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THE EUROPEAN UNION AND
THE TECHNOLOGY SHIFT
Interdisciplinary European Studies

EDITED BY ANTONINA BAKARDJIEVA ENGELBREKT

KARIN LEIJON · ANNA MICHALSKI · LARS OXELHEIM
The European Union and the Technology Shift
 Antonina Bakardjieva Engelbrekt
Karin Leijon • Anna Michalski
Lars Oxelheim
Editors

The European Union

and the Technology
Shift
Editors
Antonina Bakardjieva Engelbrekt Karin Leijon
Faculty of Law Department of Government
Stockholm University Uppsala University
Stockholm, Sweden Uppsala, Sweden

Anna Michalski Lars Oxelheim

Department of Government University of Agder
Uppsala University Kristiansand, Norway
Uppsala, Sweden
Research Institute of Industrial
Economics (IFN)
Stockholm, Sweden

ISBN 978-3-030-63671-5    ISBN 978-3-030-63672-2 (eBook)

https://doi.org/10.1007/978-3-030-63672-2

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
Nature Switzerland AG 2021
This work is subject to copyright. All rights are solely and exclusively licensed by the
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­publisher nor the authors or the editors give a warranty, expressed or implied, with respect to
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­institutional affiliations.

Cover illustration: Sky Motion / eStudio Calamar

This Palgrave Macmillan imprint is published by the registered company Springer Nature
Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
 Contents

1 What Does the Technological Shift Have in Store

for the EU? Opportunities and Pitfalls for European
Societies  1
Antonina Bakardjieva Engelbrekt, Karin Leijon, Anna
Michalski, and Lars Oxelheim

2 Technological Megashift and the EU: Threats,

Vulnerabilities and Fragmented Responsibilities 27
Lindy M. Newlove-Eriksson and Johan Eriksson

3 Technological Discontinuities and the Climate

Transition in Europe: The Role of Policy in Two
Traditions of Economic Thinking 57
Staffan Jacobsson and Björn Sandén

4 AI in the EU: Ethical Guidelines as a Governance Tool 85

Stefan Larsson

5 How Does the EU Protect Competition in the Digital

Platform Economy?113
Björn Lundqvist

v
vi Contents

6 Digitalisation, Productivity and Jobs: A European

Perspective135
Fredrik Heyman, Pehr-Johan Norbäck, and Lars Persson

7 Technological Shifts and the Social Partners: Is the

European Semester Heading Towards a Social Europe?161
Jenny Jansson, Olle Jansson, and Jan Ottosson

8 Money for Nothin’: Digitalization and Fluid Tax Bases185

Mårten Blix and Emil Bustos

9 New Tax on Digital Services: A Step Towards Fairer

Taxation in the EU’s Single Market?211
Pernilla Rendahl

10 Digital Democracy and the European Union237

Martin Karlsson

Index263
 Notes on Contributors

Mårten Blix is research fellow at the Research Institute of Industrial

Economics (IFN) in Stockholm, Sweden. He holds an MSc in Econometrics
from The London School of Economics and Political Science and a
PhD in Economics from Stockholm University. His research interests
include digitalisation, public finance and welfare.
Emil Bustos is a PhD candidate at the Stockholm School of Economics
in Sweden. He holds an MSc in Economics from the Paris School of
Economics. His research interests include labour market institutions and
the role of commercial insurance.
Antonina Bakardjieva Engelbrekt is Professor of European Law at the
Faculty of Law of Stockholm University. She is chair of the Swedish
Network for European Legal Studies (SNELS), and she has been Torsten
och Ragnar Söderberg Professor of Legal Science (2015–2018). Her
research interests include European economic law and the influence of
Europeanisation and globalisation on national laws and institutions.
Johan Eriksson is Professor of Political Science at Södertörn University.
His research interests include international relations, security studies and
foreign policy, specifically politics of technology and expertise, space pol-
icy and cybersecurity.
Fredrik Heyman is Associate Professor of Economics and senior research
fellow at the Research Institute of Industrial Economics (IFN) in
Stockholm. His research interests include how globalisation and new tech-
nologies affect firms and workers.

