Donald Trump's security policy document offers a flawed view of the European Union. The document asserts that open-border policies and so-called "woke" policies pose an grave threat to European civilization. However, this argument rests on a fundamental misreading of the reality. The true danger confronting Europe is not cultural but technological and economic lag.
The Stark Growth Gap Between the US and Europe
The data paint a stark picture. Between 2008 and 2023, US GDP grew by 87%, compared to a paltry thirteen and a half percent growth for the European Union. Over this time, EU GDP per capita fell from over three-quarters to just half of the US level. Strikingly, even the poorest US state now has a higher per capita income than major European economies like Italy and France.
Today, about half of the world’s 50 largest technology firms are US-based, while only four are European.
The Technological Deficit: A Critical Problem
The growing disparity is driven by superior efficiency gains in the US, fueled by breakthroughs and better use of resources. The scene of world technology leadership is decidedly US-centric. Over the past fifty years, 241 US firms have scaled into companies valued at more than ten billion dollars, compared with just 14 in Europe.
This disparity prompts a vital issue: As the competition for future industries like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely concede it is largely a two-horse race involving the United States and China, with European nations entering at a clear disadvantage.
Root Causes of the Continent's Technological Lag
Several major factors explain this technological divide.
- Financing Ecosystem: The US boasts a much more robust and agile system for funding startups. Europe has yet to establish a true capital markets union, which caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided regulation hinder European business. A US startup can introduce a product under one set of laws to access a market of hundreds of millions. The EU, despite a bigger population, is divided among 27 different national systems, creating significant market obstacles.
- Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has weakened its capacity for breakthrough innovation.
The Road Ahead: Reasons for Cautious Optimism
Despite these challenges, there are causes for optimism. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Notable reports on EU competitiveness and the internal market point to the need for major reforms.
With the right incentives and regulatory reforms, Europe's strengths could support far greater degrees of commercial innovation.
Europe retains considerable strengths: skilled human capital, excellent schools and universities, and world-class research institutions. Alongside a vast domestic consumer base and high savings rates, these elements could trigger a surge of venture creation.
Importantly, even if the EU does not take the lead in creating next-generation technologies, it can still significantly increase productivity by implementing and tailoring advancements from other regions.
An Inflection Point
Europe now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. But, without bold steps to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.
