The recent US national security strategy offers a misguided assessment of Europe. It claims that open-border policies and what it terms "progressive" policies represent an grave threat to European civilization. Yet, this perspective is based on a serious misreading of the situation. The actual danger confronting Europe is not societal but technological and economic backwardness.
The Stark Growth Gap Between Europe and the US
Statistics reveal a stark contrast. From 2008 and 2023, US GDP grew by eighty-seven percent, compared to a paltry 13.5% growth for the EU. Over this time, EU GDP per capita dropped from over three-quarters to just half of the US level. Remarkably, even Mississippi now boasts a greater average income than major EU nations like Italy and France.
Currently, roughly 50% of the world’s top fifty tech companies are US-based, while a mere four are from Europe.
The Technological Shortfall: A Critical Problem
This widening economic gap stems from stronger efficiency gains in the United States, largely due to breakthroughs and better use of resources. The scene of global tech leadership is decidedly US-centric. Over the past fifty years, hundreds of American startups have grown into companies valued at more than $10bn, compared with just 14 in the European continent.
This gap raises a pressing issue: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, what is the EU positioned? Most analysts concede it is largely a two-horse race between the US and China, with Europe starting at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
Several major factors explain this technological divide.
- Venture Capital: The United States has a much more robust and agile system for funding startups. The EU still lacks a true capital markets union, which limits the scale of emerging companies.
- Regulatory Fragmentation: Complex and divided regulation hamper Europe. A US startup can launch a service under a single regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population size, is divided among twenty-seven different national regimes, creating significant internal barriers.
- Mindset Differences: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was historically met with stigma, whereas in the United States, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its capacity for breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these challenges, there are causes for optimism. European leaders are growing more conscious of the severe threat and have started to propose serious reform. Notable analyses on EU competitiveness and the single market point to the need for sweeping changes.
With the right policies and rule changes, Europe's strengths might enable much higher levels of commercial innovation.
Europe still possesses considerable advantages: high-quality workforce, top-tier education systems, and premier labs. Alongside a large internal market and high savings rates, these foundations have the potential to trigger a surge of venture creation.
Importantly, even if the EU does not take the lead in creating next-generation tech, it can still dramatically boost productivity by adopting and adapting advancements from other regions.
An Inflection Point
The European Union now faces a critical moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. But, without bold steps to address its structural weaknesses, today's slow erosion could turn into a rapid and permanent loss of global economic relevance.
