The recent US national security strategy presents a misguided view of Europe. It claims that open-border policies and so-called "woke" agendas pose an grave risk to the continent's identity. Yet, this argument is based on a fundamental misreading of the situation. The actual challenge facing the EU is not societal but economic and technological lag.
A Glaring Economic Gap Separating the US and Europe
Statistics paint a stark picture. From 2008 and 2023, US GDP grew by 87%, compared to a mere 13.5% growth for the EU. Over this period, EU GDP per capita dropped from 76.5% to just half of the US level. Remarkably, even Mississippi now has a greater average income than several leading European economies like France and Italy.
Currently, roughly half of the world’s 50 largest tech companies are American, while only four are from Europe.
The Technological Deficit: A Critical Question
The growing disparity stems from stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, versus only fourteen in Europe.
This disparity prompts a pressing question: As the competition for future industries like AI, semiconductors, and quantum computing, what is Europe positioned? Most analysts agree it is largely a two-horse race between the United States and China, with European nations starting at a significant disadvantage.
Root Causes of the Continent's Technological Lag
Several major factors explain this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for financing new ventures. 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 rules hamper European business. A US startup can launch a service under one regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population size, is divided among twenty-seven separate regimes, creating huge market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was once met with penalties, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.
A Path Forward: Reasons for Cautious Optimism
Despite these challenges, one can find causes for optimism. European leaders are increasingly aware of the severe threat and have started to propose substantial change. Notable reports on European competitiveness and the internal market highlight the necessity of sweeping changes.
With the right incentives and regulatory reforms, these assets could support far greater levels of business-led breakthroughs.
Europe still possesses considerable advantages: skilled workforce, excellent education systems, and premier research institutions. Alongside a large internal market and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in creating next-generation tech, it can still significantly boost productivity by adopting and adapting advancements from other regions.
A Critical Juncture
Europe now faces a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been steady. But, without bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of world influence.
