Donald Trump's security policy document offers a flawed view of Europe. It claims that open-border policies and so-called "progressive" policies pose an grave threat to the continent's identity. Yet, this argument is based on a fundamental misinterpretation of the situation. The actual challenge confronting Europe is not societal but economic and technological lag.
A Glaring Growth Gap Between the US and Europe
Statistics reveal a sobering picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, compared to a mere thirteen and a half percent increase for the European Union. During this time, European income per person dropped from 76.5% to just 50% of the US level. Remarkably, even Mississippi now boasts a greater average income than major European economies like France and Italy.
Currently, about 50% of the world’s top fifty technology firms are US-based, while only four are from Europe.
The Technological Shortfall: A Critical Question
The growing economic gap stems from stronger efficiency gains in the US, largely due to technological innovation and higher total factor productivity. The landscape of world technology dominance is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at over ten billion dollars, compared with only fourteen in Europe.
This gap prompts a vital question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe stand? Most analysts concede it is largely a two-horse race between the United States and China, with Europe entering at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key factors explain this technological divide.
- Venture Capital: The US boasts a much more robust and more dynamic system for funding startups. The EU still lacks a genuine capital markets union, which caps the scale of new firms.
- Bureaucratic Hurdles: Complex and divided rules hamper European business. A American entrepreneur can introduce a service under one set of laws to access a market of hundreds of millions. The European Union, despite a larger population size, is divided among twenty-seven different national regimes, creating huge internal barriers.
- Mindset Differences: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once met with stigma, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Reasons for Hopefulness
In spite of these challenges, there are reasons for hope. European leaders are increasingly aware of the existential challenge and have started to advance substantial change. Key reports on EU competitiveness and the single market point to the need for major changes.
With the right policies and regulatory reforms, Europe's strengths could support far greater levels of commercial innovation.
The continent still possesses considerable strengths: high-quality workforce, top-tier schools and universities, and premier labs. Coupled with a large internal market and high savings rates, these foundations could unleash a new wave of venture creation.
Crucially, even if Europe does not take the lead in developing cutting-edge tech, it can still dramatically boost productivity by implementing and tailoring advancements from other regions.
A Critical Juncture
Europe now faces a critical moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". So far, the continent's technological decline has been steady. But, without decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible decline in global economic relevance.
