The recent US national security strategy presents a misguided view of the European Union. It claims that open-border policies and so-called "progressive" policies represent an existential threat to European civilization. Yet, this perspective is based on a serious misreading of the reality. The actual danger facing Europe is not cultural but technological and economic backwardness.
The Stark Growth Divide Between the US and Europe
Statistics paint a sobering contrast. From 2008 and 2023, American economic output grew by 87%, compared to a mere 13.5% increase for the European Union. Over this time, European income per person fell from over three-quarters to just 50% of the US level. Strikingly, even the poorest US state now has a greater average income than several leading EU nations like Italy and France.
Currently, roughly 50% of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.
The Innovation Shortfall: A Critical Question
This widening economic gap is driven by superior efficiency gains in the US, largely due to breakthroughs and better use of resources. The scene of global tech dominance is overwhelmingly American. Over the past five decades, hundreds of American startups have scaled into companies valued at over $10bn, versus just 14 in the European continent.
This gap prompts a pressing issue: In the race for future industries like AI, semiconductors, and quantum computing, where does Europe positioned? Most analysts agree it is essentially a two-horse race involving the US and China, with European nations starting at a clear handicap.
Underlying Factors of Europe's Technological Lag
A number of major reasons explain this technological divide.
- Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. Europe still lacks a genuine unified investment market, a factor that limits the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A American entrepreneur can launch a product under a single regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population size, is divided among twenty-seven separate systems, creating huge market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
- Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in defense has eroded its capacity for breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these hurdles, one can find causes for optimism. Policymakers are growing more conscious of the existential challenge and have begun to advance serious reform. Key analyses on EU competitiveness and the single market highlight the need for major changes.
Given appropriate incentives and regulatory reforms, these assets could support much higher degrees of commercial innovation.
Europe still possesses significant strengths: skilled workforce, top-tier schools and universities, and world-class labs. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of venture creation.
Importantly, even if Europe does not take the lead in creating next-generation tech, it can still dramatically increase economic output by implementing and tailoring innovations from elsewhere.
A Critical Juncture
Europe now faces a decisive moment. 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 bold steps to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
