Donald Trump's security policy document presents a flawed view of Europe. It claims that open-border policies and what it terms "progressive" policies pose an grave threat to European civilization. Yet, this argument is based on a fundamental misreading of the reality. The actual danger facing the EU is not societal but technological and economic lag.
A Glaring Growth Gap Between Europe and the US
The data reveal a stark contrast. Between 2008 and 2023, US GDP grew by eighty-seven percent, compared to a paltry thirteen and a half percent growth for the European Union. During this period, EU GDP per capita fell from over three-quarters to just half of the US level. Strikingly, even the poorest US state now boasts a higher per capita income than major European economies like Italy and France.
Today, about 50% of the global top fifty technology firms are American, while a mere four are European.
The Technological Deficit: The Core Question
The growing disparity is driven by stronger efficiency gains in the United States, fueled by breakthroughs and better use of resources. The landscape of world technology leadership is decidedly US-centric. Over the past fifty years, hundreds of American startups have scaled into companies valued at more than $10bn, compared with only fourteen in Europe.
This disparity prompts a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU positioned? Most analysts agree it is essentially a two-horse race involving the United States and China, with European nations starting at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key factors explain this technological divide.
- Venture Capital: The US boasts a far deeper and more dynamic system for funding startups. The EU has yet to establish a genuine capital markets union, which caps the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can launch a service under a single set of laws to access a market of hundreds of millions. The EU, despite a bigger population size, is split among twenty-seven separate regimes, creating huge market obstacles.
- Mindset Differences: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was historically viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
- Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
Despite these challenges, there are reasons for hope. European leaders are increasingly aware of the existential challenge and have begun to advance serious reform. Notable reports on European competitiveness and the single market point to the necessity of sweeping changes.
With the right incentives and rule changes, Europe's strengths could support far greater levels of commercial innovation.
The continent still possesses significant strengths: high-quality workforce, top-tier education systems, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements could unleash a surge of investment and entrepreneurship.
Crucially, even if Europe does not take the lead in developing next-generation technologies, 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, economic erosion often happens "slowly, then all at once". To date, Europe's slide in innovation has been steady. But, if it fails to take bold steps to address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of global economic relevance.
