Donald Trump's national security strategy presents a misguided view of the European Union. It claims that open-border policies and what it terms "woke" policies pose an grave risk to European civilization. However, this argument is based on a fundamental misreading of the reality. The true challenge facing the EU is not societal but technological and economic backwardness.
A Glaring Economic Divide Between Europe and the US
Statistics paint a sobering picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% growth for the European Union. Over this period, European income per person dropped from 76.5% to just half of the US level. Remarkably, even the poorest US state now boasts a greater average income than several leading European economies like Italy and France.
Currently, roughly half of the world’s 50 largest tech companies are American, while a mere four are from Europe.
The Innovation Shortfall: A Critical Question
The growing economic gap is driven by superior productivity growth in the United States, fueled by breakthroughs and better use of resources. The scene of world technology dominance is decidedly American. Over the past five decades, 241 US firms have scaled into companies valued at over ten billion dollars, versus only fourteen in the European continent.
This gap prompts a pressing issue: As the competition for future industries like AI, semiconductors, and fusion energy, what is Europe stand? Experts widely agree it is largely a two-horse race involving the US and China, with Europe starting at a significant handicap.
Root Causes of the Continent's Technological Lag
Several major factors account for this technological divide.
- Financing Ecosystem: The United States has a far deeper and agile system for funding startups. The EU has yet to establish a true capital markets union, which limits the scale of new firms.
- Regulatory Fragmentation: Complex and divided regulation hamper 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 divided among 27 different national systems, creating huge market obstacles.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In parts of Europe, business failure was once viewed with stigma, whereas in the US, 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 long-term lack of spending in defense has weakened its ability in pioneering research.
A Path Forward: Reasons for Cautious Optimism
In spite of these hurdles, there are reasons for hope. Policymakers are increasingly aware of the existential challenge and have begun to propose serious reform. Notable reports on European competitiveness and the single market point to the need for sweeping changes.
Given appropriate incentives and rule changes, Europe's strengths might enable far greater degrees of commercial innovation.
Europe retains considerable strengths: 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 investment and entrepreneurship.
Crucially, even if the EU does not take the lead in developing next-generation technologies, it can still dramatically increase productivity by adopting and adapting advancements from other regions.
A Critical Juncture
Europe now faces a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's slide in innovation has been gradual. But, without bold steps to address its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of world influence.
