Donald Trump's national security strategy offers a misguided view of the European Union. It claims that open-border policies and so-called "progressive" agendas represent an existential threat to the continent's identity. However, this perspective is based on a serious misinterpretation of the reality. The actual danger facing the EU is not cultural but technological and economic backwardness.
A Glaring Growth Gap Separating the US and Europe
The data reveal a sobering picture. From 2008 and 2023, US GDP surged by 87%, compared to a mere 13.5% increase for the European Union. Over this time, European income per person fell from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now boasts a greater average income than several leading EU nations like France and Italy.
Currently, roughly 50% of the world’s 50 largest technology firms are American, while only four are European.
The Technological Shortfall: A Critical Question
This widening economic gap is driven by superior productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The landscape of global tech dominance is decidedly American. Over the past five decades, hundreds of American startups have grown into companies valued at more than $10bn, versus just 14 in the European continent.
This gap raises a pressing question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU positioned? Experts widely agree it is largely a contest between two involving the United States and China, with Europe starting at a clear handicap.
Root Causes of Europe's Technological Lag
Several major factors account for this technological divide.
- Venture Capital: The US boasts a far deeper and more dynamic system for financing new ventures. The EU still lacks a genuine capital markets union, a factor that limits the growth potential of new firms.
- Bureaucratic Hurdles: Complex and divided regulation hamper Europe. A American entrepreneur can launch a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population, is divided among 27 different national regimes, creating significant market obstacles.
- Mindset Differences: Views on risk-taking vary greatly. In some EU nations, business failure was historically viewed with penalties, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.
A Path Forward: Reasons for Hopefulness
In spite of these challenges, there are reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Key reports on EU competitiveness and the internal market point to the necessity of major reforms.
Given appropriate policies and rule changes, these assets might enable much higher levels of business-led breakthroughs.
The continent still possesses significant strengths: high-quality human capital, excellent schools and universities, and premier labs. Alongside a large internal market and substantial household savings, these foundations could unleash a new wave of investment and entrepreneurship.
Importantly, even if the EU does not become the leader in creating cutting-edge technologies, it can still significantly increase productivity by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now stands at a critical moment. As the saying goes, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. However, without decisive action to tackle its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in world influence.
