🔗 Share this article

The recent US national security strategy presents a flawed assessment of the European Union. The document asserts that open-border policies and so-called "progressive" agendas represent an existential risk to European civilization. However, this argument is based on a fundamental misreading of the reality. The true danger facing the EU is not societal but economic and technological lag.

A Glaring Growth Gap Between Europe and the US

Statistics reveal a stark picture. Between 2008 and 2023, US GDP grew by 87%, compared to 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 half of the American figure. Remarkably, even the poorest US state now has a greater average income than several leading EU nations like France and Italy.

Today, about 50% of the global 50 largest tech companies are US-based, while a mere four are European.

The Technological Deficit: A Critical Question

The growing economic gap is driven by stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The scene of global tech leadership is decidedly US-centric. In the last fifty years, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with just 14 in the European continent.

This gap prompts a vital question: As the competition for future industries like AI, semiconductors, and fusion energy, where does Europe stand? Most analysts concede it is largely a contest between two between the US and China, with European nations entering at a clear disadvantage.

Underlying Factors of Europe's Technological Lag

A number of major factors explain this technological divide.

• Venture Capital: The US boasts a much more robust and agile network for funding startups. The EU still lacks a genuine capital markets union, which limits the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided regulation hinder Europe. A American entrepreneur can introduce a product under one regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population, is split among twenty-seven separate systems, creating significant market obstacles.
• Cultural Attitudes: Views on risk-taking vary greatly. In some EU nations, business failure was historically met with penalties, whereas in the United States, it is often considered a badge of experience.
• Defense Spending: The United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its capacity for pioneering research.

A Path Forward: Grounds for Cautious Optimism

In spite of these hurdles, one can find reasons for hope. European leaders are increasingly aware of the severe threat and have started to advance substantial change. Key reports on EU competitiveness and the internal market point to the need for major reforms.

With the right policies and regulatory reforms, these assets might enable much higher degrees of business-led breakthroughs.

The continent retains considerable advantages: high-quality workforce, excellent schools and universities, and premier research institutions. Alongside a vast domestic consumer base and high savings rates, these foundations could unleash a surge of venture creation.

Crucially, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically boost economic output by implementing and tailoring innovations from other regions.

A Critical Juncture

The European Union now stands at a critical crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. However, if it fails to take decisive action to tackle its structural weaknesses, today's slow erosion could turn into a rapid and permanent loss of global economic relevance.