The recent US national security strategy offers a misguided assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies pose an existential risk to European civilization. However, this argument is based on a serious misinterpretation of the situation. The actual challenge facing Europe is not societal but economic and technological lag.
A Glaring Economic Gap Between the US and Europe
Statistics paint a stark picture. Between 2008 and 2023, US GDP grew by eighty-seven percent, while a mere thirteen and a half percent growth for the EU. During this time, European income per person dropped from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than several leading European economies like France and Italy.
Today, roughly half of the world’s 50 largest technology firms are US-based, while only four are from Europe.
The Technological Deficit: A Critical Problem
This widening disparity stems from superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The landscape of world technology dominance is decidedly US-centric. In the last five decades, hundreds of American startups have grown into companies valued at more than ten billion dollars, versus just 14 in the European continent.
This gap raises a vital question: As the competition for future industries like semiconductors, AI, and fusion energy, what is Europe positioned? Experts widely concede it is essentially a two-horse race between the United States and China, with European nations starting at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of major reasons explain this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for funding startups. The EU has yet to establish a true unified investment market, a factor that caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided regulation hinder Europe. A US startup can launch a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a bigger population size, is divided among twenty-seven separate regimes, creating significant market obstacles.
- 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.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
Despite these challenges, one can find causes for optimism. European leaders are increasingly aware of the existential challenge and have begun to advance substantial change. Key analyses on EU competitiveness and the internal market point to the need for major changes.
Given appropriate incentives and regulatory reforms, these assets could support far greater levels of commercial innovation.
Europe retains considerable advantages: high-quality human capital, excellent education systems, and premier research institutions. Alongside a vast domestic consumer base and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.
Importantly, even if the EU does not take the lead in creating next-generation technologies, it can still dramatically increase productivity by adopting and adapting advancements from elsewhere.
An Inflection Point
The European Union now faces a decisive moment. As the saying goes, decline 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 address its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible decline in global economic relevance.
