🔗 Share this article

Donald Trump's national security strategy offers a flawed view of the European Union. The document asserts that open-border policies and so-called "progressive" policies represent an grave threat to the continent's identity. However, this perspective rests on a fundamental misreading of the reality. The actual danger facing Europe is not cultural but technological and economic lag.

A Glaring Growth Divide Between Europe and the US

Statistics reveal a sobering picture. From 2008 and 2023, American economic output grew by 87%, compared to a paltry thirteen and a half percent growth for the EU. Over this period, EU GDP per capita fell from 76.5% to just half of the American figure. Strikingly, even the poorest US state now boasts a greater average income than several leading European economies like France and Italy.

Today, about half of the world’s top fifty technology firms are US-based, while only four are European.

The Innovation Deficit: The Core Problem

The growing economic gap is driven by stronger efficiency gains in the United States, fueled by technological innovation and higher total factor productivity. The scene of world technology dominance is decidedly American. Over the past five decades, 241 US firms have scaled into enterprises valued at over $10bn, versus just 14 in the European continent.

This gap raises a vital question: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely concede it is essentially a contest between two between the US and China, with Europe entering at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

A number of major factors explain this technological divide.

• Financing Ecosystem: The United States has a far deeper and agile system for financing new ventures. Europe has yet to establish a true unified investment market, a factor that limits the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided regulation hinder Europe. A US startup can introduce a service under a single regulatory framework to access a market of over 330 million. The European Union, despite a bigger population size, is divided among 27 separate systems, creating huge market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was historically viewed with stigma, whereas in the US, it is often considered a valuable lesson.
• Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its capacity for pioneering research.

A Path Forward: Reasons for Cautious Optimism

In spite of these challenges, there are causes for hope. European leaders are increasingly aware of the severe threat and have begun to advance substantial change. Key analyses on EU competitiveness and the single market highlight the necessity of sweeping reforms.

Given appropriate incentives and rule changes, these assets could support far greater degrees of commercial innovation.

The continent retains significant advantages: high-quality human capital, top-tier schools and universities, and premier research institutions. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in creating cutting-edge technologies, it can still significantly increase economic output by adopting and adapting advancements from other regions.

A Critical Juncture

Europe now faces a critical moment. As the saying goes, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been steady. However, if it fails to take bold steps to address its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible loss of global economic relevance.