🔗 Share this article

Donald Trump's security policy document presents a misguided assessment of the European Union. The document asserts that open-border policies and so-called "woke" policies represent an existential threat to European civilization. However, this argument is based on a serious misreading of the reality. The true challenge confronting the EU is not societal but technological and economic backwardness.

The Stark Growth Gap Between Europe and the US

The data paint a stark picture. From 2008 and 2023, US GDP surged by 87%, while a mere thirteen and a half percent growth for the European Union. During this time, European income per person fell from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now has a greater average income than major European economies like France and Italy.

Currently, roughly half of the world’s top fifty technology firms are American, while only four are from Europe.

The Technological Deficit: The Core Question

This widening disparity is driven by superior productivity growth in the US, largely due to technological innovation and higher total factor productivity. The scene of global tech leadership is decidedly US-centric. Over the past five decades, 241 US firms have grown into enterprises valued at more than $10bn, versus just 14 in Europe.

This disparity raises a vital issue: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, what is Europe positioned? Most analysts concede it is largely a contest between two between the US and China, with European nations starting at a clear disadvantage.

Underlying Factors of the Continent's Innovation Gap

Several major reasons explain this innovation chasm.

• Financing Ecosystem: The US boasts a much more robust and agile system for financing new ventures. The EU has yet to establish a true unified investment market, which limits the growth potential of emerging companies.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A US startup can introduce a service under one set of laws to access a market of hundreds of millions. The EU, despite a bigger population, is divided among 27 different national systems, creating significant market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was once met with penalties, whereas in the US, it is often seen as a badge of experience.
• Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in defense has weakened its ability in breakthrough innovation.

The Road Ahead: Reasons for Cautious Optimism

Despite these hurdles, one can find reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to advance substantial change. Notable reports on European competitiveness and the internal market point to the necessity of sweeping reforms.

Given appropriate incentives and regulatory reforms, these assets could support much higher degrees of commercial innovation.

Europe retains considerable advantages: high-quality workforce, top-tier schools and universities, and premier research institutions. Coupled with a vast domestic consumer base and high savings rates, these foundations have the potential to unleash a new wave of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in creating cutting-edge technologies, it can still significantly increase productivity by adopting and adapting advancements from other regions.

An Inflection Point

Europe now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's slide in innovation has been steady. However, if it fails to take decisive action to address its structural weaknesses, today's slow erosion could give way to a sudden and irreversible loss of world influence.