Donald Trump's national security strategy presents a misguided assessment of the European Union. It claims that open-border policies and so-called "woke" policies represent an existential risk to European civilization. However, this argument is based on a serious misreading of the situation. The actual danger confronting Europe is not societal but economic and technological backwardness.
A Glaring Growth Gap Separating the US and Europe
The data paint a sobering picture. Between 2008 and 2023, US GDP grew by 87%, while a paltry 13.5% increase for the EU. During this period, EU GDP per capita dropped from over three-quarters to just 50% of the American figure. Strikingly, even the poorest US state now boasts a higher per capita income than several leading EU nations like Italy and France.
Currently, about 50% of the world’s top fifty tech companies are American, while a mere four are European.
The Technological Shortfall: The Core Question
The growing economic gap is driven by superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of global tech leadership is decidedly American. In the last fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, compared with just 14 in Europe.
This disparity prompts a pressing issue: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe positioned? Experts widely agree it is essentially a two-horse race between the United States and China, with European nations entering at a clear handicap.
Underlying Factors of the Continent's Technological Lag
A number of key reasons account for this innovation chasm.
- Venture Capital: The United States has a much more robust and agile network for funding startups. Europe still lacks a true unified investment market, a factor that limits the growth potential of new firms.
- Regulatory Fragmentation: Complex and divided regulation hamper European business. A American entrepreneur can introduce a service under a single set of laws to access a consumer base of over 330 million. The EU, despite a larger population size, is divided among twenty-seven different national systems, creating huge internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, a startup's collapse was historically viewed with penalties, whereas in the US, it is often seen as a badge of experience.
- Military Investment: The US benefits from a tightly woven innovation pipeline linking defense and academia. The continent's long-term lack of spending in defense has weakened its ability in pioneering research.
A Path Forward: Reasons for Hopefulness
Despite these challenges, one can find causes for hope. European leaders are increasingly aware of the existential challenge and have begun to propose substantial change. Notable analyses on European competitiveness and the single market point to the need for sweeping changes.
With the right incentives and regulatory reforms, these assets might enable far greater degrees of commercial innovation.
The continent retains considerable advantages: skilled workforce, top-tier schools and universities, and world-class labs. Coupled with a large internal market and high savings rates, these foundations could unleash a new wave of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating cutting-edge tech, it can still significantly boost productivity by adopting and adapting advancements from other regions.
A Critical Juncture
The European Union now stands at a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. However, without decisive action to address its structural weaknesses, today's gradual weakening could give way to a rapid and permanent loss of world influence.
