The recent US security policy document offers a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" policies represent an grave risk to European civilization. Yet, this perspective is based on a fundamental misinterpretation of the situation. The true danger confronting Europe is not cultural but economic and technological backwardness.
The Stark Economic Gap Separating Europe and the US
The data reveal a sobering picture. From 2008 and 2023, US GDP grew by 87%, compared to a mere 13.5% increase for the European Union. During this period, EU GDP per capita fell from 76.5% to just half of the American figure. Remarkably, even Mississippi now has a higher per capita income than several leading EU nations like Italy and France.
Today, roughly 50% of the global 50 largest technology firms are US-based, while a mere four are from Europe.
The Innovation Shortfall: A Critical Problem
The growing disparity stems from superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of world technology dominance is decidedly US-centric. In the last five decades, hundreds of American startups have scaled into companies valued at more than $10bn, versus only fourteen in Europe.
This gap raises a vital issue: As the competition for future industries like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely agree it is largely a two-horse race involving the US and China, with Europe starting at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key reasons account for this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic network for funding startups. Europe has yet to establish a genuine capital markets union, a factor that limits the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hamper European business. A American entrepreneur can introduce a product under a single set of laws 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.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, business failure was historically met with penalties, whereas in the US, it is often seen as a valuable lesson.
- Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its ability in pioneering research.
The Road Ahead: Grounds for Hopefulness
Despite these challenges, one can find causes for optimism. European leaders are growing more conscious of the existential challenge and have started to propose substantial change. Key analyses on EU competitiveness and the single market point to the need for sweeping reforms.
With the right incentives and rule changes, Europe's strengths might enable much higher degrees of business-led breakthroughs.
The continent still possesses considerable strengths: high-quality workforce, excellent schools and universities, and world-class labs. Coupled with a large internal market and substantial household savings, these foundations could unleash a surge of investment and entrepreneurship.
Importantly, even if the EU does not take the lead in creating next-generation tech, it can still significantly boost productivity by adopting and adapting innovations from other regions.
An Inflection Point
Europe now stands at a critical moment. As the saying goes, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. But, 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.
