Donald Trump's national security strategy presents a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" policies represent an grave threat to European civilization. Yet, this perspective is based on a fundamental misinterpretation of the reality. The actual danger confronting the EU is not societal but economic and technological backwardness.
The Stark Economic Divide Separating the US and Europe
Statistics paint a sobering contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, compared to a paltry thirteen and a half percent growth for the EU. During this period, EU GDP per capita fell from over three-quarters to just 50% of the American figure. Strikingly, even the poorest US state now has a greater average income than several leading European economies like France and Italy.
Currently, about half of the world’s top fifty technology firms are American, while only four are European.
The Innovation Shortfall: A Critical Problem
This widening disparity is driven by stronger efficiency gains in the US, fueled by breakthroughs and higher total factor productivity. The landscape of global tech dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into companies valued at more than $10bn, compared with only fourteen in the European continent.
This gap prompts a vital issue: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU stand? Most analysts agree it is largely a contest between two involving the United States and China, with European nations entering at a clear disadvantage.
Underlying Factors of the Continent's Innovation Gap
Several major reasons account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and agile system for funding startups. Europe has yet to establish a true capital markets union, which limits the growth potential of emerging companies.
- Regulatory Fragmentation: Complex and divided rules hinder European business. A US startup can launch a service under a single regulatory framework to access a market of hundreds of millions. The EU, despite a larger population size, is split among twenty-seven different national regimes, creating significant market obstacles.
- Mindset Differences: Attitudes toward entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was once met with penalties, whereas in the United States, it is often seen as a valuable lesson.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.
A Path Forward: Reasons for Hopefulness
In spite of these challenges, there are reasons for optimism. European leaders are increasingly aware of the existential challenge and have started to advance serious reform. Key analyses on EU competitiveness and the single market highlight the need for sweeping changes.
Given appropriate policies and rule changes, Europe's strengths could support much higher levels of business-led breakthroughs.
The continent still possesses significant strengths: high-quality human capital, top-tier education systems, and world-class labs. Coupled with a large internal market and high savings rates, these foundations could unleash a surge of venture creation.
Importantly, even if the EU does not become the leader in creating next-generation tech, it can still significantly increase productivity by implementing and tailoring advancements from elsewhere.
A Critical Juncture
The European Union now faces a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. But, without decisive action to address its structural weaknesses, today's gradual weakening could turn into a sudden and irreversible loss of world influence.