vii
viii NOTES ON CONTRIBUTORS

Staffan Jacobsson is Professor Emeritus of Science and Technology

Policy, Chalmers University of Technology. His research interests include
technical and industrial development, such as computer-controlled
machine tools, wind turbines, solar cells and gasified biomass.
Jenny Jansson is a researcher at the Department of Government, Uppsala
University. Her research interests include industrial relations, social media
and workers’ education.
Olle Jansson is a researcher at the Department of Economic History,
Uppsala University. His areas of interests include labour migration and
migration governance in Sweden during the post-war period, post-war
industrial relations and social partners policies and influence on social
protection for employees.
Martin Karlsson is Associate Professor of Political Science at Örebro
University. His research interests include the relationship between infor-
mation technology and politics, as well as citizen participation in demo-
cratic decision-making.
Stefan Larsson is a lawyer (LLM), senior lecturer and Associate Professor
of Technology and Social Change at the Department of Technology and
Society, Lund University, Sweden. His research interests include
issues of trust and transparency on digital, data-driven markets, and
the socio-legal impact of autonomous and AI-driven technologies.
Karin Leijon holds a PhD in Political Science and is a researcher at the
Department of Government, Uppsala University. Her research interests
include judicial politics, European legal integration and public
administration.
Björn Lundqvist is Associate Professor of Law at the Department of
Law, Stockholm University. His research interests include innovation,
competition, property and law.
Anna Michalski is Associate Professor of Political Science at the
Department of Government, Uppsala University, and associate research
fellow at the Swedish Institute of International Affairs. She is chair for the
Swedish Network for European Studies in Political Science (SNES). Her
research interests include European foreign policy, EU-China rela-
tions, strategic partnerships and socialisation in international
organisations.
 NOTES ON CONTRIBUTORS ix

Lindy M. Newlove-Eriksson is adjunct lecturer at the Swedish Defence

University and doctoral candidate at the Royal Institute of Technology
(KTH). Her research interests include governance and accountability, spe-
cifically with regard to the politics of critical infrastructure, and psychoso-
cial support in crises.
Pehr-Johan Norbäck is Associate Professor of Economics and senior
research fellow at the Research Institute of Industrial Economics (IFN) in
Stockholm. His research interests include globalisation, foreign direct
investment and how venture capitalists, entrepreneurs and incumbent
firms interact in the innovation market.
Jan Ottosson is Professor of Economic History at the Department of
Economic History, Uppsala University. His research interests include
business history, financial history, transport history, regulations, industrial
relations and institutional theory, focusing on modern economic his-
tory of Sweden. He is Editor-in-Chief of the peer-review journal
Economic and Industrial Democracy.
Lars Oxelheim is Professor of International Business and Finance at the
University of Agder and affiliated with the Research Institute of Industrial
Economics (IFN). He is the founder of the Swedish Network for
European Studies in Economics and Business (SNEE). His research
interests include economic and financial integration, corporate gover-
nance and risk management.
Lars Persson is Professor of Economics and Deputy Director of Research
Institute of Industrial Economics (IFN) in Stockholm. His research inter-
ests include the functioning of imperfectly competitive markets, entrepre-
neurship, technology change and trade.
Pernilla Rendahl is Associate Professor of Tax Law at the Department of
Law, University of Gothenburg. Her research interests include EU law,
societal challenges of tax law and sustainability in tax law.
Björn Sandén is Professor of Innovation and Sustainability at the
Department of Technology Management and Economics at Chalmers
University of Technology. His research interests include technology assess-
ment, industrial ecology, climate policy, innovation systems and sustain-
ability transitions, with a special focus on advanced materials, transport,
electricity systems and the circular economy.
 List of Figures

