The recent US security policy document offers a misguided assessment of Europe. It claims that unrestrained immigration and so-called "woke" policies represent an existential threat to European civilization. However, this argument is based on a serious misinterpretation of the situation. The actual challenge facing the EU is not societal but technological and economic backwardness.
A Glaring Growth Divide Between the US and Europe
The data paint a sobering contrast. Between 2008 and 2023, American economic output grew by 87%, while a mere 13.5% increase for the EU. Over this time, EU GDP per capita dropped from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now has a higher per capita income than major EU nations like France and Italy.
Today, roughly half of the global top fifty technology firms are American, while only four are European.
The Technological Shortfall: The Core Problem
This widening economic gap is driven by stronger efficiency gains in the United States, fueled by technological innovation and better use of resources. The scene of global tech leadership is overwhelmingly American. Over the past fifty years, 241 US firms have grown into companies valued at more than ten billion dollars, compared with just 14 in the European continent.
This disparity raises a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and fusion energy, what is the EU positioned? Most analysts concede it is essentially a two-horse race involving the US and China, with Europe entering at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
Several major reasons account for this technological divide.
- Venture Capital: The US boasts a far deeper and agile system for funding startups. The EU has yet to establish a genuine unified investment market, which caps the scale of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can introduce a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population size, is split among 27 different national regimes, creating significant internal barriers.
- Mindset Differences: Attitudes toward risk-taking differ sharply. In some EU nations, a startup's collapse was once met with stigma, whereas in the US, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its capacity for pioneering research.
A Path Forward: Reasons for Cautious Optimism
Despite these hurdles, there are reasons for hope. Policymakers are increasingly aware of the existential challenge and have begun to propose serious reform. Notable analyses on European competitiveness and the single market point to the necessity of sweeping changes.
With the right incentives and rule changes, Europe's strengths might enable far greater degrees of business-led breakthroughs.
Europe retains significant advantages: skilled human capital, excellent schools and universities, and world-class research institutions. Coupled with a large internal market and high savings rates, these foundations have the potential to trigger a new wave of venture creation.
Importantly, even if Europe does not become the leader in creating cutting-edge tech, it can still dramatically increase economic output by implementing and tailoring advancements from other regions.
An Inflection Point
The European Union now faces a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. But, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of world influence.
