The recent US national security strategy presents a misguided view of the European Union. The document asserts that unrestrained immigration and what it terms "woke" policies represent an existential threat to European civilization. However, this perspective rests on a serious misreading of the situation. The true danger facing the EU is not societal but technological and economic backwardness.
A Glaring Growth Gap Between Europe and the US
The data paint a stark contrast. Between 2008 and 2023, US GDP surged by eighty-seven percent, while a mere 13.5% growth for the European Union. During this time, European income per person fell from over three-quarters to just half of the American figure. Strikingly, even Mississippi now has a higher per capita income than major European economies like France and Italy.
Currently, roughly 50% of the global top fifty technology firms are American, while only four are European.
The Technological Shortfall: A Critical Problem
The growing disparity is driven by stronger efficiency gains in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly American. In the last fifty years, 241 US firms have scaled into companies valued at over $10bn, compared with only fourteen in Europe.
This disparity prompts a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, where does the EU stand? Experts widely agree it is essentially a two-horse race between the United States and China, with Europe entering at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key factors explain this innovation chasm.
- Financing Ecosystem: The US boasts a far deeper and more dynamic network for funding startups. Europe still lacks a true unified investment market, a factor that caps the growth potential of emerging companies.
- Bureaucratic Hurdles: Complex and divided rules hamper Europe. A US startup can introduce a service under one regulatory framework to access a market of hundreds of millions. The EU, despite a larger population size, is divided among 27 separate systems, creating significant internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, business failure was once viewed with penalties, whereas in the United States, it is often considered a badge of experience.
- Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its ability in breakthrough innovation.
A Path Forward: Reasons for Hopefulness
Despite these challenges, one can find causes for optimism. European leaders are growing more conscious of the severe threat and have started to propose substantial change. Key reports on EU competitiveness and the internal market highlight the necessity of sweeping changes.
With the right incentives and rule changes, Europe's strengths could support much higher levels of commercial innovation.
The continent still possesses significant strengths: high-quality human capital, excellent schools and universities, and world-class research institutions. Coupled with a large internal market and high savings rates, these foundations have the potential to trigger a new wave of venture creation.
Importantly, even if the EU does not become the leader in developing cutting-edge tech, it can still significantly boost economic output by implementing and tailoring advancements from elsewhere.
An Inflection Point
Europe 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 steady. But, if it fails to take decisive action to address its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in world influence.
