The recent US security policy document presents a misguided view of the European Union. The document asserts that open-border policies and what it terms "progressive" policies represent an grave risk to European civilization. However, this argument is based on a fundamental misreading of the reality. The actual danger confronting Europe is not cultural but economic and technological backwardness.
A Glaring Economic Divide Between Europe and the US
Statistics paint a stark picture. Between 2008 and 2023, American economic output grew by 87%, while a mere thirteen and a half percent growth for the European Union. Over this time, European income per person fell from 76.5% to just half of the American figure. Strikingly, even Mississippi now has a higher per capita income than several leading EU nations like Italy and France.
Today, roughly 50% of the global 50 largest technology firms are American, while a mere four are European.
The Innovation Deficit: A Critical Problem
The growing economic gap stems from stronger efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The scene of world technology dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into companies valued at more than ten billion dollars, versus just 14 in the European continent.
This disparity raises a pressing issue: In the race for future industries like semiconductors, AI, and fusion energy, where does Europe stand? Most analysts agree it is largely a contest between two involving the United States and China, with Europe starting at a clear disadvantage.
Root Causes of the Continent's Innovation Gap
A number of major reasons account for this technological divide.
- Venture Capital: The US boasts a much more robust and agile system for financing new ventures. Europe has yet to establish a true capital markets union, which limits the scale of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented rules hinder European business. A American entrepreneur can introduce a service under a single regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population size, is split among 27 separate regimes, creating huge internal barriers.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was historically met with stigma, whereas in the US, it is often seen as a badge of experience.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's chronic underinvestment in defense has eroded its capacity for breakthrough innovation.
A Path Forward: Grounds for Cautious Optimism
Despite these hurdles, there are reasons for optimism. European leaders are growing more conscious of the severe threat and have started to propose serious reform. Notable reports on EU competitiveness and the single market point to the necessity of major reforms.
Given appropriate incentives and rule changes, Europe's strengths might enable much higher levels of business-led breakthroughs.
Europe still possesses considerable strengths: high-quality workforce, top-tier schools and universities, and premier labs. Coupled with a large internal market and high savings rates, these foundations have the potential to trigger a new wave of venture creation.
Importantly, even if Europe does not become the leader in creating cutting-edge tech, it can still significantly increase economic output by adopting and adapting advancements from other regions.
An Inflection Point
The European Union now faces a critical crossroads. As the saying goes, decline often happens "slowly, then all at once". To date, Europe's technological decline has been steady. But, without bold steps to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent loss of world influence.
