Donald Trump's national security strategy presents a flawed assessment of Europe. It claims that open-border policies and so-called "progressive" policies represent an existential threat to the continent's identity. However, this perspective is based on a fundamental misreading of the situation. The actual challenge facing Europe is not societal but economic and technological backwardness.
The Stark Growth Divide Between the US and Europe
Statistics paint a sobering picture. Between 2008 and 2023, US GDP surged by 87%, while a mere 13.5% increase for the European Union. Over this time, European income per person dropped from 76.5% to just half of the US level. Remarkably, even the poorest US state now has a higher per capita income than major European economies like France and Italy.
Currently, about 50% of the global 50 largest technology firms are American, while only four are European.
The Technological Shortfall: A Critical Question
This widening disparity stems from superior efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The landscape of world technology leadership is decidedly American. In the last fifty years, hundreds of American startups have grown into companies valued at over ten billion dollars, versus only fourteen in Europe.
This gap raises a pressing 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 between the United States and China, with Europe starting at a clear handicap.
Root Causes of Europe's Technological Lag
A number of key factors account for this innovation chasm.
- Venture Capital: The US boasts a much more robust and more dynamic network for financing new ventures. Europe still lacks a true capital markets union, which limits the scale of new firms.
- Bureaucratic Hurdles: Complex and divided rules hinder Europe. A US startup can introduce a product under one regulatory framework to access a market of over 330 million. The European Union, despite a bigger population size, is divided among twenty-seven separate regimes, creating huge internal barriers.
- Cultural Attitudes: Views on risk-taking vary greatly. In some EU nations, business failure was historically viewed with stigma, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has weakened its capacity for pioneering research.
The Road Ahead: Grounds for Hopefulness
In spite of these hurdles, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have started to advance serious reform. Key reports on EU competitiveness and the single market highlight the need for sweeping changes.
With the right incentives and rule changes, Europe's strengths might enable much higher levels of business-led breakthroughs.
Europe retains significant strengths: skilled workforce, top-tier schools and universities, and world-class research institutions. Alongside a large internal market and high savings rates, these elements have the potential to unleash a new wave of venture creation.
Crucially, 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 elsewhere.
An Inflection Point
The European Union now faces a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. But, without decisive action to tackle its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in global economic relevance.
