The recent US national security strategy offers a misguided assessment of the European Union. The document asserts that open-border policies and so-called "progressive" policies represent an existential threat to European civilization. However, this perspective rests on a serious misinterpretation of the reality. The actual danger confronting Europe is not societal but technological and economic backwardness.
The Stark Growth Divide Between Europe and the US
The data reveal a stark picture. Between 2008 and 2023, American economic output surged by eighty-seven percent, while a mere thirteen and a half percent increase for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than major EU nations like France and Italy.
Today, roughly 50% of the global 50 largest tech companies are US-based, while only four are from Europe.
The Innovation Deficit: A Critical Question
This widening economic gap is driven by superior efficiency gains in the US, fueled by technological innovation and better use of resources. The scene of global tech dominance is overwhelmingly US-centric. Over the past five decades, hundreds of American startups have grown into enterprises valued at more than $10bn, versus just 14 in Europe.
This disparity prompts a vital issue: In the race for future industries like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely concede it is largely a contest between two involving the US and China, with European nations entering at a clear handicap.
Root Causes of the Continent's Technological Lag
Several major reasons account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic network for funding startups. Europe still lacks a genuine unified investment market, which caps the scale of emerging companies.
- Regulatory Fragmentation: Complex and divided regulation hamper European business. A US startup can launch a product under a single set of laws to access a market of over 330 million. The EU, despite a larger population, is split among 27 separate systems, creating huge internal barriers.
- Cultural Attitudes: Views on risk-taking differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has weakened its ability in breakthrough innovation.
The Road Ahead: Grounds for Cautious Optimism
Despite these challenges, there are causes for optimism. European leaders are increasingly aware of the severe threat and have started to advance serious reform. Notable analyses on EU competitiveness and the internal market point to the need for major reforms.
Given appropriate policies and regulatory reforms, these assets might enable far greater levels of business-led breakthroughs.
Europe retains considerable strengths: skilled human capital, top-tier education systems, and world-class research institutions. Alongside a large internal market and substantial household savings, these foundations could trigger a surge of venture creation.
Importantly, even if the EU does not take the lead in developing cutting-edge technologies, it can still dramatically boost productivity by adopting and adapting advancements from elsewhere.
A Critical Juncture
Europe now stands at a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. But, without decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.
