Donald Trump's security policy document offers a misguided view of the European Union. It claims that unrestrained immigration and so-called "progressive" policies pose an existential threat to European civilization. However, this argument rests on a fundamental misreading of the situation. The true danger facing Europe is not cultural but economic and technological backwardness.
A Glaring Economic Divide Separating Europe and the US
Statistics paint a stark picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, while a mere thirteen and a half percent growth for the EU. During this time, European income per person fell from over three-quarters to just 50% of the American figure. Remarkably, even the poorest US state now has a greater average income than several leading European economies like France and Italy.
Today, about half of the global 50 largest technology firms are American, while a mere four are European.
The Innovation Deficit: A Critical Problem
The growing economic gap is driven by stronger efficiency gains in the US, fueled by breakthroughs and higher total factor productivity. The scene of world technology leadership is overwhelmingly American. In the last five decades, 241 US firms have scaled into companies valued at more than ten billion dollars, compared with just 14 in Europe.
This gap raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe stand? Experts widely agree it is essentially a two-horse race between the US and China, with European nations entering at a significant handicap.
Root Causes of the Continent's Technological Lag
A number of key reasons account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic network for financing new ventures. Europe has yet to establish a true capital markets union, a factor that limits the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented regulation hamper Europe. A American entrepreneur can launch a service under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a larger population, is split among 27 different national regimes, creating huge internal barriers.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was once viewed with penalties, whereas in the US, it is often seen as a badge of experience.
- Defense Spending: The United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its ability in breakthrough innovation.
The Road Ahead: Reasons for Cautious Optimism
In spite of these hurdles, there are causes for hope. European leaders are increasingly aware of the severe threat and have begun to propose serious reform. Notable analyses on EU competitiveness and the internal market highlight the need for sweeping changes.
Given appropriate policies and rule changes, these assets could support much higher degrees of commercial innovation.
Europe still possesses considerable advantages: high-quality human capital, top-tier schools and universities, and premier research institutions. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of venture creation.
Crucially, even if the EU does not take the lead in creating cutting-edge technologies, it can still significantly boost productivity by adopting and adapting advancements from other regions.
An Inflection Point
Europe now faces a critical crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. However, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.
