Donald Trump's national security strategy offers a misguided assessment of Europe. The document asserts that open-border policies and what it terms "woke" policies represent an existential risk to European civilization. However, this argument rests on a fundamental misinterpretation of the situation. The true danger facing the EU is not societal but technological and economic lag.
A Glaring Growth Divide Between the US and Europe
Statistics reveal a stark picture. From 2008 and 2023, US GDP grew by eighty-seven percent, while a mere 13.5% growth for the EU. Over this period, European income per person dropped from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now has a higher per capita income than several leading European economies like France and Italy.
Currently, about half of the global 50 largest technology firms are American, while only four are from Europe.
The Innovation Shortfall: The Core Problem
This widening economic gap is driven by stronger efficiency gains in the United States, fueled by technological innovation and higher total factor productivity. The scene of world technology dominance is decidedly US-centric. Over the past fifty years, hundreds of American startups have scaled into companies valued at more than $10bn, compared with just 14 in Europe.
This gap raises a vital issue: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU stand? Experts widely agree it is largely a contest between two involving the US and China, with European nations entering at a clear handicap.
Root Causes of Europe's Technological Lag
Several key factors account for this innovation chasm.
- Venture Capital: The US boasts a far deeper and agile network for financing new ventures. Europe has yet to establish a true capital markets union, a factor that caps the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented 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 European Union, despite a larger population size, is divided among 27 different national regimes, creating huge market obstacles.
- Mindset Differences: Views on entrepreneurial failure vary greatly. In some EU nations, business failure was once viewed with stigma, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.
The Road Ahead: Grounds for Hopefulness
In spite of these challenges, one can find causes for hope. European leaders are growing more conscious of the existential challenge and have started to advance substantial change. Notable reports on European competitiveness and the internal market point to the necessity of major changes.
Given appropriate policies and regulatory reforms, these assets could support much higher levels of commercial innovation.
The continent retains significant strengths: high-quality human capital, excellent schools and universities, and premier labs. Alongside a large internal market and high savings rates, these foundations could trigger a new wave of venture creation.
Importantly, even if the EU does not become the leader in creating next-generation tech, it can still dramatically boost productivity by implementing and tailoring innovations from elsewhere.
A Critical Juncture
Europe now faces a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. However, without decisive action to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in global economic relevance.