Fig. 3.1 A system-dynamics visualization of the development

of wind power. The figure illustrates how events in the
context increased the legitimacy of wind power and how
several self-reinforcing processes led to a better technology
and a larger market. Government policies influenced
the dynamics in this case through R&D support (down to
the left) and market support, for example, feed-in laws
(up to the right). (Source: Author) 71
Fig. 4.1 Reproduced from Iyad Rahwan’s ‘Society-in-the-Loop:
Programming the Algorithmic Social Contract’ (2018) 96
Fig. 4.2 From AI HLEG (2019b). Seven requirements for the
realisation of trustworthy AI 101
Fig. 6.1 Structural transformation in the business sector: explanatory
factors. (Source: Heyman et al. 2016) 141
Fig. 6.2 Illustration of job polarisation. (Source: Translation
of Fig. 2.2. in Heyman et al. 2016) 148

xi
 CHAPTER 1

What Does the Technological Shift Have

in Store for the EU? Opportunities
and Pitfalls for European Societies

Antonina Bakardjieva Engelbrekt, Karin Leijon,

Anna Michalski, and Lars Oxelheim

Introduction
The breath-taking technological developments of the 2000s have, no
doubt, changed society fundamentally. Much as earlier industrial revolu-
tions redrew economic and political arrangements, the ongoing IT and
digital revolutions have far-reaching repercussions for the structure of

A. Bakardjieva Engelbrekt
Faculty of Law, Stockholm University, Stockholm, Sweden
e-mail: [email protected]
K. Leijon • A. Michalski (*)
Department of Government, Uppsala University, Uppsala, Sweden
e-mail: [email protected]; [email protected]
L. Oxelheim
University of Agder, Kristiansand, Norway
Research Institute of Industrial Economics (IFN), Stockholm, Sweden
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2021
A. Bakardjieva Engelbrekt et al. (eds.), The European Union and the
Technology Shift, https://doi.org/10.1007/978-3-030-63672-2_1
2 A. BAKARDJIEVA ENGELBREKT ET AL.

society. To be sure, the European Union (EU) and its member states have
much to gain from new technology. Innovation and continued investment
may enable the EU to maintain and perhaps even to increase its global
competitiveness. At the same time, a variety of voices warn of the prob-
lems that follow in the wake of the rapid technological shift. The labour
market is becoming increasingly automated, and robots and artificial intel-
ligence (AI) are replacing people in the job market. Certain types of jobs
are unavoidably disappearing, and it is unclear where new job opportuni-
ties will emerge. This entails some heavy costs of adjustment, both for
society at large and for the persons who lose their livelihood.
There are also many examples of how the digitalisation of informa-
tion—which was expected to make business and administration more effi-
cient and connect people more closely with one another—can have the
converse effect, and undermine privacy as well. Furthermore, we see an
ever more pronounced concentration of power in the hands of a few global
platform companies, which raises the question of if and how these domi-
nant players ought to be regulated. New security threats are also appearing
in the wake of digitalisation. Cyberattacks against the IT systems that con-
trol strategic infrastructure like energy and telecommunications are
becoming more and more common. Digital technology can be used to
conduct military espionage and to influence political elections, posing a
serious threat to national security and democracy (Bakardjieva Engelbrekt
et al. 2018).
In the early 2020s, then, there are several reasons to highlight the
importance of the technological advances for European integration. The
technological shift offers great opportunities for improving society, but
the challenges it poses are at least as great. Certainly, efforts to adapt soci-
ety to new conditions and to solve cross-border problems have always
characterised the process of European integration. However, it remains to
be seen whether, or the extent to which, the EU is able to reap the benefits
of the technological development. This challenge has become even more
acute in the wake of the Covid-19 global health crisis, as the pandemic
proved with undeniable clarity humankind’s dependency on scientific
breakthroughs and technological advances but also the scourge of fake
news, deliberate miscommunication and ill-intentioned great power
rivalry.
In this book, we shed light on the opportunities and pitfalls that the
technological shift has in store for Europe. Technological advancement
poses a complex challenge which spans over a great number of policy areas
 1 WHAT DOES THE TECHNOLOGICAL SHIFT HAVE IN STORE FOR THE EU?… 3

