Donald Trump's national security strategy offers a misguided assessment of Europe. It claims that open-border policies and what it terms "woke" policies pose an existential risk to European civilization. However, this argument rests on a serious misreading of the situation. The true danger confronting the EU is not societal but technological and economic backwardness.
The Stark Growth Gap Between the US and Europe
The data reveal a stark picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, compared to a paltry 13.5% growth for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the US level. Remarkably, even the poorest US state now boasts a greater average income than major EU nations like Italy and France.
Today, roughly half of the global 50 largest technology firms are US-based, while a mere four are European.
The Technological Deficit: A Critical Question
The growing economic gap is driven by stronger efficiency gains in the US, largely due to breakthroughs and better use of resources. The landscape of global tech dominance is decidedly US-centric. Over the past five decades, hundreds of American startups have scaled into enterprises valued at over $10bn, versus only fourteen in Europe.
This disparity prompts a vital issue: In the race for future industries like semiconductors, AI, and fusion energy, where does Europe positioned? Experts widely agree it is largely a two-horse race involving the US and China, with Europe starting at a clear handicap.
Underlying Factors of the Continent's Technological Lag
Several key reasons account for this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for funding startups. Europe still lacks a genuine capital markets union, a factor that limits the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A American entrepreneur can introduce a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a bigger population, is split among 27 different national regimes, creating significant internal barriers.
- Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was once met with stigma, whereas in the US, it is often considered a badge of experience.
- Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in defense has weakened its capacity for pioneering research.
A Path Forward: Grounds for Cautious Optimism
Despite these hurdles, there are causes for hope. European leaders are growing more conscious of the existential challenge and have begun to propose serious reform. Key analyses on European competitiveness and the single market point to the need for sweeping changes.
With the right policies and regulatory reforms, Europe's strengths could support far greater levels of business-led breakthroughs.
Europe retains considerable advantages: high-quality human capital, top-tier schools and universities, and world-class labs. Alongside a large internal market and substantial household savings, these elements have the potential to unleash a new wave of venture creation.
Importantly, even if Europe does not take the lead in creating cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring advancements from other regions.
An Inflection Point
The European Union now faces a decisive crossroads. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, Europe's technological decline has been gradual. But, without decisive action to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of global economic relevance.
