Donald Trump's security policy document offers a flawed view of Europe. The document asserts that open-border policies and so-called "progressive" agendas represent an grave threat to European civilization. However, this argument is based on a fundamental misreading of the situation. The true danger facing the EU is not societal but technological and economic backwardness.
The Stark Economic Gap Between Europe and the US
Statistics paint a sobering picture. From 2008 and 2023, American economic output grew by eighty-seven percent, compared to a paltry thirteen and a half percent growth for the European Union. During this time, European income per person dropped from over three-quarters to just half of the US level. Strikingly, even Mississippi now boasts a higher per capita income than several leading European economies like France and Italy.
Currently, about half of the world’s 50 largest tech companies are American, while only four are from Europe.
The Technological Deficit: A Critical Question
This widening disparity stems from superior productivity growth in the US, largely due to technological innovation and better use of resources. The scene of global tech leadership is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, compared with just 14 in the European continent.
This gap prompts a vital issue: As the competition for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Experts widely concede it is essentially a two-horse race between the US and China, with Europe starting at a significant disadvantage.
Underlying Factors of the Continent's Innovation Gap
Several key reasons explain this technological divide.
- Venture Capital: The US boasts a much more robust and more dynamic network for funding startups. Europe has yet to establish a true unified investment market, a factor that limits the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can introduce a product under a single set of laws to access a market of over 330 million. The EU, despite a bigger population, is divided among twenty-seven different national systems, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, business failure was historically viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
- Military Investment: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its capacity for pioneering research.
A Path Forward: Grounds for Cautious Optimism
In spite of these hurdles, one can find causes for optimism. Policymakers are increasingly aware of the existential challenge and have begun to propose substantial change. Key analyses on European competitiveness and the internal market point to the necessity of major changes.
With the right policies and regulatory reforms, these assets could support much higher degrees of commercial innovation.
Europe retains considerable advantages: skilled human capital, excellent schools and universities, and world-class labs. Alongside a large internal market and high savings rates, these elements have the potential to unleash a new wave of investment and entrepreneurship.
Importantly, even if Europe does not become the leader in creating cutting-edge technologies, it can still dramatically increase economic output by implementing and tailoring innovations from elsewhere.
An Inflection Point
Europe now stands at a decisive crossroads. As the saying goes, 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 turn into a rapid and permanent loss of global economic relevance.
