The recent US national security strategy offers a flawed view of the European Union. It claims that open-border policies and so-called "woke" agendas represent an grave risk to the continent's identity. However, this argument rests on a serious misreading of the reality. The actual danger confronting Europe is not cultural but technological and economic lag.
The Stark Growth Gap Between the US and Europe
Statistics paint a sobering contrast. From 2008 and 2023, American economic output surged by 87%, while a paltry thirteen and a half percent growth for the European Union. During this time, EU GDP per capita dropped from over three-quarters to just half of the US level. Strikingly, even the poorest US state now boasts a greater average income than several leading EU nations like Italy and France.
Today, about 50% of the global 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Deficit: A Critical Question
The growing disparity is driven by superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of world technology leadership is decidedly American. Over the past five decades, 241 US firms have scaled into companies valued at over $10bn, compared with only fourteen in the European continent.
This gap prompts a pressing question: In the race for future industries like AI, semiconductors, and quantum computing, what is the EU positioned? Experts widely concede it is largely a contest between two between the US and China, with European nations entering at a clear handicap.
Root Causes of the Continent's Technological Lag
A number of major reasons explain this technological divide.
- Venture Capital: The US boasts a much more robust and agile system for financing new ventures. Europe has yet to establish a true capital markets union, which caps the scale of new firms.
- Bureaucratic Hurdles: Excessive and fragmented rules hamper Europe. A US startup can introduce a product under a single set of laws to access a consumer base of hundreds of millions. The EU, despite a bigger population, is divided among twenty-seven separate systems, creating significant internal barriers.
- Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, business failure was historically viewed with penalties, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
Despite these challenges, one can find reasons for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance serious reform. Key analyses on EU competitiveness and the internal market point to the necessity of major changes.
With the right incentives and rule changes, Europe's strengths might enable much higher degrees of business-led breakthroughs.
Europe still possesses significant strengths: high-quality workforce, top-tier schools and universities, and premier labs. Alongside a large internal market and substantial household savings, these elements could trigger a new wave of investment and entrepreneurship.
Crucially, even if Europe does not take the lead in creating next-generation tech, it can still significantly increase 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 "slowly, then all at once". To date, Europe's slide in innovation has been gradual. But, if it fails to take decisive action to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
