The recent US security policy document offers a misguided assessment of Europe. It claims that open-border policies and so-called "progressive" agendas represent an grave risk to the continent's identity. Yet, this argument rests on a fundamental misinterpretation of the reality. The true challenge facing Europe is not cultural but technological and economic lag.
The Stark Growth Gap Between the US and Europe
Statistics reveal a stark picture. Between 2008 and 2023, US GDP grew by 87%, while a paltry 13.5% growth for the EU. Over this time, European income per person dropped from over three-quarters to just half of the US level. Strikingly, even the poorest US state now boasts a higher per capita income than several leading European economies like Italy and France.
Today, roughly half of the global 50 largest technology firms are American, while only four are from Europe.
The Technological Shortfall: The Core Problem
The growing disparity is driven by superior efficiency gains in the US, fueled by breakthroughs and better use of resources. The landscape of global tech leadership is decidedly US-centric. Over the past fifty years, hundreds of American startups have scaled into enterprises valued at over $10bn, versus only fourteen in Europe.
This gap prompts a pressing question: As the competition for future industries like semiconductors, AI, and quantum computing, where does Europe stand? Experts widely agree it is largely a two-horse race between the US and China, with Europe entering at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of key factors explain this technological divide.
- Financing Ecosystem: The US boasts a much more robust and agile system for funding startups. The EU still lacks a true capital markets union, which limits the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided regulation hinder Europe. A US startup can launch a service under one regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population, is split among 27 separate regimes, creating significant internal barriers.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In some EU nations, a startup's collapse was once met with stigma, whereas in the United States, it is often considered a badge of experience.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has eroded its capacity for pioneering research.
A Path Forward: Reasons for Hopefulness
Despite these challenges, there are reasons for hope. European leaders are increasingly aware of the existential challenge and have started to advance substantial change. Notable analyses on European competitiveness and the single market point to the need for sweeping reforms.
Given appropriate policies and regulatory reforms, Europe's strengths might enable far greater levels of business-led breakthroughs.
The continent still possesses considerable strengths: skilled human capital, excellent schools and universities, and premier research institutions. Coupled with a vast domestic consumer base and high savings rates, these foundations could trigger a new wave of venture creation.
Importantly, even if the EU does not take the lead in developing cutting-edge technologies, it can still dramatically increase economic output by adopting and adapting innovations from elsewhere.
A Critical Juncture
Europe now stands at a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, the continent's slide in innovation has been gradual. But, without decisive action to address its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.
