State-Anchored Capitalism

How Europe Bought the Free-Market Myth

The Rational Trap

In-Q-Tel was founded in 1999 as the venture arm of the Central Intelligence Agency. Its job was to identify commercially promising technology and deploy a small amount of public money to shape it for intelligence-community use.

Its most infamous investment, in 2003, was two million dollars in a three-person company called Palantir Technologies.

By 2025, Palantir was valued at more than three hundred and seventy billion dollars. Most of that value rests on government contracts. The American intelligence community shaped the product. The American defence budget paid the bills while it scaled.

By the time Palantir entered Europe, it had a decade of state-anchored revenue behind it.

In 2016, in the aftermath of the Paris attacks, France’s Direction Générale de la Sécurité Intérieure signed a contract to deploy Palantir Gotham across French counter-terrorism operations.

DGSI did not have a European alternative at production scale. It needed an operational platform within months. Palantir had one.

In 2020, NHS England signed an emergency contract with Palantir during the COVID-19 pandemic. The original entry-point contract was reportedly worth one pound. By 2023, the company held a contract worth more than three hundred and thirty million pounds to operate the NHS Federated Data Platform.

In January 2026, the British Medical Association’s UK council voted that doctors should not feed patient data to the platform for any purpose other than direct care.

American state aid funds an early-stage capability that our treaty law would not permit us to fund the same way. The capability matures on US government contracts. By the time the product enters Europe, it offers something our companies cannot match.

We were prohibited from accessing the same kind of state-anchored runway.

The European procurement office, asked to choose between a battle-tested American platform and a thinner European alternative, chooses the American platform.

That choice is correct on the day it is made.

In 2025, the DGSI Gotham contract was renewed for three more years. The decision was rational.

The exit cost (data migration, retraining, integration with allied platforms, operational risk during transition) exceeded the cost of staying.

The first stage is entry at a price European competitors cannot beat. The second stage is renewal at a price that Europe can no longer refuse.

The Hypocrisy in Two Dates

The Buy American Act became law on 3 March 1933. It requires the US federal government to prefer American-made products in its procurement, with price preferences of twenty to fifty per cent and a domestic content threshold rising to seventy-five per cent by 2029.

It has been in continuous operation for ninety-three years.

Government procurement was excluded from the General Agreement on Tariffs and Trade from the day the agreement was drafted. It was built into the architecture of the global trading system by the country that designed the system.

Fifteen years later, the same country attached conditions to thirteen point three billion dollars in Marshall Plan reconstruction aid requiring European recipients to open their markets, reduce trade barriers, and create conditions favourable to American investment.

Six thousand European managers were sent on productivity missions to American factories. The Organisation for European Economic Cooperation (now the OECD) was created as an explicit precondition for receiving aid.

The Soviet Union refused the Marshall Plan despite needing reconstruction, because it recognised the conditions for what they were.

Buy American: 1933. Open European markets: 1948. The country that required Europe to open its procurement kept its own closed.

The Central Intelligence Agency funded approximately two-thirds of the budget of the European Movement in the 1950s.

The American Committee on United Europe, co-chaired by William Donovan, former head of the Office of Strategic Services, and Allen Dulles, future director of the CIA, channelled roughly four million dollars (forty-two million in today’s money) to a specific kind of European federalist: economically liberal, open-market, anti-state-aid.

Eisenhower wrote in his 1951 diary: “I am coming to believe that Europe’s security problem is never going to be solved satisfactorily until there exists a United States of Europe.”

The Treaty of Rome’s state-aid provisions, Articles 92 to 94, were drafted in this environment. They declared state aid generally incompatible with the common market.

Every subsidy required pre-approval from the Commission. These provisions today prevent a European In-Q-Tel. They prevent a European DARPA.

They prevent the kind of direct state investment in strategic technology that the United States has practised, continuously and at scale, since 1958.

The CHIPS and Science Act was introduced and signed into US law within two years. Fifty-two point seven billion dollars in direct subsidies. Twenty-four billion dollars in tax credits. No multi-country negotiation. No pre-approval from a supranational competition authority.

