The recent US national security strategy presents a flawed assessment of the European Union. It claims that open-border policies and so-called "progressive" policies represent an existential threat to European civilization. However, this perspective is based on a fundamental misreading of the situation. The actual danger confronting the EU is not cultural but technological and economic backwardness.
The Stark Growth Divide Between Europe and the US
Statistics paint a stark picture. Between 2008 and 2023, American economic output grew by 87%, while a paltry thirteen and a half percent increase for the EU. Over this period, European income per person fell from 76.5% to just half of the American figure. Remarkably, even Mississippi now has a greater average income than several leading EU nations like France and Italy.
Currently, roughly half of the world’s 50 largest technology firms are US-based, while only four are from Europe.
The Technological Deficit: A Critical Problem
The growing economic gap stems from stronger productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The scene of world technology leadership is overwhelmingly American. Over the past fifty years, 241 US firms have scaled into companies valued at more than ten billion dollars, compared with just 14 in Europe.
This gap raises a pressing question: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is the EU positioned? Experts widely concede it is essentially a two-horse race involving the United States and China, with European nations starting at a clear disadvantage.
Underlying Factors of Europe's Technological Lag
Several major reasons account for this technological divide.
- Financing Ecosystem: The US boasts a much more robust and more dynamic network for funding startups. Europe still lacks a genuine unified investment market, which limits the scale of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented regulation hamper European business. A US startup can launch a service under a single regulatory framework to access a market of hundreds of millions. The European Union, despite a larger population size, is divided among 27 different national systems, creating significant internal barriers.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In some EU nations, business failure was historically viewed with penalties, whereas in the US, it is often considered a badge of experience.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Grounds for Hopefulness
In spite of these challenges, one can find causes for optimism. Policymakers are increasingly aware of the existential challenge and have begun to advance substantial change. Notable analyses on European competitiveness and the internal market highlight the need for sweeping reforms.
With the right incentives and rule changes, these assets could support much higher degrees of commercial innovation.
Europe still possesses significant strengths: skilled human capital, excellent education systems, and premier research institutions. Alongside a large internal market and high savings rates, these foundations have the potential to unleash a new wave of venture creation.
Importantly, even if the EU does not take the lead in creating cutting-edge technologies, it can still significantly increase productivity by adopting and adapting advancements from other regions.
A Critical Juncture
Europe now faces a decisive moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's slide in innovation has been gradual. However, if it fails to take decisive action to address its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
