The recent US security policy document offers a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" policies pose an grave risk to the continent's identity. However, this perspective is based on a serious misreading of the reality. The actual danger confronting Europe is not societal but economic and technological lag.
A Glaring Growth Gap Separating the US and Europe
The data reveal a sobering contrast. Between 2008 and 2023, US GDP grew by eighty-seven percent, while a mere thirteen and a half percent growth for the EU. Over this time, 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 higher per capita income than major EU nations like Italy and France.
Currently, roughly half of the global top fifty tech companies are US-based, while a mere four are European.
The Technological Shortfall: The Core Question
The growing disparity stems from stronger efficiency gains in the US, largely due to technological innovation and better use of resources. The landscape of global tech dominance is decidedly American. In the last fifty years, hundreds of American startups have scaled into enterprises valued at over $10bn, compared with only fourteen in the European continent.
This gap raises a pressing question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU stand? Most analysts concede it is largely a contest between two between the United States and China, with Europe entering at a significant handicap.
Underlying Factors of Europe's Technological Lag
Several major factors account for this technological divide.
- Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. Europe has yet to establish a genuine capital markets union, which limits the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A American entrepreneur can introduce a product under a single set of laws to access a market of over 330 million. The EU, despite a larger population size, is divided among twenty-seven different national regimes, creating significant internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.
A Path Forward: Reasons for Cautious Optimism
In spite of these hurdles, there are causes for hope. European leaders are increasingly aware of the existential challenge and have begun to propose serious reform. Notable analyses on European competitiveness and the internal market highlight the need for major changes.
With the right policies and rule changes, Europe's strengths could support far greater levels of business-led breakthroughs.
The continent still possesses considerable advantages: skilled human capital, top-tier schools and universities, and premier research institutions. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a new wave of venture creation.
Crucially, even if the EU does not become the leader in developing next-generation technologies, it can still significantly boost productivity by adopting and adapting advancements from other regions.
A Critical Juncture
The European Union now stands at a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". So far, the continent's technological decline has been steady. But, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a rapid and permanent decline in world influence.
