Donald Trump's security policy document presents a misguided assessment of the European Union. The document asserts that open-border policies and what it terms "progressive" policies pose an existential threat to European civilization. However, this argument rests on a serious misinterpretation of the reality. The true challenge confronting Europe is not societal but economic and technological backwardness.
A Glaring Growth Divide Between Europe and the US
The data paint a sobering picture. From 2008 and 2023, US GDP surged by eighty-seven percent, compared to a paltry thirteen and a half percent growth for the EU. During this time, European income per person fell from over three-quarters to just half of the US level. Remarkably, even the poorest US state now has a greater average income than several leading European economies like France and Italy.
Today, about half of the global 50 largest technology firms are American, while a mere four are European.
The Technological Deficit: A Critical Question
The growing economic gap is driven by stronger efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with only fourteen in the European continent.
This gap raises a vital issue: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely agree it is essentially a contest between two involving the US and China, with European nations starting at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of major factors account for this technological divide.
- Financing Ecosystem: The US boasts a far deeper and agile network for funding startups. The EU has yet to establish a genuine unified investment market, a factor that limits the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided rules hamper European business. A US startup can introduce a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population size, is divided among 27 different national regimes, creating significant internal barriers.
- Cultural Attitudes: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with stigma, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its ability in breakthrough innovation.
A Path Forward: Reasons for Cautious Optimism
In spite of these challenges, one can find causes for optimism. European leaders are growing more conscious of the existential challenge and have begun to propose substantial change. Notable reports on EU competitiveness and the internal market point to the need for major changes.
With the right incentives and regulatory reforms, these assets might enable far greater levels of business-led breakthroughs.
The continent still possesses considerable advantages: high-quality workforce, top-tier schools and universities, and premier labs. Coupled with a vast domestic consumer base and high savings rates, these foundations could trigger a new wave of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating next-generation technologies, it can still dramatically increase economic output by adopting and adapting innovations from other regions.
An Inflection Point
The European Union now stands at 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. But, if it fails to take decisive action to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.
