Sovereignty of Innovation and Sovereign Innovation
The 2025 Nobel Prize in Economics is shaping up to be a significant event for humanity, particularly reflecting the rise of economic nationalism that played a role in Donald Trump’s election and Brexit’s public support.
This year, Joel Mokyr, Philippe Aghion, and Peter Howitt have been honored with the Explanation Award for their research on how innovation fuels economic growth. Their extensive studies highlight findings that many in established economic circles have seemingly overlooked. They emphasize the importance of political sovereignty, the risks associated with regulatory harmonization, and the critical difference between innovation-driven progress and disruptions caused by offshoring.
Interestingly, none of these economists label themselves as “economic nationalists,” a term that remains somewhat controversial in academic circles. Adopting such a stance might ignite protests on campuses across the U.S. and Europe. Yet their work appears to challenge core aspects of globalism and align more closely with the perspectives of current nationalists in America, Britain, and Europe.
Today, let’s delve into Mokyr’s findings on how sovereignty and political fragmentation can foster innovation and growth. Tomorrow, we’ll explore the research of Aghion and Howitt.
Political Division Has Enriched the West
Mokyr’s investigation into why Europe emerged as a global economic force led to groundbreaking conclusions. Europe thrived not despite its political divisions but rather because of them.
For nearly a century, advocates of global governance have believed that harmonized rules and centralized control foster prosperity. This notion is foundational to the European Union’s structure, its international regulatory bodies, trade agreements, and the broader goal of global economic integration.
However, Mokyr’s findings suggest the contrary. The multitude of competing states within Europe created a “marketplace of ideas” where innovators could escape oppressive environments. If the King of France stifled your research, you could relocate to the Netherlands; if the Pope condemned your work, you could find refuge in Protestant areas. Heretical notions survived precisely because no singular authority could suppress them consistently.
In contrast, think of China. Despite its technological advancements and rich culture, it operates under a singular imperial bureaucracy that can stifle innovation. When Europe experienced substantial growth, China found itself in stagnation.
The present-day implications for the EU are concerning. Brussels imposes continent-wide regulations on everything from AI development to labor markets without offering alternatives. If your business model conflicts with EU rules, you might have to exit Europe entirely.
Mokyr points out that Brussels has replicated a Chinese-style imperial model, which poses a threat to innovation. It’s no surprise that Europe is currently facing economic challenges.
The Latin Secret: How Cultural Unity Made Political Diversity Possible
Mokyr’s discovery is even more compelling when considering that Europe has accomplished a unique mix of political fragmentation coupled with cultural and intellectual solidarity.
Latin served as a shared language, facilitating the exchange of scientific, philosophical, and educational insights across Europe. Scholars from Portugal could read German scientific works, and an Italian inventor could correspond with a British mathematician. A “Republic of Letters” operated in Latin regardless of the ruling prince, allowing intellectuals to share ideas across political boundaries.
This wasn’t globalism as we define it today. Rather, it represents a situation where a shared civilizational heritage from Rome and the Renaissance enabled a free flow of ideas even while maintaining political diversity and competitiveness.
Scientists were able to communicate as they moved between jurisdictions. Their education, Christian theology (despite disputes), Roman law concepts, and Aristotelian frameworks persisted, yet they existed under distinct political systems and various regulations.
In today’s context, it would be akin to the EU allowing for free movement while refraining from enforcing uniform rules—like the Anglosphere, where the U.S., U.K., Canada, and Australia enjoy a shared language, legal heritage, and cultural foundations but operate under transparent political frameworks and regulatory standards.
Currently, English plays the role Latin once held, facilitating cross-border idea exchange. However, sovereignty fuels meaningful experimentation. AI researchers in the UK can collaborate with U.S. entrepreneurs, even with differing regulatory systems in place. That’s a winning combination.
Conversely, the EU seems to be moving towards increased political integration while cultural trust diminishes. By harmonizing regulations, Brussels overlooks the value of diverse cultural frameworks. They’ve flipped the successful paradigm: now it’s political unity along with cultural fragmentation.
Why Is Mobility Without Diversity Meaningless?
There’s a paradox in the idea of mobility that advocates for open borders often overlook: the ability to move between jurisdictions lacks true value if those jurisdictions operate under identical rules.
The EU promotes “freedom of movement,” allowing individuals to migrate from Germany to France without a visa, which certainly sounds appealing. Yet, if both nations adhere to the same Brussels mandates on data privacy, employment laws, and product standards, what’s the point?
A German AI researcher can’t escape GDPR limitations by moving to France, just as a French entrepreneur cannot sidestep EU labor regulations by relocating to Italy. Although the physical boundaries are open, the regulatory barriers remain intact.
This scenario stands in stark contrast to the conditions that made historic Europe so innovative. Scholars shared Latin and classical knowledge, functioning under different rulers with varying regulations. They combined the seamless exchange of ideas and people with legitimate political diversity and meaningful regulation. Nowadays, movement without diversity translates to freedom without true choice.
By contrast, in the U.S., real federalism thrives. When tech entrepreneurs transition from California to Texas, they encounter fundamentally different regulatory, taxation, and business landscapes. Americans share language, culture, and constitutional principles, yet states compete on policy, which is a feature, not a flaw. This rivalry induces competitive pressure and encourages innovation.
The Enlightenment’s secret was simple: competition surpasses consensus. Sovereignty itself becomes a catalyst for innovation and economic growth. Europe’s history of sovereignty has laid the groundwork for the modern world.
