🔗 Share this article

Donald Trump's security policy document offers a flawed view of Europe. It claims that open-border policies and what it terms "woke" agendas represent an existential threat to European civilization. However, this argument rests on a fundamental misinterpretation of the situation. The actual danger facing the EU is not societal but economic and technological backwardness.

The Stark Economic Divide Between the US and Europe

Statistics paint a sobering picture. From 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent increase for the EU. During this time, European income per person fell from over three-quarters to just half of the US level. Remarkably, even Mississippi now boasts a greater average income than several leading European economies like France and Italy.

Today, about 50% of the global top fifty technology firms are American, while a mere four are European.

The Innovation Shortfall: The Core Problem

This widening economic gap is driven by stronger productivity growth in the US, fueled by technological innovation and higher total factor productivity. The landscape of global tech dominance is decidedly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at over ten billion dollars, versus just 14 in the European continent.

This gap raises a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and fusion energy, where does Europe stand? Experts widely concede it is largely a contest between two between the United States and China, with Europe entering at a clear disadvantage.

Underlying Factors of Europe's Technological Lag

A number of major factors explain this technological divide.

• Financing Ecosystem: The US boasts a far deeper and agile system for funding startups. The EU has yet to establish a genuine unified investment market, a factor that limits the scale of new firms.
• Bureaucratic Hurdles: Excessive and fragmented rules hamper Europe. A US startup can introduce a service under a single regulatory framework to access a consumer base of hundreds of millions. The European Union, despite a larger population size, is divided among twenty-seven different national regimes, creating huge market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, business failure was once met with stigma, whereas in the US, it is often seen as a badge of experience.
• Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.

The Road Ahead: Reasons for Hopefulness

In spite of these challenges, there are reasons for hope. European leaders are increasingly aware of the severe threat and have started to propose substantial change. Notable analyses on European competitiveness and the internal market highlight the necessity of major changes.

With the right policies and rule changes, these assets could support far greater levels of commercial innovation.

The continent retains considerable advantages: high-quality workforce, excellent schools and universities, and world-class research institutions. Alongside a large internal market and substantial household savings, these foundations could trigger a surge of investment and entrepreneurship.

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

An Inflection Point

The European Union now stands at a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's slide in innovation has been steady. But, without bold steps to tackle its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in global economic relevance.