🔗 Share this article

The recent US national security strategy presents a flawed view of the European Union. It claims that open-border policies and what it terms "woke" agendas pose an grave risk to European civilization. Yet, this argument rests on a serious misreading of the situation. The true danger facing the EU is not cultural but economic and technological lag.

The Stark Growth Gap Between Europe and the US

Statistics paint a sobering picture. Between 2008 and 2023, US GDP grew by 87%, compared to a paltry 13.5% growth for the EU. Over this period, European income per person fell from 76.5% to just half of the US level. Remarkably, even Mississippi now has a higher per capita income than major European economies like Italy and France.

Currently, about 50% of the global 50 largest technology firms are US-based, while a mere four are from Europe.

The Innovation Shortfall: A Critical Question

The growing economic gap stems from superior efficiency gains in the United States, fueled by technological innovation 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 enterprises valued at over ten billion dollars, compared with only fourteen in Europe.

This gap prompts a vital issue: In the race for future industries like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely agree it is largely a two-horse race between the United States and China, with European nations starting at a significant handicap.

Underlying Factors of the Continent's Technological Lag

A number of major factors account for this technological divide.

• Financing Ecosystem: The United States has a much more robust and agile network for funding startups. The EU still lacks a true capital markets union, which caps the scale of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hamper Europe. A US startup can introduce a product under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population, is divided among 27 different national regimes, creating significant market obstacles.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the United States, it is often seen as a valuable lesson.
• Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its ability in breakthrough innovation.

The Road Ahead: Reasons for Cautious Optimism

In spite of these challenges, one can find causes for optimism. European leaders are increasingly aware of the severe threat and have begun to advance serious reform. Notable reports on EU competitiveness and the internal market highlight the necessity of major reforms.

With the right policies and regulatory reforms, these assets could support far greater degrees of business-led breakthroughs.

The continent still possesses significant advantages: skilled workforce, top-tier schools and universities, and world-class research institutions. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a new wave of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in developing next-generation tech, it can still significantly increase economic output by adopting and adapting innovations from other regions.

An Inflection Point

The European Union now faces a decisive crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. However, if it fails to take bold steps to tackle its deep-seated problems, today's slow erosion could give way to a sudden and irreversible loss of world influence.