Donald Trump's national security strategy presents a flawed assessment of Europe. It claims that open-border policies and what it terms "woke" policies represent an grave risk to the continent's identity. However, this argument is based on a serious misreading of the situation. The true danger confronting the EU is not societal but technological and economic backwardness.
A Glaring Economic Gap Between Europe and the US
The data reveal a sobering picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, while a mere thirteen and a half percent increase for the EU. Over this period, European income per person dropped from 76.5% to just half of the American figure. Remarkably, even Mississippi now boasts a higher per capita income than major EU nations like Italy and France.
Today, about 50% of the global 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Shortfall: A Critical Question
This widening economic gap is driven by stronger productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The scene of global tech dominance is overwhelmingly US-centric. Over the past five decades, 241 US firms have scaled into companies valued at more than ten billion dollars, compared with just 14 in Europe.
This gap prompts a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and fusion energy, where does Europe stand? Most analysts concede it is essentially a contest between two involving the United States and China, with European nations entering at a clear disadvantage.
Root Causes of Europe's Technological Lag
A number of key factors account for this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and agile system for funding startups. The EU still lacks a true capital markets union, which limits the growth potential of new firms.
- Regulatory Fragmentation: Complex and divided rules hamper Europe. A American entrepreneur can introduce a product under one set of laws to access a market of over 330 million. The EU, despite a bigger population size, is divided among twenty-seven separate regimes, creating huge market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was historically met with stigma, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. The continent's long-term lack of spending in defense has weakened its ability in breakthrough innovation.
A Path Forward: Reasons for Hopefulness
Despite these hurdles, there are causes for optimism. European leaders are growing more conscious of the existential challenge and have begun to propose serious reform. Key reports on EU competitiveness and the single market point to the necessity of sweeping changes.
With the right incentives and regulatory reforms, these assets could support much higher degrees of commercial innovation.
Europe still possesses considerable strengths: skilled human capital, top-tier education systems, and world-class research institutions. Alongside a large internal market and high savings rates, these elements have the potential to trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in creating cutting-edge technologies, it can still dramatically boost productivity by adopting and adapting advancements from elsewhere.
An Inflection Point
The European Union now stands at a decisive crossroads. As the saying goes, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. But, if it fails to take decisive action to address its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible loss of world influence.
