Donald Trump's security policy document offers a misguided assessment of Europe. The document asserts that open-border policies and so-called "woke" policies pose an grave risk to European civilization. Yet, this argument is based on a fundamental misreading of the situation. The true challenge facing Europe is not societal but technological and economic backwardness.
The Stark Economic Divide Between the US and Europe
The data reveal a sobering picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% increase for the European Union. During this period, European income per person dropped from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a greater average income than major EU nations like France and Italy.
Currently, about half of the world’s 50 largest tech companies are American, while a mere four are from Europe.
The Technological Shortfall: The Core Problem
This widening economic gap stems from stronger efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of global tech leadership is overwhelmingly American. In the last five decades, hundreds of American startups have scaled into enterprises valued at over $10bn, versus just 14 in Europe.
This disparity raises a vital issue: As the competition for future industries like semiconductors, AI, and fusion energy, where does the EU stand? Experts widely concede it is largely a two-horse race between the United States and China, with Europe entering at a clear handicap.
Root Causes of Europe's Technological Lag
Several major factors account for this innovation chasm.
- Financing Ecosystem: The United States has a far deeper and agile network for funding startups. Europe still lacks a genuine capital markets union, a factor that caps the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A US startup can launch a service under one set of laws to access a consumer base of hundreds of millions. The EU, despite a larger population size, is split among 27 separate systems, creating huge market obstacles.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In some EU nations, business failure was once viewed with penalties, whereas in the US, it is often considered a badge of experience.
- Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Reasons for Hopefulness
In spite of these hurdles, one can find reasons for optimism. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Key reports on EU competitiveness and the single market highlight the need for major reforms.
Given appropriate policies and rule changes, these assets could support much higher levels of business-led breakthroughs.
The continent still possesses considerable advantages: high-quality workforce, excellent education systems, and world-class labs. Alongside a large internal market and substantial household savings, these elements have the potential to trigger a surge of venture creation.
Importantly, even if the EU does not take the lead in creating cutting-edge tech, it can still dramatically boost productivity by implementing and tailoring advancements from other regions.
An Inflection Point
The European Union now stands at a decisive moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. However, without bold steps to address its structural weaknesses, today's slow erosion could give way to a sudden and irreversible decline in global economic relevance.
