The recent US national security strategy presents a misguided view of the European Union. The document asserts that open-border policies and what it terms "progressive" agendas pose an grave risk to European civilization. However, this argument is based on a serious misreading of the reality. The actual challenge facing Europe is not cultural but technological and economic backwardness.
The Stark Economic Gap Separating the US and Europe
The data paint a sobering picture. Between 2008 and 2023, US GDP grew by 87%, while a paltry 13.5% growth for the EU. During this period, European income per person fell from 76.5% to just 50% of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major EU nations like France and Italy.
Today, roughly half of the global top fifty tech companies are US-based, while only four are from Europe.
The Innovation Deficit: The Core Question
This widening economic gap is driven by stronger productivity growth in the US, largely due to breakthroughs and higher total factor productivity. The landscape of global tech leadership 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 disparity prompts a pressing question: As the competition for future industries like AI, semiconductors, and quantum computing, what is the EU positioned? Experts widely concede it is largely a contest between two involving the US and China, with European nations starting at a significant handicap.
Underlying Factors of the Continent's Technological Lag
Several key reasons explain this technological divide.
- Financing Ecosystem: The US boasts a much more robust and agile system for funding startups. Europe has yet to establish a genuine unified investment market, which caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided rules hinder Europe. A American entrepreneur can launch a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a bigger population, is divided among 27 different national systems, creating huge internal barriers.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the US, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.
A Path Forward: Reasons for Hopefulness
Despite these hurdles, one can find reasons for optimism. Policymakers are increasingly aware of the severe threat and have started to advance substantial change. Notable analyses on European competitiveness and the internal market highlight the need for major reforms.
With the right policies and rule changes, Europe's strengths could support much higher degrees of commercial innovation.
The continent still possesses considerable advantages: skilled workforce, excellent education systems, and premier labs. Alongside a vast domestic consumer base and substantial household savings, these elements could unleash a surge of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in creating cutting-edge technologies, it can still significantly increase productivity by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now faces a decisive moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, Europe's slide in innovation has been gradual. But, without decisive action to tackle its deep-seated problems, today's slow erosion could turn into a rapid and permanent loss of global economic relevance.
