Donald Trump's security policy document offers a misguided view of the European Union. It claims that open-border policies and what it terms "woke" policies represent an existential threat to European civilization. Yet, this argument rests on a fundamental misreading of the reality. The actual danger confronting Europe is not societal but technological and economic backwardness.
The Stark Growth Divide Between the US and Europe
The data reveal a stark picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry thirteen and a half percent increase for the EU. Over this period, European income per person fell from over three-quarters 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.
Currently, about half of the world’s top fifty technology firms are US-based, while only four are European.
The Innovation Deficit: A Critical Question
This widening disparity is driven by superior productivity growth in the United States, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly American. In the last five decades, 241 US firms have scaled into enterprises valued at more than ten billion dollars, compared with just 14 in Europe.
This disparity prompts a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU stand? Most analysts agree it is essentially a contest between two between the United States and China, with European nations entering at a clear handicap.
Underlying Factors of Europe's Technological Lag
A number of major reasons account for this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and agile system for funding startups. Europe has yet to establish a genuine unified investment market, a factor that caps the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can launch a service under a single set of laws to access a market of hundreds of millions. The European Union, despite a larger population, is divided among twenty-seven separate regimes, creating huge internal barriers.
- Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was historically 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. Europe's long-term lack of spending in military capabilities has eroded its ability in breakthrough innovation.
A Path Forward: Reasons for Hopefulness
Despite these challenges, one can find reasons for optimism. Policymakers are increasingly aware of the severe threat and have started to advance substantial change. Notable reports on EU competitiveness and the internal market point to the need for sweeping changes.
Given appropriate incentives and regulatory reforms, these assets could support far greater levels of business-led breakthroughs.
The continent still possesses significant advantages: high-quality workforce, excellent schools and universities, and premier labs. Alongside a large internal market and substantial household savings, these foundations could trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not become the leader in creating next-generation technologies, it can still significantly increase economic output by adopting and adapting advancements from other regions.
An Inflection Point
The European Union now stands at a decisive crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". So far, Europe's slide in innovation has been gradual. However, without bold steps to address its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of global economic relevance.
