The recent US national security strategy presents a flawed view of the European Union. It claims that open-border policies and what it terms "progressive" policies pose an grave risk to European civilization. Yet, this perspective is based on a serious misreading of the situation. The true danger facing Europe is not cultural but technological and economic lag.
A Glaring Growth Divide Between the US and Europe
Statistics paint a sobering picture. From 2008 and 2023, American economic output surged by eighty-seven percent, compared to a mere 13.5% increase for the EU. Over this time, European income per person fell from 76.5% to just half of the US level. Remarkably, even the poorest US state now boasts a greater average income than major European economies like Italy and France.
Currently, about 50% of the global 50 largest tech companies are American, while only four are from Europe.
The Technological Shortfall: The Core Problem
The growing disparity is driven by stronger efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The scene of world technology dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into enterprises valued at over ten billion dollars, compared with just 14 in Europe.
This gap raises a pressing question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU stand? Most analysts agree it is essentially a two-horse race involving the United States and China, with Europe starting at a clear disadvantage.
Root Causes of Europe's Technological Lag
Several key factors account for this technological divide.
- Venture Capital: The United States has a far deeper and agile network 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: Complex and divided rules hinder Europe. A American entrepreneur can introduce a product under a single set of laws 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.
- Mindset Differences: Views on entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was once met with stigma, whereas in the United States, it is often considered a badge of experience.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has eroded its capacity for breakthrough innovation.
A Path Forward: Reasons for Hopefulness
Despite these hurdles, there are reasons for optimism. Policymakers are growing more conscious of the severe threat and have begun to advance serious reform. Notable reports on European competitiveness and the single market highlight the need for sweeping reforms.
Given appropriate incentives and rule changes, Europe's strengths might enable much higher levels of business-led breakthroughs.
Europe retains considerable strengths: skilled workforce, excellent schools and universities, and premier research institutions. Coupled with a large internal market and substantial household savings, these elements could trigger a surge of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating next-generation tech, it can still dramatically boost economic output by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now faces a critical crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's slide in innovation has been gradual. But, without bold steps to address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
