Donald Trump's national security strategy offers a flawed view of Europe. The document asserts that unrestrained immigration and so-called "woke" agendas pose an grave threat to European civilization. However, this argument is based on a serious misreading of the situation. The actual danger confronting the EU is not cultural but economic and technological backwardness.
The Stark Economic Divide Separating the US and Europe
Statistics paint a sobering contrast. From 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% growth for the European Union. During this time, European income per person fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than major EU nations like France and Italy.
Today, about 50% of the world’s 50 largest tech companies are American, while a mere four are European.
The Technological Deficit: The Core Problem
This widening economic gap stems from stronger productivity growth in the US, largely due to technological innovation and higher total factor productivity. The landscape of global tech leadership is overwhelmingly American. In the last five decades, 241 US firms have grown into enterprises valued at more than $10bn, compared with just 14 in Europe.
This gap raises a vital question: In the race for future industries like AI, semiconductors, and quantum computing, what is the EU positioned? Experts widely concede it is essentially a contest between two between the US and China, with Europe starting at a clear disadvantage.
Underlying Factors of Europe's Technological Lag
A number of major factors explain this technological divide.
- Venture Capital: The US boasts a far deeper and more dynamic network for funding startups. The EU still lacks a genuine capital markets union, a factor that caps the growth potential of emerging companies.
- Regulatory Fragmentation: Complex and divided rules hinder Europe. A US startup can launch a product under one regulatory framework to access a market of over 330 million. The European Union, despite a larger population, is divided among twenty-seven separate systems, creating huge internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, business failure was once viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in military capabilities has eroded its ability in breakthrough innovation.
A Path Forward: Grounds for Hopefulness
In spite of these challenges, one can find causes for hope. Policymakers are growing more conscious of the severe threat and have started to propose substantial change. Notable analyses on EU competitiveness and the internal market highlight the necessity of major changes.
Given appropriate incentives and rule changes, these assets might enable much higher degrees of business-led breakthroughs.
The continent retains significant advantages: skilled workforce, excellent schools and universities, and world-class labs. Coupled with a large internal market and high savings rates, these foundations have the potential to unleash a surge of investment and entrepreneurship.
Importantly, even if the EU does not take the lead in creating cutting-edge technologies, it can still dramatically increase productivity by adopting and adapting innovations from elsewhere.
A Critical Juncture
Europe now faces 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 gradual. But, without decisive action to tackle its structural weaknesses, today's slow erosion could give way to a sudden and irreversible loss of global economic relevance.
