The recent US national security strategy presents a misguided assessment of Europe. It claims that open-border policies and so-called "woke" policies represent an grave threat to European civilization. However, this argument rests on a fundamental misreading of the reality. The true danger facing Europe is not societal but economic and technological backwardness.
A Glaring Economic Divide Separating the US and Europe
Statistics reveal a sobering picture. Between 2008 and 2023, US GDP grew by 87%, while a paltry thirteen and a half percent growth for the EU. During this period, EU GDP per capita dropped from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now has a greater average income than several leading EU nations like France and Italy.
Today, roughly half of the global 50 largest tech companies are American, while only four are European.
The Technological Shortfall: The Core Problem
This widening disparity is driven by stronger efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly US-centric. Over the past fifty years, 241 US firms have scaled into enterprises valued at over $10bn, versus just 14 in the European continent.
This gap prompts a pressing question: As the competition for tomorrow's sectors like semiconductors, AI, 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 significant handicap.
Root Causes of Europe's Technological Lag
A number of key factors explain this technological divide.
- Venture Capital: The United States has a much more robust and more dynamic network for funding startups. The EU has yet to establish a true unified investment market, a factor that limits the scale of new firms.
- Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A American entrepreneur can launch a product under a single set of laws to access a consumer base of over 330 million. The European Union, despite a bigger population size, is split among 27 separate regimes, creating significant market obstacles.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was once met with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its capacity for breakthrough innovation.
A Path Forward: Reasons for Hopefulness
In spite of these challenges, there are causes for optimism. Policymakers are growing more conscious of the existential challenge and have begun to advance substantial change. Key analyses on European competitiveness and the internal market highlight the necessity of sweeping reforms.
Given appropriate policies and regulatory reforms, these assets could support much higher levels of commercial innovation.
The continent retains significant strengths: skilled workforce, top-tier schools and universities, and world-class research institutions. Coupled with a large internal market and substantial household savings, these elements could trigger a new wave of venture creation.
Crucially, even if the EU does not become the leader in developing next-generation technologies, it can still dramatically increase productivity by implementing and tailoring innovations from other regions.
An Inflection Point
The European Union now stands at a decisive crossroads. As the saying goes, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. But, if it fails to take decisive action to address its structural weaknesses, today's gradual weakening could give way to a rapid and permanent decline in global economic relevance.
