Donald Trump's national security strategy offers a misguided assessment of the European Union. It claims that open-border policies and what it terms "progressive" policies pose an existential threat to European civilization. However, this perspective rests on a fundamental misreading of the situation. The actual danger confronting the EU is not cultural but technological and economic backwardness.
A Glaring Growth Gap Between the US and Europe
The data paint a sobering contrast. From 2008 and 2023, US GDP surged by eighty-seven percent, compared to a mere thirteen and a half percent growth for the EU. During this time, European income per person dropped from 76.5% to just 50% of the American figure. Strikingly, even the poorest US state now has a greater average income than several leading EU nations like France and Italy.
Today, roughly half of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Deficit: A Critical Question
The growing disparity stems from superior efficiency gains in the US, fueled by breakthroughs and better use of resources. The scene of global tech dominance is decidedly US-centric. In the last fifty years, 241 US firms have scaled into companies valued at more than $10bn, versus just 14 in the European continent.
This disparity prompts a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU positioned? Most analysts concede it is largely a two-horse race involving the US and China, with European nations entering at a significant handicap.
Root Causes of Europe's Technological Lag
Several key factors account for this technological divide.
- Venture Capital: The United States has a far deeper and agile system for financing new ventures. Europe has yet to establish a genuine capital markets union, which caps the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A US startup can introduce a service under one regulatory framework to access a market of over 330 million. The European Union, despite a bigger population size, is divided among 27 different national systems, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once viewed with stigma, whereas in the United States, it is often considered a badge of experience.
- Defense Spending: 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.
The Road Ahead: Reasons for Cautious Optimism
Despite these challenges, one can find causes for hope. European leaders are increasingly aware of the existential challenge and have started to advance serious reform. Key analyses on EU competitiveness and the internal market point to the need for sweeping reforms.
With the right incentives and rule changes, Europe's strengths might enable far greater levels of business-led breakthroughs.
Europe retains significant 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 trigger a surge of investment and entrepreneurship.
Crucially, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically increase productivity by adopting and adapting innovations from other regions.
A Critical Juncture
The European Union now faces a critical crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. But, without decisive action to address its deep-seated problems, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
