AI Summit: Is the European Union stifling AI with regulation?

By Chris Price, AI Summit, Turku, Finland

The inaugural AI Summit in Turku, Finland, became the stage for a debate over Europe’s economic fate, with leading figures from finance, academia, and government clashing over whether the continent’s regulatory instinct is crippling its ability to compete in the age of AI.

Björn Wahlroos, Chairman of the board of directors of UPM, opened the session with a stark assessment, using his native Finland as a cautionary tale. He argued that economic growth is the “foundation of any nation’s survival,” directly linking financial success – “based on technology and investment” – to national defence and security.

“For those of you who are not Finnish, note this: Finland has had no economic growth for 18 years now,” Wahlroos stated bluntly. He put the massive cost of this stagnation into quantifiable terms: if Finland had matched Sweden’s modest 1.5% annual growth rate, its GDP would be 30% higher every year.

“That’s about €75 to €80 billion, which is three times as much as healthcare expenditure in Finland. This we have lost,” he emphasized, pointing out that this deficit could have paid off the entire public debt in less than a year and a half.

Wahlroos’s core message was that economic growth is a function of increased work hours, capital investment, and most crucially, productivity driven by technological innovation. Without addressing the underlying structural issues, Europe risks falling further behind.

The Problem of “Regulation First” Economy

This stark economic reality set the stage for Nobel Laureate and MIT Professor Bengt Holmström, who provided a blistering critique of the European Union’s institutional framework, arguing that it is specifically designed to hinder innovation.

Holmström challenged the prevailing notion that Europe can afford to be a “museum come retirement home, happy to leave the technological frontier to other countries.” Instead, he argued, Europe could and must become the “engine of a new industrial revolution.”

The primary obstacle, in his view, is the continent’s self-proclaimed status as a “regulation first” economy. He contended that Europe has defaulted to regulation as a response to change, especially when it struggles to “kill legacy assets” in the private sector. The spirit of this approach, he noted, is captured in the notion that “regulation is Europe’s superpower.”

Holmström decried the negative tone of EU policy: “It’s all about what cannot be. You are not allowed to do this. You have to fill in these forms. You know, everything is about negative things that we cannot do. How about shifting regulation into a different form to make things possible?”

He stressed that entrepreneurs thrive on freedom, and Europe must free its startup communities from “totally excessive regulation.”

Radical Reforms for the Knowledge Economy

To reverse this trend, Holmström outlined radical institutional reforms. His proposal centres on giving the EU an overriding goal – specifically, “growth and prosperity,” which must serve as the primary filter for all policy decisions.

More controversially, he advocated for eliminating EU directives entirely, which currently lead to an “endless negotiation process and 27 different kinds of plans ” that businesses must navigate.

His most striking proposal for fostering tech competitiveness is the “28th regime.” This would create a super-regime, equal for all EU nations, that supersedes national laws for specific areas, such as the incorporation and regulation of startups.

This system would allow a startup to incorporate under the “28th state” and bypass having to negotiate national rules, freeing them to “innovate and explore, make mistakes and learn from mistakes.”

Jussi Westergreen of the University of Oxford and DeepMind provided a parallel academic perspective, noting the vast challenge of translating European research excellence into commercial success. “We have world-class research, and we have the best researchers in the world,” Westergreen observed. However, he lamented the tendency to “turn research into papers, but not into companies.”

He also emphasized the need for a unified approach and vision. “We don’t have a shared vision of where we are going, and without a shared vision, you can’t align incentives and resources in the same way,” he stated, suggesting that a clear, collective goal for European AI development is essential to channeling resources effectively.

Geopolitics, Society and Data

The debate extended beyond simple economics into the knowledge economy’s societal and geopolitical implications. Foreign Minister of Finland, Elina Valtonen, joined the discussion, underscoring the necessity of technological sovereignty in a world increasingly squeezed between the technological ambitions of the US and China.

Holmström also pointed to a peculiar contradiction in Europe’s societal approach to technology, noting that the continent is suddenly becoming “enormously individualistic” regarding data. He argued that restricting the use of data in areas like health research – where an individual can opt out of contributing their medical information to a shared “knowledge commons” – is depriving billions of people of the benefits of collective insight.

“What has happened to the idea of, you know, we are communities?” Holmström questioned, suggesting that the current regulatory stance, often framed by “values,” is actually undermining the public good necessary for AI breakthroughs in fields like medicine.

According to Wahlroos, the decline Europe is experiencing is “not a fate. It’s actually a choice that Europe has made, and we better choose something different now.” The path forward requires comprehensive institutional and financial overhaul, focusing on capital markets, taxation, and a sweeping deregulation that allows technology and innovation to lead economic recovery, he believed.

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