and engages a variety of private and public actors. Moreover, it has a wide
and uneven impact on different groups in society. And this is not all.
Technological progress is a truly global phenomenon, but its effects are
local. Oftentimes, public authorities are unable to manage the negative
fallout of technological change by themselves, while at the same time hav-
ing a hard time to harness the promise of improvements in a variety of
areas. For Europe to stand its ground in the global technological race, it is
necessary to do things together. As we show in this volume, the EU and
its member states work together in order to regulate AI, the global plat-
form enterprises and, more generally, the digital economy while simulta-
neously strive harder towards economic competitiveness and sustainable
development. But more can be done in terms of forging a common
approach to the challenge of continuous technological change.
This volume brings together well-renowned scholars from the fields of
economics, law and political science to analyse the multifaceted implica-
tions of the technological shift. From their different vantage points, these
scholars contribute with a variety of perspectives on how the EU and its
member states can manage the technological shift and the transition to the
digital age. The main takeaway from the chapters in this book is that
national governments and EU institutions have a joint responsibility in
creating regulatory certainty in fast-evolving areas to harness the positive
effects of technological changes while buttressing the negative impact on
European society and citizens.
The technological shift is but one of the challenges that the EU faces in
the beginning of the 2020s. Following the 2019 elections to the European
Parliament and the voting-in of a new Commission under the leadership of
Ursula von der Leyen, the EU has entered a new political phase. After
pausing temporarily the political reform process due to the UK’s departure
from the EU, and the drawn-out negotiations over Brexit, there is a strong
need for clear direction and political determination. The EU must unite
behind a vision for the future which can inspire citizens and breathe new
life into the integration process. At the same time, many of the external and
internal challenges with which the EU has long struggled persist. Political
tensions on the global level remain, not least because the USA, up until the
end of Donald J. Trump’s presidency, pursued a protectionist trade policy
at odds with EU interests. China, meanwhile, is growing ever stronger,
both politically and economically, with the aid of heavy investments in new
technology and through the colossal infrastructure project, Belt and Road
Initiative. In the EU, to be sure, the economic recovery during the 2010s
4 A. BAKARDJIEVA ENGELBREKT ET AL.

has been adequate; however, unemployment within the Union has failed to
fall at a sufficiently rapid rate. Furthermore, new storm clouds are forming
on the horizon as the global trading system takes a step backwards, and the
eurozone is preparing itself for a gradual normalisation of the generous
monetary policy pursued by the European Central Bank (ECB).
Several issues that caused discord within the EU in the second half of
the 2010s persist, among them disputes over refugee policy and irregular
migration, differences in economic competitiveness between northern and
southern Europe, and challenges in connection with democratic principles
and the rule of law in several member states. Populist currents, it may be,
have not advanced as far as some observers had feared they would, but
they do seem to have captured a permanent place in European politics.
It is an open question whether, in terms of competitiveness and politi-
cal cohesion, the technological shift will end up strengthening or weaken-
ing the EU. Technological progress can be seen as a precondition if the
international community is to be able to live up to the sustainability goals
set out in the UN’s Agenda 2030, which calls for measures on both
domestic and global levels. This is a context where the EU is a leading
actor. It is clear, however, that the EU and its member states must unite
urgently on how to meet the pressure for change which these technologi-
cal trends generate, and to turn it to the advantage of a sustainable model
of development.
The far-reaching digitalisation of goods, services, information and
security is redrawing the playing field in terms of which political instru-
ments are effective for regulating the single market, as well as what quali-
fies as an acceptable balance between different interests in society. This is
evident, not least from the discussion around the global platform compa-
nies. Existing frameworks for taxation and competition law are insufficient
for dealing with the imbalances to which the dominant position of firms
like Amazon, Apple, Google and Facebook gives rise (see Brokelind
2020). In a world where three global actors—the EU, the USA and
China—vie for influence over global regulation, it is of utmost importance
that the EU continues to champion solutions which serve to strengthen a
multilateral and rules-based order.
The remainder of this chapter is organised as follows. First, we review
how previous technological shifts have affected contemporary society.
Next, we discuss how the EU has adapted to new technologies in the
2010s. Then, we outline the financial and regulatory resources at the EU’s
disposal to steer the technological shift in the 2020s. Following on from
 1 WHAT DOES THE TECHNOLOGICAL SHIFT HAVE IN STORE FOR THE EU?… 5

