Donald Trump's security policy document offers a flawed view of Europe. It claims that unrestrained immigration and what it terms "progressive" agendas pose an grave risk to European civilization. However, this perspective is based on a fundamental misreading of the reality. The true danger confronting the EU is not societal but economic and technological backwardness.
A Glaring Growth Gap Separating the US and Europe
The data paint a sobering contrast. Between 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% increase for the European Union. Over this time, European income per person fell from over three-quarters to just half of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major EU nations like Italy and France.
Currently, roughly half of the world’s top fifty tech companies are American, while only four are European.
The Technological Deficit: The Core Question
This widening disparity is driven by superior productivity growth in the US, fueled by technological innovation and better use of resources. The landscape of world technology dominance is decidedly US-centric. Over the past fifty years, hundreds of American startups have scaled into companies valued at over $10bn, compared with only fourteen in Europe.
This disparity raises a pressing question: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU stand? Experts widely agree it is largely a two-horse race involving the United States and China, with European nations starting at a significant handicap.
Underlying Factors of Europe's Technological Lag
Several major factors account for this technological divide.
- Venture Capital: The United States has a far deeper and more dynamic system for funding startups. The EU still lacks a true capital markets union, a factor that caps the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided rules hinder European business. A American entrepreneur can introduce a service under a single set of laws to access a consumer base of over 330 million. The European Union, despite a bigger population size, is divided among twenty-seven different national systems, creating significant internal barriers.
- Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, business failure was once viewed with stigma, whereas in the US, it is often seen as a valuable lesson.
- Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has eroded its capacity for breakthrough innovation.
A Path Forward: Grounds for Hopefulness
Despite these challenges, there are reasons for hope. Policymakers are growing more conscious of the existential challenge and have begun to propose substantial change. Notable analyses on EU competitiveness and the single market highlight the need for sweeping changes.
With the right incentives and regulatory reforms, these assets could support much higher levels of commercial innovation.
Europe retains significant strengths: skilled workforce, excellent schools and universities, and world-class research institutions. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a new wave of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in creating next-generation tech, it can still significantly boost productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
Europe now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent'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 sudden and irreversible decline in global economic relevance.
