Nobel laureate Philippe Aghion emphasizes the need for Europe to enhance its industrial policy, particularly in the realm of artificial intelligence (AI), to remain competitive globally. He argues that current trends show long-term institutional investors, like pension funds, are predominantly channeling their AI investments into the U.S., highlighting a significant gap in Europe’s strategic approach.
Aghion, a professor at the London School of Economics and other prestigious institutions, spoke at the Amundi World Investment Forum 2026, where he outlined the critical need for a cohesive strategy that integrates AI with market dynamics. He noted historical patterns of market concentration during technological revolutions, drawing parallels between the current AI landscape and the IT boom from 1995 to 2005, when major firms like Google and Amazon rapidly consolidated power, potentially stifling new entrants and overall productivity.
He argued that while AI serves as a general-purpose technology that can democratize access and foster innovation, Europe must adopt a robust industrial policy to nurture this potential. Aghion criticized the EU for neglecting its industrial policy in favor of competition-focused strategies, which he believes have hampered innovation. He advocates for a European equivalent of the U.S. Defense Advanced Research Projects Agency (DARPA) to support advancements in AI, biotech, and defense.
In addressing the challenges posed by international competition, Aghion asserts that domestic innovation is the most effective response. He suggests that rather than imposing tariffs, Europe should negotiate with foreign competitors to establish joint ventures that keep production and technology transfer within the continent. He calls for a united effort among European leaders to create a more integrated market for capital and technology, drawing inspiration from Sweden’s successful model of supporting domestic innovation through pension fund contributions.