Donald Trump's security policy document presents a flawed view of Europe. It claims that open-border policies and what it terms "progressive" policies represent an existential risk to the continent's identity. Yet, this argument rests on a serious misreading of the situation. The actual danger facing the EU is not societal but technological and economic backwardness.
The Stark Growth Gap Between Europe and the US
Statistics reveal a sobering picture. Between 2008 and 2023, US GDP surged by 87%, while a mere thirteen and a half percent growth for the EU. During this time, European income per person fell from 76.5% to just 50% of the American figure. Remarkably, even Mississippi now boasts a greater average income than major European economies like Italy and France.
Today, roughly half of the global top fifty technology firms are US-based, while a mere four are from Europe.
The Technological Deficit: A Critical Problem
This widening disparity is driven by superior productivity growth in the US, largely due to technological innovation and higher total factor productivity. The scene of world technology dominance is overwhelmingly US-centric. Over the past five decades, hundreds of American startups have grown into enterprises valued at over ten billion dollars, compared with just 14 in the European continent.
This gap prompts a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU stand? Most analysts agree it is essentially a two-horse race between the US and China, with European nations entering at a clear handicap.
Root Causes of the Continent's Technological Lag
Several major factors account for this technological divide.
- Venture Capital: The US boasts a far deeper and more dynamic system for funding startups. The EU still lacks a genuine capital markets union, which limits the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder European business. A American entrepreneur can introduce a product under one set of laws to access a market of over 330 million. The EU, despite a bigger population, is divided among twenty-seven separate regimes, creating significant internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has eroded its ability in pioneering research.
A Path Forward: Reasons for Cautious Optimism
Despite these challenges, one can find reasons for optimism. European leaders are increasingly aware of the severe threat and have begun to propose substantial change. Notable analyses on EU competitiveness and the single market point to the need for sweeping changes.
With the right incentives and rule changes, Europe's strengths might enable far greater degrees of business-led breakthroughs.
The continent still possesses significant advantages: skilled workforce, top-tier schools and universities, and premier research institutions. Coupled with a large internal market and high savings rates, these foundations could trigger a surge of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating cutting-edge tech, it can still significantly increase economic output by adopting and adapting innovations from other regions.
A Critical Juncture
Europe now stands at a critical moment. As the saying goes, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. However, without bold steps to tackle its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible decline in global economic relevance.
