The recent US national security strategy presents a misguided view of the European Union. The document asserts that open-border policies and what it terms "woke" policies pose an existential risk to European civilization. However, this argument rests on a fundamental misreading of the reality. The actual danger confronting the EU is not cultural but economic and technological backwardness.
The Stark Growth Gap Separating Europe and the US
Statistics paint a stark contrast. From 2008 and 2023, US GDP grew by eighty-seven percent, compared to a mere thirteen and a half percent increase for the EU. Over this time, European income per person fell from over three-quarters to just 50% of the American figure. Strikingly, even the poorest US state now has a greater average income than several leading EU nations like Italy and France.
Today, roughly half of the global top fifty technology firms are US-based, while a mere four are European.
The Innovation Shortfall: A Critical Problem
This widening economic gap is driven by superior productivity growth in the US, fueled by technological innovation and better use of resources. The landscape of world technology dominance is overwhelmingly American. Over the past five decades, 241 US firms have grown into companies valued at more than $10bn, compared with only fourteen in the European continent.
This gap prompts a pressing issue: As the competition for future industries like AI, semiconductors, and fusion energy, where does the EU stand? Experts widely concede it is essentially a two-horse race between the United States and China, with Europe starting at a clear handicap.
Underlying Factors of the Continent's Technological Lag
A number of key reasons explain this technological divide.
- Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. Europe still lacks a true capital markets union, a factor that caps the growth potential of emerging companies.
- Regulatory Fragmentation: Complex and divided regulation hamper Europe. A US startup can launch a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a larger population size, is split among twenty-seven separate regimes, creating significant internal barriers.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.
The Road Ahead: Reasons for Hopefulness
Despite these challenges, one can find reasons for hope. European leaders are growing more conscious of the severe threat and have begun to propose substantial change. Key analyses on European competitiveness and the internal market highlight the necessity of major reforms.
Given appropriate policies and regulatory reforms, these assets could support far greater levels of commercial innovation.
The continent retains significant advantages: skilled human capital, top-tier education systems, and premier research institutions. Alongside a vast domestic consumer base 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 next-generation tech, it can still dramatically increase productivity by implementing and tailoring innovations from other regions.
A Critical Juncture
Europe now stands at a critical crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. But, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could give way to a rapid and permanent loss of global economic relevance.
