The recent US national security strategy offers a misguided view of the European Union. It claims that open-border policies and what it terms "woke" agendas represent an existential risk to European civilization. However, this perspective is based on a fundamental misreading of the situation. The actual challenge confronting the EU is not cultural but economic and technological lag.
A Glaring Growth Gap Between Europe and the US
Statistics reveal a sobering picture. Between 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% growth for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now has a higher per capita income than several leading European economies like France and Italy.
Currently, roughly 50% of the world’s top fifty tech companies are American, while only four are European.
The Technological Deficit: A Critical Question
The growing economic gap is driven by stronger productivity growth in the US, largely due to technological innovation and better use of resources. The scene of global tech leadership is decidedly US-centric. In the last five decades, hundreds of American startups have scaled into companies valued at more than ten billion dollars, compared with just 14 in Europe.
This gap prompts a vital issue: In the race for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Experts widely agree it is essentially a contest between two between the US and China, with Europe entering at a significant handicap.
Underlying Factors of the Continent's Technological Lag
Several key factors explain this technological divide.
- Financing Ecosystem: The United States has a much more robust and agile system for funding startups. The EU still lacks a genuine capital markets union, a factor that limits the scale of new firms.
- Regulatory Fragmentation: Complex and divided regulation hinder European business. A US startup can introduce a product under a single set of laws to access a consumer base of over 330 million. The European Union, despite a bigger population size, is split among 27 separate systems, creating huge internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In some EU nations, a startup's collapse was once viewed with penalties, whereas in the United States, it is often considered a badge of experience.
- Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its ability in pioneering research.
The Road Ahead: Grounds for Cautious Optimism
In spite of these challenges, there are causes for hope. European leaders are increasingly aware of the existential challenge and have begun to propose substantial change. Key analyses on EU competitiveness and the internal market point to the necessity of major changes.
With the right policies and regulatory reforms, these assets could support far greater levels of commercial innovation.
Europe still possesses considerable advantages: skilled human capital, excellent education systems, and world-class labs. Coupled with a large internal market and high savings rates, these elements could unleash a new wave of investment and entrepreneurship.
Importantly, even if Europe does not become the leader in developing cutting-edge technologies, it can still dramatically increase productivity by implementing and tailoring innovations from elsewhere.
An Inflection Point
The European Union now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been gradual. However, without bold steps to tackle its deep-seated problems, today's slow erosion could give way to a rapid and permanent decline in global economic relevance.
