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Schumpeter killed by the European Commission, once again

The new EU Directive on Public Procurement is about ready to go, soon to be approved by European institutions and to be transposed by national governments within 2 years in their legislations.

Much ado about (almost) nothing.

Nothing makes this Directive an instrument of revolution in the realm of that Sector, public procurement, which generates yearly almost one fifth of European GDP on average. Evolution? Maybe. We would have needed a revolution though.

Most of all, no news for SMEs. Oh yes, tons of bla bla bla, like this one: “given the potential of SMEs for job creation, growth and innovation it is important to encourage their participation in public procurement, both through appropriate provisions in this Directive as well as through initiatives at the national level. The new provisions provided for in this Directive should contribute towards an improvement of the level of success, by which is understood the share of SMEs in the total value of contracts awarded.

No way José. They won’t contrbute. And you know why? Because they absolutely forbid the only tool there is in the whole wide world to help SMES: restrict competition. Indeed the EU says: “It is not appropriate to impose obligatory shares of success, however, the national initiatives to enhance SME participation should be closely monitored given its importance“.

Sure. Let’s closely monitor how large firms have it all: in all of the world the total value added of SMEs in the economy is much larger than the value allocated to SME in public procurement. When it comes to demanding goods, services, works, the public sectors feels  … safe to buy … BIG.

This discrimination is the reason why small firms worldwide (Usa, China, India, Brazil, South Africa, Mexico, Tunisia) are protected by quotas.

Such is not the case in Europe: neither today, nor tomorrow.

Why is that? Protection, for the smart guns in Brussels, creates less competition today. Might it create more competition tomorrow because more small firms will have been allowed to survive? Too complicated for the EC bureaucracy worried only about today.

Yes, as “innovation” economist Joseph Schumpeter pointed out: “A system which is efficient in the static sense at every point in time can be inferior to a system which is never efficient in this sense, because the reason for its static inefficiency can be the driver for its long-term performance.”

Try teaching Schumpeter across the cozy rooms of Brussels bureacrats, another place in Europe where competition does not apply, since the more mistakes you make the more you rise in the ladder of success. Just try.

SMEs of Europe should unite to fight once and for all this battle for making the market for public demand in the continent  a fair and equitable one.

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