Donald Trump's national security strategy presents a flawed assessment of Europe. It claims that open-border policies and what it terms "progressive" policies pose an grave risk to the continent's identity. Yet, this perspective rests on a serious misinterpretation of the reality. The true danger confronting Europe is not cultural but economic and technological backwardness.
A Glaring Growth Gap Between Europe and the US
The data paint a sobering contrast. From 2008 and 2023, US GDP grew by 87%, while a paltry 13.5% increase for the EU. During this time, EU GDP per capita fell from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now boasts a greater average income than several leading European economies like Italy and France.
Today, about 50% of the global 50 largest technology firms are American, while only four are European.
The Technological Shortfall: The Core Question
This widening disparity is driven by stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The scene of global tech leadership is overwhelmingly US-centric. Over the past fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, versus only fourteen in Europe.
This disparity prompts a pressing question: As the competition for future industries like semiconductors, AI, and quantum computing, where does Europe positioned? Most analysts concede it is essentially a contest between two between the US and China, with Europe entering at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
Several key factors account for this innovation chasm.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for financing new ventures. Europe has yet to establish a genuine capital markets union, a factor that caps the growth potential of emerging companies.
- Bureaucratic Hurdles: Complex and divided rules hinder European business. A American entrepreneur can introduce a product under a single set of laws to access a market of hundreds of millions. The EU, despite a larger population, is divided among twenty-seven different national regimes, creating huge internal barriers.
- Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, business failure was historically viewed with penalties, whereas in the United States, it is often seen as a badge of experience.
- Military Investment: The US benefits from a deeply integrated innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has eroded its capacity for breakthrough innovation.
The Road Ahead: Reasons for Cautious Optimism
Despite these challenges, one can find causes for hope. Policymakers are increasingly aware of the severe threat and have started to propose serious reform. Key analyses on European competitiveness and the single market point to the need for major changes.
Given appropriate incentives and regulatory reforms, Europe's strengths could support much higher degrees of business-led breakthroughs.
Europe still possesses considerable advantages: high-quality workforce, top-tier education systems, and world-class research institutions. Alongside a vast domestic consumer base and substantial household savings, these elements could trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not become the leader in creating cutting-edge tech, it can still dramatically boost economic output by implementing and tailoring innovations from other regions.
An Inflection Point
Europe 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 bold steps to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
