Donald Trump's security policy document presents a misguided assessment of Europe. The document asserts that open-border policies and so-called "progressive" agendas represent an grave risk to European civilization. However, this perspective is based on a serious misinterpretation of the reality. The actual danger confronting the EU is not societal but technological and economic lag.
A Glaring Growth Gap Between Europe and the US
Statistics paint a sobering contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent increase for the EU. Over this time, EU GDP per capita fell from 76.5% to just 50% of the US level. Remarkably, even the poorest US state now has a greater average income than major European economies like Italy and France.
Currently, about 50% of the world’s 50 largest technology firms are US-based, while a mere four are European.
The Technological Deficit: A Critical Question
The growing economic gap is driven by superior efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The scene of world technology leadership is overwhelmingly US-centric. Over the past fifty years, hundreds of American startups have grown into companies valued at over ten billion dollars, compared with just 14 in Europe.
This gap prompts a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU positioned? Experts widely concede it is largely a contest between two between the US and China, with European nations starting at a significant handicap.
Root Causes of the Continent's Technological Lag
A number of major reasons account for this innovation chasm.
- Venture Capital: The US boasts a far deeper and agile network for financing new ventures. Europe still lacks a true unified investment market, a factor that caps the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hamper Europe. A US startup can introduce a product under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a bigger population size, is divided among 27 separate systems, creating significant market obstacles.
- Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with stigma, whereas in the United States, it is often considered a badge of experience.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
Despite these challenges, there are causes for optimism. Policymakers are increasingly aware of the existential challenge and have started to propose substantial change. Key reports on EU competitiveness and the internal market point to the necessity of major changes.
With the right policies and rule changes, Europe's strengths could support much higher levels of business-led breakthroughs.
Europe retains considerable strengths: high-quality human capital, excellent schools and universities, and premier labs. Alongside a large internal market and high savings rates, these foundations have the potential to unleash a new wave of venture creation.
Importantly, even if the EU does not become the leader in creating cutting-edge tech, it can still dramatically boost economic output by implementing and tailoring advancements from elsewhere.
A Critical Juncture
The European Union now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's slide in innovation has been steady. But, if it fails to take bold steps to tackle its deep-seated problems, today's gradual weakening could give way to a rapid and permanent loss of global economic relevance.