that, we examine the impending challenges in five areas which are funda-
mentally affected by the technological shift before presenting summaries
of the nine chapters included in the book. Finally, we present the main
findings of the book.

Technological Development
in Historical Perspective

Important technological advances over history have given Europe an eco-

nomic edge over the rest of the world. The Industrial Revolution, which
began in the 1760s in Britain with the mechanisation of the textile sector
and continued with the breakthrough of electric power thereupon, paved
the way for a period of stable economic growth in Europe for many
decades (Bairoch 1976). The factors thought to have laid the basis for
Europe’s technological advancement were the relatively well developed
societal institutions, among them the educational system and the frame-
work of legal and economic rules. Patent law, a literate citizenry and guar-
antees for private property helped produce a society where companies
dared to invest in innovation and a skilled labour force was available
(North 1981).
During the twentieth century, electronics—an innovation that would
make digitalisation possible—was introduced. It was used to control man-
ufacturing processes to begin with; subsequently, however, it would fur-
nish the basis for the IT revolution and the broad breakthrough of the
Internet during the second half of the twentieth century. The talk at the
end of the 2010s was of a fourth Industrial Revolution (Schwab 2017), in
which the physical and digital reality is becoming ever more interwoven.
It is important to recall that, even if it is mainly the positive effects of
technological change—in the form of economic prosperity and improved
living conditions—that get highlighted afterwards, all periods marked by
technological transformation have seen some quite substantial disruptions
as well. The shift from agricultural to industrial society demanded many
sacrifices, with people being forced to move to the growing cities and to
subsist on jobs with precarious terms. In the twenty-first century as well,
we see how technological changes generate various transitional costs for
individuals, as in connection with changes on the labour market. The
major difference between the 1800s and the 2020s is the security—in the
form of state-financed guarantees against risks in connection with
6 A. BAKARDJIEVA ENGELBREKT ET AL.

unemployment, illness and old age—which the modern welfare state pro-
vides to people. Nevertheless, fears have been expressed that the welfare
state is no longer capable of handling the negative consequences arising
from technological change, given the tendency of globalisation to under-
mine the ability of states to finance social safety nets.

The EU and the Technological Shift During

the 2010s

The EU has long been aware of the opportunities afforded by the techno-
logical shift. Already in the early 1990s, for instance, the European Council
took the initiative for a report (the Bangemann Report) on how the EU
should relate to the emerging global information society (European
Commission 1994). Nor has there been any lack of political initiative on
the part of the European Commission on how to handle technological
developments. The EU has expressly sought, for example, to become a
world leader in the digital economy. In March 2010, the European
Commission launched the so-called Europe 2020 strategy, a ten-year pro-
gramme for promoting ‘smart, sustainable, inclusive growth’ (European
Commission 2010). One of the main initiatives within this strategy was a
‘Digital Agenda for Europe’ (European Commission 2020). The
Commission justified this initiative on the grounds that Europe urgently
needed to improve its use of information and communications technology
(ICT) in order to accelerate the economic recovery after the sovereign
debt crisis as well as to equip the EU for a digital future. The development
of ICT, it was hoped, would help to solve major problems, such as climate
change and rising healthcare costs. Particular attention was paid to the fact
that European countries have fallen behind the USA and Japan in terms of
investment in ICT-related research and development.
Since the service market has become more and more important eco-
nomically, the digital agenda stresses the importance of realising the EU’s
Digital Single Market, in which the harmonisation of consumer rights, of
intellectual property rights and of rules on value-added taxes (VAT) plays
an important role. If freedom of movement in the single market had fully
included e-commerce as well, it could have generated up to €250 billion
in further growth during the 2015–2019 period (Juncker 2014).
Other important measures advocated in the digital agenda include
improving the digital skills of citizens. The indicators used by the European
 1 WHAT DOES THE TECHNOLOGICAL SHIFT HAVE IN STORE FOR THE EU?… 7

