The recent US national security strategy offers a misguided view of the European Union. The document asserts that open-border policies and so-called "woke" policies pose an existential threat to European civilization. Yet, this perspective is based on a serious misinterpretation of the situation. The actual danger facing Europe is not cultural but economic and technological lag.
The Stark Growth Divide Between Europe and the US
The data paint a stark contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, while a paltry 13.5% increase for the European Union. During this time, European income per person dropped from 76.5% to just half of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major European economies like Italy and France.
Today, about half of the world’s top fifty technology firms are American, while a mere four are from Europe.
The Technological Deficit: A Critical Problem
The growing disparity is driven by superior efficiency gains in the United States, fueled by breakthroughs and better use of resources. The landscape of global tech dominance is overwhelmingly American. Over the past five decades, 241 US firms have grown into enterprises valued at over $10bn, versus just 14 in the European continent.
This gap raises a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is the EU positioned? Experts widely concede it is largely a two-horse race involving the US and China, with Europe entering at a significant disadvantage.
Root Causes of the Continent's Technological Lag
A number of key factors explain this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and agile system for funding startups. Europe still lacks a genuine capital markets union, a factor that caps the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A American entrepreneur can launch a service under a single regulatory framework to access a market of hundreds of millions. The European Union, despite a larger population, is divided among 27 different national regimes, creating huge internal barriers.
- Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the US, 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 military capabilities has eroded its ability in pioneering research.
A Path Forward: Grounds for Hopefulness
In spite of these challenges, there are reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Key analyses on EU competitiveness and the single market point to the necessity of major reforms.
With the right policies and regulatory reforms, these assets might enable far greater degrees of business-led breakthroughs.
The continent retains significant strengths: skilled human capital, excellent education systems, and world-class research institutions. Alongside 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 tech, it can still significantly increase productivity by implementing and tailoring innovations from other regions.
An Inflection Point
The European Union 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 structural weaknesses, today's slow erosion could turn into a rapid and permanent decline in world influence.
