The recent US national security strategy presents a misguided assessment of the European Union. The document asserts that open-border policies and what it terms "woke" policies pose an grave risk to the continent's identity. However, this perspective is based on a serious misreading of the situation. The true danger facing the EU is not societal but technological and economic backwardness.
A Glaring Growth Divide Separating the US and Europe
Statistics reveal a sobering contrast. From 2008 and 2023, US GDP surged by 87%, compared to a paltry 13.5% growth for the EU. During this time, EU GDP per capita fell from 76.5% to just 50% of the American figure. Strikingly, even Mississippi now has a higher per capita income than several leading European economies like France and Italy.
Today, about 50% 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 stronger efficiency gains in the United States, fueled by technological innovation and better use of resources. The scene of global tech dominance is decidedly American. In the last fifty years, hundreds of American startups have scaled into companies valued at over $10bn, compared with just 14 in Europe.
This gap raises a pressing question: As the competition for future industries like AI, semiconductors, and fusion energy, where does the EU positioned? Most analysts concede it is largely a two-horse race involving the US and China, with European nations entering at a clear disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of major factors account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for funding startups. Europe has yet to establish a genuine capital markets union, a factor that limits the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided regulation hinder Europe. A US startup can introduce a service under a single set of laws to access a market of over 330 million. The EU, despite a larger population, is split among 27 separate systems, creating significant internal barriers.
- Cultural Attitudes: Views on entrepreneurial failure vary greatly. In some EU nations, business failure was historically met with stigma, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has eroded its ability in pioneering research.
A Path Forward: Reasons for Hopefulness
Despite these challenges, there are causes for hope. Policymakers are growing more conscious of the severe threat and have begun to advance substantial change. Key reports on European competitiveness and the internal market highlight the necessity of sweeping changes.
With the right incentives and regulatory reforms, these assets could support far greater degrees of business-led breakthroughs.
The continent retains significant strengths: skilled workforce, excellent schools and universities, and world-class labs. Alongside a large internal market and substantial household savings, these foundations have the potential to unleash a new wave of venture creation.
Importantly, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically increase economic output by implementing and tailoring advancements from elsewhere.
A Critical Juncture
The European Union now stands at a decisive moment. As the saying goes, decline often happens "slowly, then all at once". So far, the continent's slide in innovation has been steady. But, if it fails to take bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