Commission to track how the EU is developing digitally (the Digital

Economy and Society Index, or DESI) show that all member states have
improved, among other things, with regard to the basic ability of citizens
to handle computers (European Commission 2019c). Upon closer exami-
nation, however, major differences emerge between the member states
where the digital skills of their residents are concerned. In Estonia, the
Netherlands and the Nordic countries, digital skills are among the best in
the world. In Southern and Eastern Europe, by contrast, the situation is
different. In Bulgaria, Portugal and Romania, more than 20 per cent of
the workforce has no digital skills at all. These figures must be seen as
alarmingly high, for participation in the labour markets of tomorrow will
require a great deal in the way of digital skills.
The EU has also taken note of the changing demographic conditions
that its member states face, including declining birth rates and an ageing
population. The hope is that new technologies will ensure a secure basis
for the welfare state in terms of tax revenues and labour. Several projects
are already underway where routine tasks are performed not by human
beings but by machines. Simpler functions of public administration—in
connection with the granting of financial support, for example—can now
be handled by computer programmes, and people living far from hospitals
can meet with doctors by way of a video call. The EU is therefore investing
more and more in research and development in this area. The Commission’s
draft budget for 2020 contained a 6.4 per cent increase over the previous
year in such expenditures, amounting to €132 billion (European
Commission 2019a).
The EU’s efforts to respond to the technological transformation in a
number of different areas look set to continue during the 2020s and
beyond. When Ursula von der Leyen, president of the European
Commission, presented her political priorities for the 2019–2024 term,
she declared: ‘At the heart of our work is the need to address the changes
in climate, technology and demography that are transforming our societ-
ies and way of life’ (European Commission 2019b). This priority includes
‘a Europe fit for the digital age’, with investments in research and develop-
ment, legislative proposals on how AI is to be handled and an update of
the Digital Education Action Plan. Among the commitments made by
Competition Commissioner Margrethe Vestager, whose task it is to coor-
dinate the EU’s entry into the digital age, is that the EU is on the cusp to
push through a digital tax for IT companies in order to create fair compe-
tition and to prevent undue tax avoidance. In a speech to the European
8 A. BAKARDJIEVA ENGELBREKT ET AL.

Parliament in October 2019, Vestager also stressed that a new European

strategy for industrial development must involve the use of the entire EU
toolbox to support innovative technologies and promote industrial value
chains of strategic importance for Europe (Hall and Milne 2019).

What Resources Does the EU Possess for Handling

the Technological Shift?

A global technological shift that affects essentially all sectors and policy
areas can be seen as in many respects the very archetype of a political chal-
lenge that is best handled by a supranational organisation. What then are
the EU’s prospects for benefitting from these technological trends, and
how can their negative consequences be mitigated? To throw light on
these questions, we must consider the forms through which the EU exer-
cises power.
One of the foundations for European integration is the voluntary
transfer of decision-making powers on behalf of the member states to
the EU. A basic principle of the EU’s power, founded on a rationalist per-
spective, is that its member states see that joint decision-making can
address cross-­border challenges more effectively than they can do indi-
vidually. Another important principle on which the EU’s power rests is
that of the rule of law. The predictability resulting from this principle has
historically been a prerequisite for the growth and spread of technological
innovation. Legal integration has also been very important for the EU’s
success. According to Weiler (1994) and Alter (2001)—legal and political
science scholars, respectively—this is because the EU has managed to per-
suade the member states’ national courts to cooperate with the EU’s
supranational court (the Court of Justice of the European Union, or
CJEU). Recognition by the national courts of EU law and its precedence
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