The equivalent European mechanism, the Important Projects of Common European Interest framework, requires months of multi-country negotiation, Commission approval, and compliance with state-aid rules that the United States does not have and has never had.

We follow the same goal at a different speed, because we follow rules America wrote but doesn’t follow.

Lock-In

In 2016 and 2017, Region Hovedstaden and Region Sjælland deployed Sundhedsplatformen, an electronic health records system covering approximately two point six million Danes.

The platform runs on Epic, the dominant American electronic health records vendor. Region Hovedstaden’s implementation cost approximately two billion Danish kroner. Region Sjælland paid roughly seven hundred million Danish kroner for the same software.

Combined annual operating costs are estimated by the regions at three hundred and fifty million kroner and by independent critics at closer to eight hundred million.

A Danish hospital CIO in 2014 evaluating electronic health records options had a defensible decision matrix. Epic dominated the market. Its product was deeper than any European equivalent. Its installed base meant that hiring trained clinical informaticians was straightforward.

The European alternatives were narrower in scope and shallower in production deployment. The CIO chose Epic. So did most other European public hospital systems that ran the same evaluation.

Schrems II changed the choice. American Epic personnel access Danish patient data as part of normal product support.

Region Hovedstaden’s defence is that the data is viewed but not stored in the United States. Under Schrems II, that doesn’t matter.

Access by US persons is what the CJEU’s reasoning bars, regardless of where the data is stored. The legal exposure is documented.

The exit cost is also documented: scrapping Sundhedsplatformen has been publicly estimated at billions of kroner and several years of operational risk, and a Danish citizen proposal to replace it has been formally registered.

The political and operational difficulty of replacement is what makes the original procurement decision unrepeatable yet unreversable.

The same dynamic plays at smaller scale across European public infrastructure.

In 2003, the city of Munich began migrating from Microsoft Windows and Office to a Linux distribution it called LiMux, with LibreOffice for productivity.

By December 2013 the migration covered roughly fifteen thousand desktops. In November 2017, Munich City Council voted to reverse the migration and return to Windows by 2020.

The Council approved forty-nine point three million euros for the reversal. Microsoft moved its German headquarters to Munich in September 2016, nine months before the reversal vote. The Mayor described himself publicly as a Microsoft fan.

The migration off proprietary American software was technically successful and politically defeated.

Munich teaches three things.

Switching costs run in both directions.

Political commitment to sovereignty erodes faster than technical commitment to it.

Vendor pressure adapts to whichever direction a city is moving.

The same ratchet operates in regulated finance. DORA Article 28, in force since 17 January 2025, requires that financial institutions can switch critical third-party providers.

On 18 November 2025, the European Supervisory Authorities formally designated AWS, Microsoft Azure, and Google Cloud as critical ICT third-party service providers.

Switching from a hyperscaler to a European provider like Hetzner or OVHcloud requires application rewriting, data migration, retraining, and operational redesign.

AWS data egress alone is priced at ninety dollars per terabyte. Moving fifty terabytes costs three thousand five hundred to seven thousand dollars before any of the actual switching work begins. The right to switch exists. The infrastructure to switch costs exists.

Most institutions, evaluating the same matrix the Danish hospital CIO faced in 2014, choose to stay.

The same dynamic explains why no European country has gone first on Buy European procurement.

The country that goes first pays the cost: American retaliation, supplier relationship damage, audit and migration overhead. Later movers receive the benefit: a precedent already established, a coalition already forming, a market already opening.

Every individual European country is rationally better off waiting for someone else to start. Every European country waiting at the same time produces decades of inaction.

Each decision is individually correct. The aggregate is one that no European country would vote for directly.

The Four Mechanisms

The rational trap is held in place by four mutually reinforcing mechanisms. They form one architecture.

The first is the constitutional asymmetry (Paper 7): Europe’s treaty base prohibits the state-anchored runway that American champions enjoy through In-Q-Tel, DARPA, SBIR, and Bayh-Dole.

The second is the demand-side gap (Paper 8): Europe spends on research and grants, not on production-scale procurement.

