🔗 Share this article

Donald Trump's national security strategy presents a misguided view of the European Union. The document asserts that open-border policies and so-called "progressive" agendas represent an existential threat to the continent's identity. However, this argument is based on a fundamental misinterpretation of the reality. The actual challenge confronting the EU is not societal but technological and economic lag.

A Glaring Growth Gap Between the US and Europe

Statistics paint a sobering picture. Between 2008 and 2023, American economic output surged by 87%, while a mere thirteen and a half percent increase for the EU. Over this period, EU GDP per capita fell from over three-quarters to just 50% of the American figure. Remarkably, even the poorest US state now boasts a greater average income than several leading EU nations like France and Italy.

Currently, about half of the world’s 50 largest tech companies are US-based, while only four are European.

The Technological Shortfall: The Core Problem

This widening economic gap stems from stronger productivity growth in the US, largely due to breakthroughs and better use of resources. The scene of world technology dominance is decidedly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at more than ten billion dollars, compared with only fourteen in the European continent.

This disparity raises a vital question: In the race for tomorrow's sectors like semiconductors, AI, and fusion energy, what is Europe positioned? Experts widely concede it is essentially a two-horse race involving the United States and China, with Europe starting at a significant handicap.

Underlying Factors of Europe's Technological Lag

Several key factors explain this technological divide.

• Venture Capital: The United States has a much more robust and more dynamic system for funding startups. Europe still lacks a genuine capital markets union, which caps the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented rules hamper Europe. A American entrepreneur can introduce a service under one regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population size, is divided among twenty-seven different national regimes, creating significant internal barriers.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was historically viewed with penalties, whereas in the United States, it is often seen as a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in military capabilities has eroded its ability in breakthrough innovation.

A Path Forward: Reasons for Cautious Optimism

Despite these challenges, there are reasons for optimism. European leaders are growing more conscious of the severe threat and have begun to propose substantial change. Key analyses on EU competitiveness and the single market point to the need for major changes.

With the right policies and regulatory reforms, Europe's strengths might enable much higher levels of commercial innovation.

Europe still possesses significant advantages: high-quality human capital, excellent education systems, and premier labs. Coupled with a vast domestic consumer base and high savings rates, these foundations could trigger a new wave of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in creating next-generation tech, it can still significantly increase productivity by adopting and adapting advancements from other regions.

An Inflection Point

Europe now stands at a decisive crossroads. As the saying goes, decline often happens "gradually and then suddenly". To date, the continent's technological decline has been steady. However, without bold steps to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible decline in world influence.