The recent US national security strategy presents a flawed assessment of the European Union. It claims that open-border policies and what it terms "woke" agendas pose an existential risk to the continent's identity. However, this argument rests on a serious misreading of the situation. The actual danger facing the EU is not cultural but economic and technological backwardness.
A Glaring Economic Gap Between the US and Europe
The data paint a stark contrast. Between 2008 and 2023, US GDP surged by 87%, while a paltry thirteen and a half percent growth for the European Union. During this time, EU GDP per capita dropped from over three-quarters to just half of the US level. Remarkably, even the poorest US state now boasts a greater average income than several leading EU nations like France and Italy.
Currently, roughly half of the global 50 largest tech companies are American, while a mere four are from Europe.
The Technological Deficit: The Core Problem
This widening disparity is driven by superior efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The scene of global tech leadership is overwhelmingly US-centric. Over the past five decades, hundreds of American startups have grown into enterprises valued at more than $10bn, versus only fourteen in Europe.
This gap raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe stand? Most analysts agree it is essentially a two-horse race between the US and China, with Europe starting at a significant handicap.
Root Causes of Europe's Technological Lag
A number of major factors explain this technological divide.
- Venture Capital: The United States has a far deeper and agile system for financing new ventures. Europe has yet to establish a genuine capital markets union, a factor that caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided rules hinder Europe. A US startup can introduce a product under one set of laws to access a consumer base of hundreds of millions. The European Union, despite a bigger population, is divided among 27 separate regimes, creating significant internal barriers.
- Cultural Attitudes: Views on risk-taking vary greatly. In some EU nations, business failure was historically viewed with stigma, whereas in the US, it is often considered a valuable lesson.
- Military Investment: The US benefits from a tightly woven innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its ability in breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these challenges, one can find causes for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance serious reform. Notable analyses on European competitiveness and the single market point to the necessity of major reforms.
Given appropriate policies and regulatory reforms, Europe's strengths might enable much higher levels of business-led breakthroughs.
The continent still possesses significant strengths: high-quality workforce, top-tier education systems, and premier labs. Coupled with a large internal market and substantial household savings, these elements could trigger a surge of venture creation.
Importantly, even if Europe does not become the leader in creating next-generation tech, it can still significantly boost economic output by adopting and adapting innovations from other regions.
A Critical Juncture
The European Union now stands at a critical crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. But, without bold steps to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in global economic relevance.