🔗 Share this article

Donald Trump's national security strategy presents a flawed assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies pose an grave threat to the continent's identity. However, this perspective rests on a fundamental misreading of the reality. The actual challenge facing the EU is not cultural but economic and technological backwardness.

A Glaring Growth Gap Separating Europe and the US

Statistics paint a sobering contrast. From 2008 and 2023, American economic output surged by 87%, while a mere 13.5% growth for the EU. During this period, EU GDP per capita fell from over three-quarters to just half of the US level. Strikingly, even Mississippi now boasts a greater average income than major EU nations like France and Italy.

Currently, about half of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Shortfall: A Critical Problem

This widening disparity stems from superior efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is decidedly US-centric. Over the past five decades, hundreds of American startups have scaled into enterprises valued at over ten billion dollars, versus just 14 in Europe.

This gap prompts a vital question: In the race for future industries like AI, semiconductors, and fusion energy, what is Europe positioned? Experts widely concede it is largely a two-horse race between the United States and China, with European nations starting at a significant disadvantage.

Underlying Factors of the Continent's Technological Lag

Several major reasons explain this innovation chasm.

• Venture Capital: The US boasts a far deeper and agile network for funding startups. Europe has yet to establish a genuine capital markets union, which limits the scale of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A American entrepreneur can introduce a service under a single regulatory framework to access a market of over 330 million. The European Union, despite a larger population, is divided among twenty-seven separate systems, creating significant market obstacles.
• Cultural Attitudes: Views on risk-taking differ sharply. In parts of Europe, business failure was once met with stigma, whereas in the United States, it is often seen as a badge of experience.
• Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its ability in breakthrough innovation.

A Path Forward: Grounds for Hopefulness

Despite these challenges, there are causes for optimism. Policymakers are increasingly aware of the severe threat and have begun to advance substantial change. Key analyses on EU competitiveness and the single market highlight the need for sweeping changes.

Given appropriate incentives and rule changes, Europe's strengths might enable far greater degrees of business-led breakthroughs.

The continent still possesses significant advantages: skilled human capital, excellent education systems, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in developing cutting-edge technologies, it can still significantly increase economic output by adopting and adapting advancements from other regions.

A Critical Juncture

The European Union now faces a critical moment. As the saying goes, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. But, if it fails to take decisive action to address its deep-seated problems, today's slow erosion could give way to a sudden and irreversible decline in world influence.