The recent US national security strategy offers a flawed assessment of Europe. It claims that open-border policies and so-called "progressive" policies pose an grave risk to European civilization. Yet, this argument rests on a serious misinterpretation of the reality. The actual danger facing Europe is not societal but technological and economic lag.
A Glaring Growth Gap Between the US and Europe
The data paint a stark contrast. From 2008 and 2023, US GDP surged by eighty-seven percent, while a paltry thirteen and a half percent increase for the EU. Over this period, EU GDP per capita dropped from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now boasts a greater average income than major EU nations like France and Italy.
Today, roughly half of the global top fifty tech companies are US-based, while a mere four are from Europe.
The Technological Shortfall: A Critical Question
This widening economic gap stems from superior productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech leadership is overwhelmingly American. In the last five decades, hundreds of American startups have scaled into companies valued at more than $10bn, versus just 14 in the European continent.
This gap raises a pressing question: In the race for future industries like semiconductors, AI, and fusion energy, where does the EU stand? Experts widely agree it is essentially a two-horse race between the US and China, with European nations entering at a clear handicap.
Underlying Factors of Europe's Technological Lag
A number of key reasons account for this technological divide.
- Venture Capital: The United States has a much more robust and more dynamic system for financing new ventures. The EU still lacks a true capital markets union, a factor that caps the growth potential of new firms.
- Bureaucratic Hurdles: Complex and divided rules hinder European business. A US startup can launch a product under one regulatory framework to access a consumer base of over 330 million. The European Union, despite a bigger population, is split among twenty-seven separate regimes, creating significant market obstacles.
- Cultural Attitudes: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the US, it is often seen as a badge of experience.
- Military Investment: The US benefits from a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has weakened its ability in pioneering research.
The Road Ahead: Grounds for Hopefulness
In spite of these hurdles, there are causes for optimism. European leaders are increasingly aware of the existential challenge and have begun to advance substantial change. Key reports on EU competitiveness and the internal market point to the need for sweeping changes.
Given appropriate policies and regulatory reforms, Europe's strengths could support much higher levels of commercial innovation.
Europe still possesses considerable advantages: skilled human capital, excellent schools and universities, and premier 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 developing next-generation technologies, it can still dramatically boost economic output by adopting and adapting advancements from other regions.
An Inflection Point
The European Union now faces a decisive crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. However, without bold steps to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in world influence.
