Donald Trump's security policy document offers a misguided assessment of the European Union. It claims that open-border policies and what it terms "woke" agendas represent an grave risk to the continent's identity. However, this argument is based on a serious misinterpretation of the reality. The actual danger facing Europe is not cultural but technological and economic backwardness.
The Stark Economic Divide Between the US and Europe
Statistics paint a stark contrast. From 2008 and 2023, American economic output grew by 87%, while a paltry thirteen and a half percent increase for the EU. During this period, EU GDP per capita dropped from over three-quarters to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major European economies like Italy and France.
Today, about half of the global 50 largest technology firms are US-based, while only four are from Europe.
The Technological Shortfall: The Core Problem
The growing economic gap is driven by stronger productivity growth in the US, largely due to technological innovation and better use of resources. The landscape of world technology leadership is overwhelmingly American. In the last fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, versus only fourteen in the European continent.
This gap prompts a pressing issue: In the race for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Most analysts concede it is essentially a two-horse race between the US and China, with Europe entering at a clear disadvantage.
Underlying Factors of Europe's Technological Lag
A number of major reasons explain this technological divide.
- Venture Capital: The US boasts a far deeper and more dynamic network for financing new ventures. Europe still lacks a true capital markets union, which caps the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented rules hamper Europe. A American entrepreneur can introduce a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a larger population size, is divided among twenty-seven separate regimes, creating significant internal barriers.
- Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often considered a valuable lesson.
- Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.
The Road Ahead: Reasons for Cautious Optimism
In spite of these hurdles, there are reasons for optimism. European leaders are increasingly aware of the severe threat and have started to propose substantial change. Key analyses on European competitiveness and the single market point to the need for major reforms.
With the right policies and rule changes, Europe's strengths could support much higher levels of business-led breakthroughs.
Europe still possesses significant advantages: skilled human capital, excellent education systems, and world-class research institutions. Alongside a vast domestic consumer base and substantial household savings, these foundations could unleash a surge of venture creation.
Importantly, even if the EU does not take the lead in creating next-generation tech, it can still significantly boost productivity by adopting and adapting innovations from other regions.
A Critical Juncture
The European Union now stands at a decisive moment. As the saying goes, economic erosion often happens "gradually and then suddenly". To date, the continent's technological decline has been steady. But, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could give way to a rapid and permanent loss of world influence.
