Donald Trump's security policy document presents a misguided assessment of the European Union. It claims that open-border policies and what it terms "progressive" policies represent an grave risk to European civilization. However, this argument is based on a serious misinterpretation of the reality. The actual danger facing Europe is not societal but technological and economic backwardness.
A Glaring Economic Gap Between the US and Europe
The data paint a stark contrast. Between 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% increase for the EU. Over this time, European income per person fell from 76.5% to just 50% of the US level. Remarkably, even the poorest US state now boasts a higher per capita income than major EU nations like Italy and France.
Today, roughly half of the world’s 50 largest tech companies are US-based, while a mere four are European.
The Technological Shortfall: A Critical Problem
The growing disparity is driven by stronger productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech leadership is decidedly American. Over the past five decades, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with only fourteen in Europe.
This disparity prompts a vital question: As the competition for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU positioned? Most analysts agree it is largely a two-horse race between the United States and China, with European nations starting at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of major factors explain this innovation chasm.
- Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. The EU still lacks a true unified investment market, which limits the scale of emerging companies.
- Regulatory Fragmentation: Complex and divided regulation hinder Europe. A American entrepreneur can launch a service under a single regulatory framework to access a consumer base of hundreds of millions. The European Union, despite a bigger population size, is split among twenty-seven separate systems, creating significant market obstacles.
- 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 badge of experience.
- Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its ability in pioneering research.
The Road Ahead: Grounds for Hopefulness
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 EU competitiveness and the single market highlight the necessity of major changes.
Given appropriate policies and regulatory reforms, these assets could support far greater levels of commercial innovation.
The continent retains considerable advantages: high-quality workforce, excellent education systems, and world-class labs. Alongside a large internal market and high savings rates, these foundations could trigger a surge of venture creation.
Importantly, even if the EU does not become the leader in creating cutting-edge tech, it can still dramatically boost productivity by implementing and tailoring advancements from elsewhere.
A Critical Juncture
Europe now stands at a critical moment. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, Europe's technological decline has been steady. But, without decisive action to address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of global economic relevance.
