🔗 Share this article

Donald Trump's national security strategy presents a misguided assessment of Europe. It claims that open-border policies and what it terms "woke" policies represent an existential threat to European civilization. Yet, this argument is based on a serious misreading of the situation. The actual danger confronting Europe is not societal but technological and economic backwardness.

The Stark Economic Gap Separating the US and Europe

The data paint a sobering contrast. Between 2008 and 2023, US GDP surged by eighty-seven percent, while a paltry thirteen and a half percent growth for the European Union. Over this period, EU GDP per capita dropped from over three-quarters to just 50% of the American figure. Remarkably, even Mississippi now has a higher per capita income than several leading European economies like France and Italy.

Today, about 50% of the world’s top fifty tech companies are American, while a mere four are from Europe.

The Technological Deficit: A Critical Problem

This widening economic gap stems from stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The scene of global tech leadership is decidedly American. In the last fifty years, 241 US firms have scaled into enterprises valued at over ten billion dollars, versus just 14 in the European continent.

This gap prompts a vital issue: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU stand? Experts widely agree it is essentially a two-horse race involving the United States and China, with European nations starting at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

Several key factors explain this innovation chasm.

• Venture Capital: The US boasts a much more robust and agile system for funding startups. Europe has yet to establish a true capital markets union, a factor that limits the growth potential of new firms.
• Bureaucratic Hurdles: Complex and divided rules hamper European business. A American entrepreneur can introduce a product under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population size, is divided among twenty-seven different national regimes, creating huge market obstacles.
• Cultural Attitudes: Views on 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.
• Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in military capabilities has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Hopefulness

In spite of these challenges, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have started to propose serious reform. Key reports on European competitiveness and the single market highlight the need for major reforms.

Given appropriate policies and regulatory reforms, Europe's strengths might enable much higher levels of business-led breakthroughs.

The continent retains significant advantages: skilled workforce, excellent schools and universities, and premier labs. Coupled with a large internal market and high savings rates, these foundations have the potential to trigger a surge of venture creation.

Importantly, even if Europe does not become the leader in developing next-generation tech, it can still significantly increase productivity by implementing and tailoring advancements from other regions.

A Critical Juncture

Europe now faces a decisive moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". So far, the continent's slide in innovation has been gradual. However, without decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.