🔗 Share this article

Donald Trump's national security strategy offers a misguided view of Europe. The document asserts that open-border policies and so-called "progressive" policies represent an existential threat to European civilization. However, this argument is based on a serious misinterpretation of the reality. The true challenge facing Europe is not societal but technological and economic lag.

A Glaring Growth Gap Separating the US and Europe

The data paint a sobering contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, while a mere 13.5% growth for the EU. During this period, EU GDP per capita dropped from over three-quarters to just 50% of the American figure. Remarkably, even the poorest US state now boasts a higher per capita income than major EU nations like Italy and France.

Currently, about half of the global top fifty technology firms are American, while a mere four are European.

The Technological Shortfall: A Critical Problem

The growing disparity stems from superior productivity growth in the United States, largely due to breakthroughs and better use of resources. The scene of global tech leadership is overwhelmingly American. In the last five decades, 241 US firms have scaled into companies valued at more than ten billion dollars, versus just 14 in Europe.

This gap raises a vital issue: As the competition for tomorrow's sectors like AI, semiconductors, and fusion energy, what is the EU stand? Most analysts concede it is largely a contest between two between the United States and China, with Europe entering at a significant handicap.

Root Causes of the Continent's Technological Lag

A number of key factors explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. Europe has yet to establish a genuine capital markets union, which caps the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented rules hamper Europe. A US startup can introduce a service under one regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population size, is divided among 27 different national regimes, creating significant internal barriers.
• Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.

The Road Ahead: Grounds for Cautious Optimism

In spite of these challenges, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have started to propose serious reform. Notable analyses on European competitiveness and the internal market highlight the need for sweeping changes.

Given appropriate incentives and regulatory reforms, these assets could support much higher levels of commercial innovation.

Europe still possesses significant advantages: skilled human capital, excellent schools and universities, and premier labs. Alongside a vast domestic consumer base and substantial household savings, these elements could trigger a surge of venture creation.

Crucially, even if the EU does not become the leader in creating next-generation tech, it can still significantly boost economic output by adopting and adapting advancements from elsewhere.

A Critical Juncture

The European Union now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's technological decline has been steady. But, if it fails to take bold steps to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.