical capital, which was largely destroyed during the war, and import the second technological revolution related to electricity from the United States. But in the end, we ran out of resources to catch up with development just at the moment when the United States was undergoing revolutions in the field of ICT (information and communication technologies) and biotechnology. The problem is that we have not been able to capitalize on these revolutions, mainly due to institutional rigidity that has prevented us from moving from growth through imitation to growth through disruptive innovation. This is exactly what Draghi's report is dedicated to.
— Some employers also blame the 35-hour work week. Does it have any impact, in particular on the process of deindustrialization?
— I am not inclined to explain all the problems solely by the introduction of the 35-hour working week, although its consequences were clearly negative in the field of public services, and primarily in hospitals. In the industrial sector, most enterprises have managed to adapt to it. I rather agree with the diagnosis made by Mario Draghi: the problem is the cumulative effect of excessive state regulation in the market of goods and services — the regulations of individual EU member states overlap with pan—European norms. Added to this are the underdevelopment of the financial ecosystem (lack of venture capital, weak participation of pension funds, insufficient use of securitization) to finance innovative startups at all stages of their growth, as well as ineffective government support for innovation — poorly structured, inappropriate, and often not adequately evaluated.
— What is the risk that opting for the service sector to the detriment of industry may, as they sometimes say, weaken the country's economic power? After all, American banks, the film industry and GAFAM companies (Google, Apple, Facebook*, Amazon, Microsoft) also belong to the service sector?
— The development of the service sector in itself is not something bad. They will be increasingly targeted by demand in the future. In addition, they pollute the environment less than industry. But it's all about proportions. Industry structures territories, which is not typical for the service sector. In France, entire regions have fallen into decline due to the disappearance of industrial enterprises.
Moreover, deindustrialization leads to a loss of control over global production chains, which puts the country in a vulnerable position in trade negotiations and increases the vulnerability of consumers and companies in times of crisis. We saw this during COVID-19, when it became obvious that we lacked masks, ventilators, and active ingredients for the production of essential medicines.
Abandoning entire industries leads to a loss of expertise and skills. For example, the decision to stop investing in nuclear energy led to the loss of valuable competencies in this area, which put us in a difficult position when it was necessary to help the Finns in the construction of a new nuclear power plant.
— For a long time, France has been developing its "national champions" in strategic sectors (energy, transport, defense) and in the luxury industry. Is this model slowing down innovation and flexibility now?
— In industries with high fixed costs, one can understand the logic of creating national champions. It is difficult to have more than one company like Airbus in Europe. Fixed costs, as well as safety considerations, also explain the low level of competition in the field of nuclear energy. In some high—tech sectors, it may also be desirable to promote the emergence of "champions" for strategic reasons - I mean government support for Mistral AI in the field of artificial intelligence.
As for me personally, I am not in favor of governments choosing national champions. Indeed, politicians and officials are not the most suitable people to select promising companies, and there is a risk of distorting competition. I much prefer the ARPA (Advanced Research Projects Agency – Management of Advanced Research Projects) system. ARPA is a form of industrial policy that encourages competition. The Government identifies priority sectors — defense, healthcare, and energy — in which active and coordinated participation of players and resources is needed to achieve a strategic goal. Government funds are then allocated to project managers from the scientific community or industry. These managers have complete freedom to involve competing companies or laboratories to complete the task. For example, in the United States, it was competition between several laboratories, stimulated by federal funding through BARDA (an analogue of ARPA for biotechnology), that allowed the large-scale production of mRNA vaccines against COVID-19.
It should be noted that the French model of "national champions" has not proved to be more effective than the German or Italian model, which relies on small and medium-sized enterprises (SMEs) that cooperate to conquer export markets. These countries have been able to maintain their industrial structure better than we have. This is not least due to the fact that SMEs are less susceptible to regulatory restrictions and bureaucratic delays.
— Is the European Union a factor in strengthening or, conversely, limiting France's economic power?
— Until now, the European Union (EU) has rather hindered development: the limitation of the state budget deficit to 3% of GDP, established by the Maastricht Treaty, and competition policy, which has hindered any industrial policy. The founders of the European Union turned it into a regulatory giant and a budget dwarf. But it can be a catalyst. Especially since Germany has changed its strategy, announcing its intention to increase public investment.
To become a true economic power, Europe must embark on the path indicated by Mario Draghi. It needs to complete the formation of a single market in order to stimulate competition and expand the market for new innovative products; it needs to create a financial ecosystem that channels savings into innovation, like Sweden, which managed to create pension funds and mobilize savings to finance risky projects without switching to a funded pension system. In addition, it is necessary to develop the creation of laboratories of excellence (LabEx), whose impact on breakthrough innovations has already been proven.
— Should industrial policy be implemented at the national level or at the level of the entire European Union?
— I do not think that we can effectively act directly as part of all 27 countries. But I advocate the creation of "coalitions of the willing", for "coalitions of goodwill". For example, you can imagine projects that would involve the creation of ARPA-type organizations in the field of healthcare, energy transition, or artificial intelligence, and which would initially unite France, Germany, and the United Kingdom, as well as any other country that wished to join this group. Projects such as Airbus or CERN have proven that Europeans are capable of such initiatives.
— What should France do to maintain its status as an economic power?
— First of all, it should invest in the education system. In France, the potential of many Albert Einsteins and Marie Curies remains untapped — we are talking about gifted children who have not gained access to the knowledge necessary to become innovators. A high—quality education system is the cornerstone of any serious innovation policy. This requires well-trained and well-paid teachers, the organization of homework at school and an individual approach to each student.
In addition, France needs to channel its significant savings more effectively into risky projects. For example, the research tax credit may have helped to avoid moving production abroad, but it did not contribute to breakthrough innovations or large-scale development of high-tech industries. We are still stuck at the level of average technology and incremental improvements.
— Is the European social model a limitation of economic power or, on the contrary, a tool for strengthening it, since it increases the stability of societies and their attractiveness?
— In fact, we can simultaneously improve our social model and become more innovative. For example, by investing in education, we will train more innovators and our society will become more inclusive. Since Donald Trump has been in the White House, Europe has had a chance to attract talent and investment. It is she who now embodies democracy and freedom. In addition, Europe carries with it a social ideal and a strong commitment to environmental protection. These three advantages give it significant "soft power." We, the Europeans, can only take full advantage of this.
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