The recent US security policy document offers a misguided assessment of Europe. It claims that open-border policies and so-called "woke" policies represent an existential risk to European civilization. However, this perspective 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 paint a stark contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, compared to a paltry 13.5% increase for the European Union. During this time, EU GDP per capita dropped from 76.5% to just 50% of the US level. Strikingly, even the poorest US state now boasts a greater average income than several leading European economies like France and Italy.
Today, about half of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Shortfall: The Core Question
The growing economic gap is driven by superior productivity growth in the United States, fueled by breakthroughs and better use of resources. The scene of global tech leadership is overwhelmingly US-centric. In the last five decades, hundreds of American startups have scaled into enterprises valued at over $10bn, compared with just 14 in Europe.
This gap raises a pressing issue: As the competition for future industries like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely concede it is essentially a two-horse race involving the United States and China, with Europe starting at a significant disadvantage.
Root Causes of the Continent's Technological Lag
Several major factors explain this technological divide.
- Financing Ecosystem: The US boasts a much more robust and agile network for financing new ventures. The EU has yet to establish a genuine unified investment market, which caps the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can introduce a product under one regulatory framework to access a market of hundreds of millions. The European Union, despite a bigger population size, is split among twenty-seven separate regimes, creating significant market obstacles.
- Cultural Attitudes: Views on risk-taking vary greatly. In some EU nations, business failure was once viewed with penalties, whereas in the US, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has weakened its capacity for breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these challenges, there are reasons for hope. European leaders are increasingly aware of the existential challenge and have started to propose serious reform. Notable analyses on EU competitiveness and the single market highlight the need for sweeping changes.
With the right policies and rule changes, Europe's strengths might enable far greater levels of commercial innovation.
Europe still possesses considerable advantages: skilled workforce, top-tier schools and universities, and premier research institutions. Coupled with a large internal market and high savings rates, these elements have the potential to unleash a surge of venture creation.
Crucially, even if the EU does not take the lead in creating cutting-edge tech, it can still dramatically boost productivity by implementing and tailoring innovations from other regions.
An Inflection Point
The European Union now stands at a critical crossroads. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, the continent's technological decline has been gradual. But, without bold steps to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of world influence.
