Donald Trump's security policy document offers a flawed assessment of Europe. It claims that open-border policies and so-called "progressive" policies represent an existential risk to the continent's identity. Yet, this argument rests on a serious misreading of the situation. The true challenge confronting Europe is not cultural but economic and technological backwardness.
A Glaring Economic Gap Separating Europe and the US
Statistics reveal a sobering picture. Between 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent growth for the European Union. Over this period, European income per person dropped from over three-quarters to just half of the US level. Remarkably, even Mississippi now boasts a greater average income than several leading European economies like France and Italy.
Currently, about 50% of the world’s 50 largest technology firms are American, while only four are European.
The Technological Deficit: A Critical Problem
This widening economic gap is driven by stronger productivity growth in the United States, fueled by technological innovation and better use of resources. The scene of global tech dominance is overwhelmingly US-centric. Over the past fifty years, 241 US firms have grown into companies valued at more than $10bn, versus only fourteen in Europe.
This gap raises a vital question: As the competition for future industries like AI, semiconductors, and fusion energy, what is Europe positioned? Most analysts agree it is largely a contest between two involving the United States and China, with Europe entering at a clear handicap.
Root Causes of the Continent's Technological Lag
Several major reasons account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for financing new ventures. Europe still lacks a genuine capital markets union, which limits the growth potential of new firms.
- Regulatory Fragmentation: Complex and divided rules hamper Europe. A American entrepreneur can introduce a service under a single set of laws to access a market of over 330 million. The EU, despite a larger population, is split among twenty-seven separate regimes, creating huge internal barriers.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was historically met with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
Despite these hurdles, there are causes for hope. Policymakers are increasingly aware of the existential challenge and have begun to advance substantial change. Key reports on EU competitiveness and the single market point to the need for major reforms.
Given appropriate policies and regulatory reforms, these assets might enable much higher degrees of business-led breakthroughs.
The continent retains significant advantages: skilled workforce, excellent education systems, and premier labs. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a new wave of venture creation.
Crucially, even if Europe does not become the leader in creating next-generation tech, it can still dramatically increase productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
The European Union now stands at a critical crossroads. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, the continent's technological decline has been gradual. However, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.
