The recent US security policy document offers a flawed view of the European Union. The document asserts that open-border policies and what it terms "woke" agendas represent an grave threat to European civilization. Yet, this perspective is based on a serious misreading of the situation. The actual danger facing Europe is not societal but technological and economic lag.
The Stark Growth Gap Between Europe and the US
The data reveal a stark picture. From 2008 and 2023, US GDP surged by 87%, while a mere thirteen and a half percent increase for the European Union. During this period, European income per person dropped from over three-quarters to just 50% of the American figure. Remarkably, even the poorest US state now boasts a higher per capita income than major European economies like France and Italy.
Currently, about 50% of the world’s 50 largest technology firms are US-based, while only four are from Europe.
The Technological Deficit: The Core Question
This widening economic gap stems from superior productivity growth in the United States, fueled by breakthroughs and higher total factor productivity. The landscape of world technology leadership is overwhelmingly American. In the last five decades, 241 US firms have scaled into enterprises valued at over $10bn, versus just 14 in the European continent.
This disparity prompts a pressing issue: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, what is Europe stand? Most analysts concede it is largely a two-horse race involving the United States and China, with Europe starting at a clear disadvantage.
Root Causes of Europe's Innovation Gap
Several key reasons account for this technological divide.
- Financing Ecosystem: The US boasts a much more robust and more dynamic network for financing new ventures. Europe still lacks a genuine capital markets union, which limits the growth potential of new firms.
- Bureaucratic Hurdles: Excessive and fragmented rules hamper European business. A US startup can launch a service under one set of laws to access a consumer base of over 330 million. The EU, despite a larger population, is divided among 27 different national systems, creating significant internal barriers.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: 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 ability in breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these challenges, one can find causes for hope. Policymakers are growing more conscious of the severe threat and have begun to propose substantial change. Notable analyses on EU competitiveness and the single market highlight the necessity of sweeping changes.
Given appropriate incentives and regulatory reforms, Europe's strengths might enable far greater levels of commercial innovation.
The continent still possesses considerable advantages: skilled workforce, excellent schools and universities, and world-class research institutions. Coupled with a large internal market and substantial household savings, these elements could unleash a new wave of investment and entrepreneurship.
Crucially, even if Europe does not take the lead in creating next-generation technologies, it can still dramatically increase productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
The European Union now faces a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's technological decline has been gradual. However, without decisive action to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.