The result is companies like Mynaric, founded in Germany with world-class laser communications technology, ninety per cent of whose revenue came from American defence contracts before it filed for bankruptcy in February 2025 for lack of a European customer.

The third is innovation capture (Paper 9): European-trained talent and European-developed intellectual property route into American corporate vehicles by structural design.

Stripe is incorporated in Delaware. DeepMind was acquired by Google. ARM was sold to SoftBank. The pipeline does not need to relocate the people; the value moves anyway.

The fourth is the compliance industry (Paper 3): when infrastructure cannot be built, regulation is built in its place.

The Big Four firms hold four hundred and sixty-two million euros in EU Commission contracts and certify the same hyperscalers whose dominance European compliance is supposed to constrain.

Each mechanism is rational at the individual level. Each rational decision compounds the others. The architecture is what those decisions add up to when they were each correct on the day they were made.

The Bait Is Real

American technology is better.

Amazon alone planned more than one hundred billion dollars in capital expenditure for 2025. The five largest US technology companies spend a combined two hundred and twenty-nine billion dollars annually on research and development.

The United States controls roughly seventy-four per cent of high-end AI compute. Europe controls under five per cent. Mistral scores 81.2 on MMLU; GPT-4o scores 88.7. The capability gap is real.

The dual-use pipeline produced superior technology. State investment funded it. The products outperform European equivalents. The bait is real.

European engineers choose AWS because it works better, researchers choose American compute clusters because they are bigger, and founders choose Silicon Valley because the ecosystem is deeper.

These are rational responses to a capability gap.

The danger is that American technology is good. Quality hides dependency.

Europe has the capability. Europe lacks the rules that would let alternatives emerge at scale.

The rules were written. They can be rewritten.

The Redesign

We’ve already written the laws to require sovereignty. DORA, NIS2, GDPR under Schrems II, the public procurement directives. Read strictly, they require what this paper has been describing.

We need to mandate compliance across all public procurement, DORA-regulated entities, and NIS2 essential and important entities.

Buy American is a rule that has been on the statute book for ninety-three years. Buy European is a rule that has not yet been written.

The mandate does three things at once.

It creates the anchor demand European companies need to scale.

It dissolves the coordination problem: whoever closes the gap first wins the mandated customer base, so first-mover penalty becomes first-mover advantage.

And it makes our companies investable, because the customer base is defined, regulated, and dated.

The CIA’s six hundred million dollar AWS contract in 2013 turned a nascent capability into a viable market.

We’re already spending what we’d need to do the equivalent. We’re just spending it on American suppliers.

Two further moves let us catch up faster, but the mandate alone is enough.

Accelerator 1: rules-layer carve-outs. Treaty-level carve-outs for strategic digital infrastructure, modelled on EURATOM, Airbus, and Galileo, let our public money build companies directly the way In-Q-Tel built Palantir. The full rules-layer argument is in Paper 7.

Accelerator 2: capital-layer coordination. EuroStack’s three pillars (Buy European, Sell European, Fund European) and a coordinated EU-level investment vehicle compound European household capital into European suppliers. The full capital-architecture argument is in Paper 26.

Write the mandate. The rest follows.

Conclusion

€43 billion of European cloud spending flows to American firms every year. Redirected, it builds our own.

The rules we wrote made dependency the rational choice. We can rewrite them. We’ve done it before.

Nuclear: EURATOM. Aerospace: Airbus. Satellite navigation: Galileo. The euro itself.

Each exception was carved by someone placing the order.

Place the next one. Mandate compliance across public procurement, DORA-regulated entities, and NIS2 essential and important entities.

Let our champions grow.

In-Q-Tel was established by the CIA in 1999 to invest in commercial technology with national security applications. Its 2003-2004 investment in Palantir Technologies, of approximately $2 million, is among the most-cited cases of state-anchored venture capital in modern American technology history. See Frances Stonor Saunders, Who Paid the Piper? (Granta Books, 1999), and contemporary reporting on the In-Q-Tel investment portfolio.

Palantir Technologies (NASDAQ: PLTR) market capitalisation reached approximately $423 billion at its November 2025 peak and traded above $370 billion through late 2025. Trading data, Nasdaq; Bloomberg.

