Donald Trump's national security strategy presents a flawed assessment of Europe. The document asserts that open-border policies and so-called "woke" policies pose an grave threat to the continent's identity. Yet, this argument rests on a serious misreading of the situation. The actual challenge confronting the EU is not societal but technological and economic lag.
The Stark Growth Gap Between the US and Europe
Statistics reveal a sobering contrast. From 2008 and 2023, US GDP grew by 87%, while a paltry thirteen and a half percent increase for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now boasts a higher per capita income than major EU nations like Italy and France.
Today, about 50% of the world’s 50 largest tech companies are American, while a mere four are from Europe.
The Technological Deficit: The Core Question
This widening disparity is driven by superior productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly American. In the last fifty years, hundreds of American startups have scaled into companies valued at over $10bn, versus only fourteen in Europe.
This disparity raises a vital question: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, where does the EU positioned? Experts widely concede it is largely a contest between two between the US and China, with European nations entering at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
Several key factors explain this technological divide.
- Venture Capital: The United States has a much more robust and agile system for financing new ventures. The EU still lacks a genuine unified investment market, which limits the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented regulation hamper European business. A American entrepreneur can introduce a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a bigger population size, is split among twenty-seven separate regimes, creating significant market obstacles.
- Cultural Attitudes: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was once viewed with stigma, whereas in the US, it is often considered a badge of experience.
- Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Reasons for Hopefulness
Despite these hurdles, there are causes for optimism. European leaders are increasingly aware of the existential challenge and have started to propose substantial change. Key analyses on European competitiveness and the internal market point to the necessity of major reforms.
Given appropriate incentives and rule changes, Europe's strengths could support much higher degrees of business-led breakthroughs.
Europe retains significant advantages: high-quality workforce, excellent schools and universities, and world-class labs. Alongside a large internal market and high savings rates, these elements have the potential to trigger a new wave of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating next-generation technologies, it can still dramatically increase productivity by adopting and adapting advancements from other regions.
A Critical Juncture
Europe now faces a decisive crossroads. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. However, without bold steps to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of global economic relevance.
