Leonardo Quattrucci and Silvia Vannutelli / Oct 2025
Photo: Shutterstock
Today’s world is a harder place for Europe.
Despite being the third largest economy and the largest trading bloc on the planet, the European Union has become a net importer of foreign influence: more dependent on Chinese trade, more vulnerable to American tariffs and threats.
Bureaucracy is often blamed for such a decline: too slow and sloppy to anticipate the exponential changes driven by technologies such as artificial intelligence. Today, Europeans find themselves regulating others’ inventions.
Paradoxically, the solution to European obsolescence may be to invest in more bureaucracy, to make it better.
The State is a distinctively European asset. It forms world-class engineers and scientists through public universities. The world’s most advanced chips and airspace technologies exist because European governments and institutions invested in them. Public welfare, which is expected to be in greater demand as AI disrupts employment, is an area where Europeans have been pioneers.
Yet, the State has not invested in itself. As a result, it’s gone out of date. State capacity—the ability to design, implement, and monitor policies effectively—has stalled or shrunk.
In the EU, overall public sector employment averages 17%, almost half compared to the Nordic public sectors, famous for their effectiveness, where the public sector represents 30% of the workforce. Today, the European Commission has around 32,000 employees. That’s the more or less the same number as in 2016.
Size does not always matter, but proportion always does.
Basic institutional math reveals an impossible mismatch between aspirations and capabilities: the scope and complexity of governmental tasks have increased, but the skills and size of institutions have not.
According to ASPI’s Critical Technologies Tracker, there are 64 critical technologies that governments need to monitor and manage. In fact, digital policies have ballooned in the past decade: Brussels has made its name globally by passing several comprehensive regulations on data protection, online platforms, AI, and interoperability. Shockingly, the share of staff in the responsible departments has shrunk between 2016 and 2024.
State capacity has not just diminished in quantity, but also in quality. In a world run by engineers, European governments have largely failed to acquire engineering skills. Their recruiting systems attract a legalistic workforce that resembles the Habsburg Empire’s.
Short of internal skills and pressed to respond to political urgencies, European governments take a shortcut that leads them to consulting companies. As a result, an oligopoly of advisory firms has captured governments’ confidence gap. The European Commission spent €6.4 billion on consultants between 2014 and 2021. That’s twice the amount the EU has allocated to strengthen administrative capacity in Member States over the same timeframe.
When governments outsource their expertise without the ability to verify, the consequences are dire. In the Netherlands, an algorithm developed by supposed external experts wrongly labelled citizens as fraudsters, leading to fines, trials, and casualties. Hence, governments take the blame when things go wrong without the means to find out why. That leads to a vicious cycle: the State loses trust and legitimacy, which leads it to hire “experts” to regain credibility, hollowing out its own capacity to understand and manage complex issues.
How did we get here?
First, state capacity has long been treated as a development issue for developing countries. By looking outwards, old bureaucracies have neither grown nor evolved. What has grown instead of competency is legacy. An accumulation of rules on hiring, buying, and legislating has created a jungle of procedures that makes government risk-adverse and vulnerable to capture. This has led to a second consequence.
Conversations about state capacity have been reduced to issues of austerity. Public institutions are an easy scapegoat for things going wrong. So vested interests have pushed for less government, most famously in the short-lived Department of` Government Efficiency. But the culling of American institutions has not solved America’s problems. In fact, it seems to have fuelled recessionary trends in the US economy. The same would be true in Europe.
We need more State, not less. What we also need is a more capable State. Where bureaucracy is most effective, like in Singapore, civil servants are highly paid, hold social prestige, and have autonomy in operations. The same is true for DARPA – the US agency behind the creation of the internet – where the best and brightest go on rotations to advance technological breakthroughs. There are success stories made in Europe too: Estonia turned its legacy as an IT farm for the Soviet Union into a national advantage. Precedents exist, so do low-hanging fruits.
In the EU, public procurement represents 14% of GDP, much of it wasted in following obsolete tools. A 1% efficiency gain in procurement processes would yield €20 billions that could be re-invested in hiring well-paid talent in government.
Governments now have a generational opportunity to renew themselves: younger talents are ready to take a pay cut to serve a mission they identify with – what higher mission than serving your future? But they have one condition: flexibility. Government contracting today is too rigid to be interesting for entrepreneurial types. Getting those who will own the future to work on governing it is also likely to restore trust and legitimacy in public institutions.
To save themselves, institutions need to look inwards; they must become an object for investment. If common sense requires matching unlimited ambitions to limited means, our impoverished Europe needs to bank on its most enduring asset: the capacity of the State.