Direction Générale de la Sécurité Intérieure (DGSI), France’s domestic intelligence service, contracted Palantir Gotham in November 2015 following the 13 November 2015 Paris attacks. The contract was renewed in 2018 and again in 2025 for a further three-year term. See Le Monde reporting on the DGSI-Palantir contract (November 2015 onwards).

NHS England awarded Palantir an emergency contract in 2020 for the NHS COVID-19 Data Store. The original entry-stage contract value was reported at £1. By 2021, contracts had grown to 23 million pounds; in November 2023, NHS England awarded the Federated Data Platform contract to Palantir at a value of three hundred and thirty million pounds, rising to over three hundred and sixty million when associated services were included. See The Guardian, Open Democracy, and Computer Weekly reporting from 2020 to 2024.

British Medical Association UK Council resolution, January 2026, recommending that doctors should not provide patient data to the Federated Data Platform for any purpose other than direct patient care.

Buy American Act (41 U.S.C. §§8301-8305), enacted 3 March 1933.

General Agreement on Tariffs and Trade (1947); WTO Agreement on Government Procurement.

$173 billion in 2023-equivalent terms. See Michael J. Hogan, The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952 (Cambridge University Press, 1987); Bent Boel, The European Productivity Agency and Transatlantic Relations, 1953-1961 (Museum Tusculanum Press, 2003).

Hogan (1987), pp. 36-42.

Documented in declassified US government records. See Richard J. Aldrich, “OSS, CIA and European Unity: The American Committee on United Europe, 1948-60,” Diplomacy and Statecraft, Vol. 8, No. 1 (1997), pp. 184-227. See also Frances Stonor Saunders, Who Paid the Piper? (Granta Books, 1999).

Eisenhower diary entry, 11 June 1951. The Eisenhower Diaries, ed. Robert H. Ferrell (W.W. Norton, 1981).

Treaty of Rome (1957), Articles 92-94 (now Articles 107-109 TFEU).

CHIPS and Science Act, Pub. L. 117-167, signed 9 August 2022.

Sundhedsplatformen deployed across Region Hovedstaden (2016) and Region Sjælland (2017), covering approximately 2.6 million people in eastern Denmark. Region Hovedstaden’s implementation cost is reported at approximately 2 billion DKK (Ugeskriftet.dk, “Milliardregning for at skrotte Sundhedsplatformen”; Version2, “Epic og NNIT vinder milliardstor ordre paa sundhedsplatform”). Region Sjælland paid roughly 700 million DKK for the same software (DR News, “Knap tre gange saa dyrt som naboens”); the regions report combined annual operating costs at 350 million DKK while critics including Sundhedspolitisk Tidsskrift place the figure closer to 800 million DKK. A citizen proposal to scrap the platform has been registered (TV2 ØST, “Sundhedspersonale bag borgerforslag: Skrot Sundhedsplatformen”).

The Court of Justice of the European Union held in Schrems II (Case C-311/18, 16 July 2020) that US surveillance laws lack protections essentially equivalent to those required under EU law, with the implication that any access to EU personal data by US persons subject to US surveillance laws constitutes an unlawful transfer regardless of physical data location. Region Hovedstaden’s response, that data is “viewed but not stored” in the United States, does not address the legal point. See Version2 reporting on the post-Schrems II Sundhedsplatformen position.

Munich City Council vote, November 2017, approving 49.3 million euros for migration from LiMux to Windows 10 by 2020. Reuters and Silicon UK reporting.

Microsoft Deutschland relocated its German headquarters from Unterschleißheim to Munich in September 2016, nine months before the November 2017 Council vote. See Free Software Foundation Europe analysis (March 2017).

Regulation (EU) 2022/2554 (DORA), Article 28 et seq. AWS, Azure, and Google Cloud were designated critical ICT third-party service providers by the European Supervisory Authorities on 18 November 2025.

Amazon Web Services Internet Data Transfer Out pricing: $0.09 per GB for the first 10 TB per month from EC2 and S3 to the public internet, equivalent to $90 per terabyte. AWS S3 Pricing page; AWS EC2 Pricing page, 2025.

