Donald Trump's security policy document offers a misguided assessment of Europe. It claims that open-border policies and what it terms "progressive" agendas pose an existential risk to the continent's identity. However, this perspective is based on a serious misinterpretation of the situation. The true danger facing the EU is not cultural but economic and technological backwardness.
The Stark Economic Gap Separating Europe and the US
The data paint a stark contrast. From 2008 and 2023, US GDP surged by 87%, compared to a mere 13.5% growth for the European Union. Over this period, EU GDP per capita fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major European economies like France and Italy.
Today, about half of the global top fifty tech companies are American, while only four are European.
The Innovation Deficit: The Core Question
The growing economic gap stems from superior productivity growth in the US, largely due to breakthroughs and better use of resources. The landscape of world technology dominance is decidedly American. Over the past five decades, 241 US firms have scaled into enterprises valued at more than $10bn, versus only fourteen in the European continent.
This disparity prompts a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, where does the EU stand? Most analysts concede it is essentially a contest between two between the US and China, with Europe starting at a significant handicap.
Underlying Factors of Europe's Technological Lag
Several key reasons explain this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for funding startups. Europe has yet to establish a true unified investment market, which caps the scale of new firms.
- Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can introduce a service under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population size, is divided among 27 different national regimes, creating huge market obstacles.
- Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was once met with penalties, whereas in the United States, it is often considered a badge of experience.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in defense has weakened its ability in pioneering research.
A Path Forward: Grounds for Cautious Optimism
In spite of these hurdles, one can find reasons for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance serious reform. Notable analyses on EU competitiveness and the single market highlight the need for sweeping reforms.
Given appropriate incentives and regulatory reforms, these assets might enable far greater degrees of commercial innovation.
The continent still possesses considerable strengths: high-quality workforce, excellent education systems, and world-class labs. Alongside a vast domestic consumer base and high savings rates, these foundations could trigger a surge of investment and entrepreneurship.
Importantly, even if the EU does not become the leader in developing next-generation technologies, it can still significantly increase economic output by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now stands at a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. But, without decisive action to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.
