Donald Trump's national security strategy presents a misguided assessment of the European Union. It claims that open-border policies and what it terms "progressive" policies pose an grave risk to European civilization. However, this argument is based on a serious misinterpretation of the reality. The true danger confronting Europe is not societal but economic and technological backwardness.
A Glaring Economic Gap Between Europe and the US
Statistics reveal a stark picture. Between 2008 and 2023, American economic output grew by eighty-seven percent, while a paltry thirteen and a half percent growth for the EU. During this period, EU GDP per capita dropped from 76.5% to just half of the US level. Strikingly, even the poorest US state now boasts a greater average income than major EU nations like France and Italy.
Today, about half of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Deficit: A Critical Problem
The growing disparity is driven by superior productivity growth in the US, largely due to technological innovation and higher total factor productivity. The scene of world technology dominance is overwhelmingly American. Over the past fifty years, hundreds of American startups have grown into enterprises valued at over $10bn, versus just 14 in the European continent.
This disparity raises a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, where does Europe positioned? Experts widely concede it is essentially a contest between two between the United States and China, with Europe starting at a significant handicap.
Underlying Factors of the Continent's Technological Lag
A number of key factors account for this innovation chasm.
- Venture Capital: The US boasts a much more robust and agile system for funding startups. Europe has yet to establish a genuine capital markets union, a factor that limits the scale of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented rules hamper Europe. A US startup can introduce a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a bigger population size, is split among 27 different national regimes, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward risk-taking vary greatly. In parts of Europe, a startup's collapse was once met with penalties, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its ability in breakthrough innovation.
The Road Ahead: Grounds for Hopefulness
Despite these hurdles, there are causes for hope. European leaders are growing more conscious of the severe threat and have begun to propose serious reform. Key reports on European competitiveness and the single market highlight the necessity of major reforms.
With the right policies and regulatory reforms, Europe's strengths could support far greater degrees of commercial innovation.
The continent retains considerable strengths: high-quality human capital, top-tier schools and universities, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements have the potential to trigger a surge of venture creation.
Importantly, even if Europe does not take the lead in creating next-generation technologies, it can still significantly boost productivity by implementing and tailoring innovations from elsewhere.
An Inflection Point
The European Union now faces a critical crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, the continent's technological decline has been steady. However, if it fails to take decisive action to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.
