Donald Trump's security policy document offers a flawed assessment of Europe. It claims that open-border policies and what it terms "woke" agendas represent an existential risk to European civilization. Yet, this perspective rests on a serious misreading of the reality. The true danger confronting Europe is not cultural but technological and economic backwardness.
The Stark Growth Divide Between Europe and the US
Statistics paint a sobering contrast. From 2008 and 2023, US GDP grew by 87%, compared to a paltry thirteen and a half percent increase for the EU. Over this period, European income per person fell from 76.5% to just half of the American figure. Strikingly, even the poorest US state now boasts a greater average income than major EU nations like Italy and France.
Currently, roughly 50% of the global top fifty technology firms are American, while a mere four are European.
The Technological Shortfall: The Core Question
The growing economic gap is driven by stronger productivity growth in the United States, fueled by breakthroughs and higher total factor productivity. The scene of global tech leadership is decidedly American. Over the past five decades, hundreds of American startups have scaled into companies valued at over ten billion dollars, compared with just 14 in Europe.
This disparity raises a vital issue: In the race for future industries like AI, semiconductors, and fusion energy, what is the EU positioned? Experts widely agree it is largely a contest between two between the United States and China, with Europe entering at a clear disadvantage.
Root Causes of the Continent's Technological Lag
Several key reasons explain this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for financing new ventures. The EU has yet to establish a true capital markets union, which limits the growth potential of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented regulation hinder Europe. A American entrepreneur can introduce a product under one regulatory framework to access a market of hundreds of millions. The EU, despite a larger population, is divided among twenty-seven separate regimes, creating significant market obstacles.
- Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was once viewed with penalties, whereas in the US, it is often considered a badge of experience.
- Military Investment: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Grounds for Hopefulness
Despite these challenges, one can find reasons for optimism. Policymakers are increasingly aware of the severe threat and have started to propose serious reform. Key analyses on European competitiveness and the internal market point to the need for major changes.
With the right policies and regulatory reforms, Europe's strengths might enable much higher degrees of business-led breakthroughs.
Europe still possesses considerable strengths: skilled human capital, top-tier schools and universities, and world-class research institutions. Alongside a large internal market and high savings rates, these elements have the potential to unleash a new wave of venture creation.
Importantly, even if the EU does not take the lead in developing next-generation technologies, it can still significantly boost productivity by adopting and adapting innovations from elsewhere.
A Critical Juncture
The European Union now faces a critical crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been gradual. But, without bold steps to tackle its deep-seated problems, today's slow erosion could give way to a sudden and irreversible loss of world influence.
