🔗 Share this article

Donald Trump's security policy document offers a flawed view of Europe. The document asserts that open-border policies and what it terms "progressive" agendas pose an existential threat to European civilization. However, this argument rests on a fundamental misinterpretation of the situation. The actual challenge facing Europe is not societal but economic and technological backwardness.

The Stark Growth Divide Between Europe and the US

The data reveal a stark picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, while a mere 13.5% growth for the EU. During this period, EU GDP per capita fell from 76.5% to just 50% of the American figure. Remarkably, even Mississippi now has a higher per capita income than major EU nations like France and Italy.

Today, roughly half of the world’s 50 largest tech companies are American, while a mere four are from Europe.

The Technological Deficit: The Core Question

The growing disparity is driven by superior efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The landscape of world technology leadership is decidedly American. Over the past five decades, hundreds of American startups have scaled into companies valued at more than ten billion dollars, compared with only fourteen in the European continent.

This disparity prompts a pressing issue: As the competition for future industries like semiconductors, AI, and fusion energy, where does Europe stand? Experts widely agree it is essentially a two-horse race between the US and China, with Europe entering at a significant disadvantage.

Root Causes of the Continent's Technological Lag

Several major factors account for this technological divide.

• Financing Ecosystem: The United States has a far deeper and more dynamic system for financing new ventures. The EU has yet to establish a true capital markets union, a factor that caps the scale of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hinder European business. A US startup can launch 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 different national systems, creating huge market obstacles.
• Mindset Differences: Views on entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in military capabilities has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Cautious Optimism

Despite these hurdles, there are causes for optimism. Policymakers are increasingly aware of the severe threat and have begun to advance substantial change. Notable analyses on EU competitiveness and the internal market point to the need for sweeping reforms.

With the right policies and regulatory reforms, these assets could support far greater levels of commercial innovation.

The continent still possesses considerable advantages: skilled human capital, excellent education systems, and premier labs. Coupled with a large internal market and substantial household savings, these elements could trigger a surge of venture creation.

Importantly, even if the EU does not take the lead in developing cutting-edge technologies, it can still dramatically increase economic output by implementing and tailoring advancements from elsewhere.

A Critical Juncture

Europe 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 address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of world influence.