The recent US security policy document offers a misguided view of Europe. It claims that open-border policies and what it terms "woke" policies pose an grave risk to the continent's identity. However, this argument is based on a fundamental misinterpretation of the reality. The actual danger confronting the EU is not cultural but economic and technological lag.
The Stark Economic Divide Separating the US and Europe
The data reveal a sobering picture. Between 2008 and 2023, American economic output grew by 87%, while a paltry 13.5% increase for the European Union. Over this time, EU GDP per capita fell from over three-quarters to just half of the American figure. Remarkably, even Mississippi now has a greater average income than several leading EU nations like France and Italy.
Today, about 50% of the world’s 50 largest tech companies are US-based, while only four are European.
The Technological Shortfall: The Core Problem
This widening economic gap stems from stronger efficiency gains in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is decidedly American. Over the past fifty years, 241 US firms have grown into enterprises valued at over $10bn, versus just 14 in the European continent.
This disparity raises a pressing question: In the race for future industries like AI, semiconductors, and fusion energy, where does Europe stand? Experts widely concede it is largely a contest between two between the US and China, with Europe entering at a significant handicap.
Root Causes of the Continent's Technological Lag
A number of major reasons 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 unified investment market, which limits the scale of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented rules hamper Europe. A American entrepreneur can introduce a service under one set of laws to access a market of hundreds of millions. The European Union, despite a bigger population size, is split among 27 separate systems, creating huge internal barriers.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the United States, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a tightly woven innovation pipeline linking defense and academia. The continent's long-term lack of spending in defense has eroded its capacity for pioneering research.
The Road Ahead: Grounds for Cautious Optimism
In spite of these hurdles, one can find causes for hope. Policymakers are growing more conscious of the severe threat and have begun to advance substantial change. Key reports on European competitiveness and the single market point to the need for major changes.
With the right incentives and regulatory reforms, Europe's strengths might enable far greater degrees of commercial innovation.
The continent still possesses considerable strengths: high-quality human capital, excellent schools and universities, and premier labs. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of investment and entrepreneurship.
Crucially, even if Europe does not take the lead in developing cutting-edge technologies, it can still significantly boost economic output by implementing and tailoring advancements from elsewhere.
An Inflection Point
The European Union now faces a critical crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. But, without decisive action to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in world influence.