Defense Advanced Research Projects Agency (originally ARPA) was established on 7 February 1958 by President Eisenhower. The Bayh-Dole Act (Patent and Trademark Amendments of 1980, Pub. L. 96-517) permits universities and small businesses to retain title to federally funded inventions. The Small Business Innovation Research (SBIR) programme was established under the Small Business Innovation Development Act of 1982. Each of these mechanisms supports direct state investment in early-stage technology that EU state-aid rules generally prohibit without prior Commission approval.

Mynaric AG filed for protection under the German Corporate Stabilization and Restructuring Act (StaRUG) in February 2025. The restructuring plan was approved on 28 May 2025; the company was delisted on 2 June 2025. Mynaric reported that over 90 per cent of its order backlog was tied to United States defence customers prior to insolvency. Sources: Mynaric investor relations announcements; SpaceNews and Solactive coverage, 2025; Rocket Lab acquisition completion, 2026.

Euractiv investigation, 2020: between 2016 and 2019 the European Commission awarded €462 million in contracts to PwC, KPMG, Deloitte and EY. Breakdown: KPMG €154.84 million, EY €121.32 million, PwC €93.77 million, Deloitte €92.28 million. See also Corporate Europe Observatory, ‘Accounting for influence: how the Big Four are embedded in EU policy-making on tax avoidance’, 2018.

CNBC, “Amazon expects to spend $100 billion on capital expenditures in 2025,” 6 February 2025.

The five largest US technology companies (Amazon, Alphabet, Meta, Apple, Microsoft) collectively spent approximately $229 billion on research and development in the twelve months ending March 2024. Company annual reports.

Epoch AI and Georgetown University’s Center for Security and Emerging Technology, GeoCoded Special Report, “State of Global AI Compute,” 2025 Edition. The United States controls approximately 74.5 per cent of global high-end AI computing performance, China 14.1 per cent, the European Union 4.8 per cent.

Massive Multitask Language Understanding (MMLU) benchmark scores. Mistral Large (Mistral AI, February 2024) reported 81.2 per cent. GPT-4o (OpenAI, May 2024) reported 88.7 per cent. Sources: Mistral AI announcement ‘Au Large’, February 2024; OpenAI GPT-4o announcement, May 2024.

Commercial Cloud Services (C2S) contract, awarded by the Central Intelligence Agency to Amazon Web Services in 2013 for approximately $600 million over ten years, providing cloud infrastructure to the CIA and the seventeen agencies of the United States Intelligence Community. Sources: Washington Post, ‘The Details About the CIA’s Deal With Amazon’, 17 July 2014; Washington Technology, ‘Amazon win restarts CIA cloud contract’, October 2013.

EURATOM: Treaty establishing the European Atomic Energy Community, signed 25 March 1957 in Rome, in force 1 January 1958, providing a separate legal basis for nuclear-sector state coordination outside ordinary state-aid constraints. Airbus: Airbus Industrie GIE constituted on 18 December 1970 between France’s Aérospatiale and West Germany’s Deutsche Airbus, with development costs underwritten by member-state governments. Galileo: Council Regulation (EC) No 876/2002 of 21 May 2002 set up the Galileo Joint Undertaking to fund and develop the European satellite navigation system.

EuroStack initiative, launched at the European Parliament conference ‘Toward European Digital Independence: Building the EuroStack’ on 24 September 2024 in Brussels, organised by Cristina Caffarra, Francesca Bria and Meredith Whittaker. Over 80 organisations signed the supporting letter published January 2025. The Bertelsmann Stiftung estimates a decade-long transformation requiring approximately €300 billion in investment.

Synergy Research Group, European Cloud Infrastructure Market data, 2024. The total European cloud infrastructure market reached approximately €61 billion in 2024, with US hyperscalers (Amazon Web Services, Microsoft Azure, Google Cloud) holding around 70 per cent regional market share, equivalent to approximately €43 billion captured by American firms annually. European providers held approximately 15 per cent, down from 29 per cent in 2017.