The recent US security policy document presents a misguided assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies represent an grave threat to European civilization. Yet, this perspective rests on a serious misreading of the reality. The true challenge facing Europe is not societal but economic and technological backwardness.
A Glaring Economic Divide Between the US and Europe
The data reveal a stark contrast. Between 2008 and 2023, American economic output surged by 87%, compared to a mere 13.5% increase for the EU. During this period, European income per person dropped from over three-quarters to just half of the American figure. Strikingly, even Mississippi now has a greater average income than major EU nations like Italy and France.
Today, roughly half of the world’s top fifty technology firms are American, while only four are European.
The Technological Shortfall: A Critical Problem
This widening disparity stems from stronger efficiency gains in the United States, fueled by technological innovation and higher total factor productivity. The landscape of global tech dominance is overwhelmingly American. In the last five decades, 241 US firms have scaled into companies valued at more than ten billion dollars, versus only fourteen in Europe.
This gap prompts a pressing issue: As the competition for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Most analysts concede it is essentially a contest between two involving the US and China, with European nations entering at a clear handicap.
Root Causes of the Continent's Technological Lag
A number of major factors explain this innovation chasm.
- Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. Europe has yet to establish a genuine unified investment market, which caps the growth potential of new firms.
- Bureaucratic Hurdles: Excessive and fragmented regulation hinder European business. A US startup can introduce a service under one regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population size, is split among twenty-seven different national systems, creating significant market obstacles.
- Cultural Attitudes: Views on risk-taking differ sharply. In some EU nations, business failure was once viewed with stigma, whereas in the US, it is often considered a badge of experience.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has weakened its ability in pioneering research.
A Path Forward: Grounds for Cautious Optimism
Despite these hurdles, there are causes for optimism. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Key reports on EU 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 commercial innovation.
Europe still possesses significant advantages: high-quality workforce, excellent schools and universities, and world-class research institutions. Coupled with a large internal market and substantial household savings, these foundations have the potential to unleash a new wave of venture creation.
Crucially, even if the EU does not become the leader in developing cutting-edge technologies, it can still significantly increase economic output by adopting and adapting innovations from elsewhere.
An Inflection Point
The European Union now faces a decisive crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. But, without decisive action to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent loss of world influence.
