Donald Trump's national security strategy offers a misguided view of Europe. The document asserts that open-border policies and what it terms "woke" policies represent an existential threat to the continent's identity. However, this argument rests on a serious misinterpretation of the situation. The actual danger confronting Europe is not cultural but economic and technological backwardness.
A Glaring Economic Gap Separating Europe and the US
The data reveal a sobering contrast. Between 2008 and 2023, American economic output grew by 87%, while a mere 13.5% increase for the EU. Over this time, EU GDP per capita 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, about half of the global 50 largest tech companies are American, while a mere four are from Europe.
The Innovation Deficit: A Critical Problem
This widening disparity is driven by superior productivity growth in the US, largely due to technological innovation and higher total factor productivity. The landscape of global tech dominance is overwhelmingly American. In the last five decades, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, versus just 14 in Europe.
This gap raises a pressing issue: As the competition for future industries like semiconductors, AI, and fusion energy, where does Europe stand? Experts widely agree it is essentially a contest between two involving the United States and China, with Europe entering at a clear disadvantage.
Root Causes of the Continent's Technological Lag
Several key factors account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for financing new ventures. The EU has yet to establish a genuine unified investment market, a factor that caps the growth potential of new firms.
- Bureaucratic Hurdles: Excessive and fragmented regulation hinder European business. A US startup can introduce a product under a single regulatory framework to access a consumer base of hundreds of millions. The European Union, despite a larger population size, is split among 27 separate systems, creating significant internal barriers.
- Mindset Differences: Views on entrepreneurial failure differ sharply. In some EU nations, business failure was historically viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in defense has eroded its capacity for breakthrough innovation.
The Road Ahead: Reasons for Hopefulness
Despite these hurdles, one can find reasons for optimism. Policymakers are growing more conscious of the existential challenge and have begun to propose serious reform. Notable 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.
The continent retains considerable strengths: high-quality workforce, top-tier education systems, and world-class labs. Alongside a vast domestic consumer base and high savings rates, these foundations have the potential to unleash a surge of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in developing cutting-edge technologies, it can still dramatically increase productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
Europe now faces a critical moment. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been steady. However, without bold steps to tackle its structural weaknesses, today's slow erosion could turn into a rapid and permanent decline in world influence.
