Donald Trump's security policy document offers a flawed assessment of the European Union. The document asserts that open-border policies and so-called "progressive" agendas represent an existential threat to the continent's identity. However, this argument rests on a fundamental misreading of the reality. The actual challenge facing Europe is not societal but economic and technological backwardness.
The Stark Economic Gap Between Europe and the US
Statistics paint a sobering contrast. From 2008 and 2023, American economic output surged by 87%, compared to a mere 13.5% increase for the EU. During this period, European income per person fell from 76.5% to just 50% of the American figure. Strikingly, even the poorest US state now has a higher per capita income than major EU nations like France and Italy.
Currently, about half of the global 50 largest tech companies are US-based, while only four are from Europe.
The Technological Deficit: The Core Question
The growing economic gap is driven by stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly US-centric. Over the past five decades, 241 US firms have grown into companies valued at over $10bn, versus only fourteen in the European continent.
This gap prompts a pressing issue: As the competition for future industries like semiconductors, AI, and quantum computing, where does the EU stand? Experts widely agree it is largely a two-horse race involving the United States and China, with Europe entering at a clear disadvantage.
Root Causes of the Continent's Technological Lag
Several key reasons account for this technological divide.
- Financing Ecosystem: The US boasts a much more robust and more dynamic network for funding startups. The EU has yet to establish a true capital markets union, a factor that limits the scale of emerging companies.
- Regulatory Fragmentation: Complex and divided regulation hinder European business. A American entrepreneur can introduce a service under one set of laws to access a market of hundreds of millions. The EU, despite a larger population size, is split among 27 different national regimes, creating significant market obstacles.
- Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its capacity for pioneering research.
A Path Forward: Grounds for Hopefulness
In spite of these hurdles, there are reasons for optimism. Policymakers are growing more conscious of the existential challenge and have started to advance serious reform. Key analyses on European competitiveness and the internal market highlight the need for sweeping changes.
Given appropriate incentives and rule changes, these assets could support far greater levels of business-led breakthroughs.
Europe still possesses significant strengths: skilled workforce, excellent schools and universities, and premier labs. Alongside a large internal market and high savings rates, these foundations have the potential to trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in developing next-generation technologies, it can still significantly boost productivity by adopting and adapting innovations from elsewhere.
An Inflection Point
Europe now stands at a decisive moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, Europe's slide in innovation has been gradual. However, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.
