Donald Trump's security policy document presents a misguided assessment of Europe. It claims that open-border policies and so-called "progressive" agendas represent an existential threat to European civilization. Yet, this argument rests on a fundamental misreading of the situation. The true challenge confronting the EU is not societal but technological and economic lag.
A Glaring Growth Gap Between the US and Europe
Statistics paint a sobering contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, while a paltry 13.5% increase for the EU. During this period, European income per person dropped from over three-quarters to just half of the American figure. Strikingly, even Mississippi now boasts a greater average income than several leading EU nations like France and Italy.
Currently, about half of the global top fifty tech companies are US-based, while only four are from Europe.
The Technological Deficit: The Core Question
The growing economic gap is driven by superior productivity growth in the United States, fueled by breakthroughs and better use of resources. The scene of world technology dominance is decidedly US-centric. In the last five decades, 241 US firms have scaled into companies valued at more than $10bn, versus just 14 in the European continent.
This disparity raises a pressing issue: In the race for future industries like AI, semiconductors, 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 entering at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key factors account for this technological divide.
- Venture Capital: The US boasts a much more robust and agile system for financing new ventures. Europe still lacks a genuine capital markets union, which limits the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A US startup can introduce a product under one regulatory framework to access a market of over 330 million. The European Union, despite a bigger population, is divided among 27 different national systems, creating significant internal barriers.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the United States, it is often seen as a valuable lesson.
- Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.
A Path Forward: Reasons for Hopefulness
Despite these challenges, one can find reasons for optimism. European leaders are increasingly aware of the severe threat and have begun to propose serious reform. Notable analyses on EU competitiveness and the single market point to the need for major reforms.
With the right incentives and rule changes, Europe's strengths could support much higher degrees of business-led breakthroughs.
The continent retains significant advantages: skilled workforce, excellent schools and universities, and world-class labs. Coupled with a vast domestic consumer base and high savings rates, these elements have the potential to trigger a new wave of investment and entrepreneurship.
Crucially, even if Europe does not become the leader in creating cutting-edge technologies, it can still significantly increase economic output by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now faces a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, the continent's technological decline has been steady. However, without decisive action to address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of world influence.
