The recent US national security strategy offers a flawed view of Europe. The document asserts that open-border policies and so-called "progressive" agendas pose an grave risk to the continent's identity. Yet, this argument is based on a serious misreading of the reality. The true danger facing Europe is not societal but technological and economic backwardness.
A Glaring Growth Gap Between Europe and the US
The data paint a sobering contrast. From 2008 and 2023, American economic output grew by 87%, compared to a mere thirteen and a half percent growth for the EU. Over this period, European income per person dropped from 76.5% to just 50% of the American figure. Remarkably, even Mississippi now has a greater average income than major European economies like France and Italy.
Today, roughly 50% of the global top fifty technology firms are US-based, while a mere four are European.
The Technological Shortfall: A Critical Question
The growing disparity is driven by superior efficiency gains in the United States, fueled by technological innovation and better use of resources. The landscape of world technology dominance is decidedly American. In the last fifty years, hundreds of American startups have scaled into companies valued at over $10bn, compared with just 14 in the European continent.
This gap raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, what is the EU positioned? Most analysts concede it is essentially a contest between two between the US and China, with European nations starting at a clear disadvantage.
Underlying Factors of the Continent's Innovation Gap
Several key reasons explain this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for funding startups. The EU has yet to establish a genuine capital markets union, which caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided rules hinder Europe. A US startup can launch a product under one set of laws to access a market of over 330 million. The EU, despite a bigger population size, is split among 27 separate systems, creating huge internal barriers.
- Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, business failure was historically viewed with penalties, whereas in the US, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Grounds for Hopefulness
In spite of these challenges, one can find reasons for hope. Policymakers are increasingly aware of the existential challenge and have started to advance substantial change. Key reports on EU competitiveness and the internal market highlight the need for major reforms.
Given appropriate incentives and regulatory reforms, these assets might enable much higher degrees of commercial innovation.
The continent retains significant advantages: skilled workforce, top-tier schools and universities, and premier research institutions. Coupled with a vast domestic consumer base and high savings rates, these foundations have the potential to unleash a new wave of investment and entrepreneurship.
Importantly, even if the EU does not take the lead in developing next-generation tech, it can still significantly increase productivity by adopting and adapting advancements from other regions.
An Inflection Point
The European Union now faces a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's slide in innovation has been gradual. However, without decisive action to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in world influence.
