Donald Trump's security policy document presents a misguided assessment of the European Union. The document asserts that open-border policies and so-called "woke" policies pose an existential risk to European civilization. However, this argument is based on a fundamental misreading of the reality. The actual danger confronting the EU is not societal but economic and technological lag.
A Glaring Economic Divide Between the US and Europe
The data reveal a sobering picture. From 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent increase for the EU. During this time, European income per person dropped from over three-quarters to just half of the American figure. Strikingly, even the poorest US state now has a higher per capita income than several leading EU nations like France and Italy.
Today, about 50% of the global top fifty technology firms are US-based, while a mere four are European.
The Technological Deficit: A Critical Problem
This widening economic gap stems from superior productivity growth in the US, largely due to technological innovation and higher total factor productivity. The landscape of global tech leadership is decidedly American. Over the past five decades, hundreds of American startups have grown into companies valued at more than ten billion dollars, compared with only fourteen in the European continent.
This gap prompts a vital question: As the competition for future industries like semiconductors, AI, and fusion energy, what is Europe positioned? Most analysts agree it is essentially a contest between two involving the US and China, with Europe starting at a significant handicap.
Underlying Factors of the Continent's Technological Lag
Several key reasons explain this innovation chasm.
- Financing Ecosystem: The US boasts a much more robust and more dynamic network for financing new ventures. Europe has yet to establish a true unified investment market, a factor that caps the scale of new firms.
- Bureaucratic Hurdles: Excessive and fragmented rules hinder European business. A American entrepreneur can launch a service under one regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population size, is split among twenty-seven separate systems, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, business failure was once viewed with stigma, whereas in the United States, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has eroded its capacity for pioneering research.
A Path Forward: Grounds for Cautious Optimism
In spite of these challenges, one can find causes for optimism. Policymakers are increasingly aware of the severe threat and have started to advance substantial change. Key reports on EU competitiveness and the single market highlight the necessity of sweeping reforms.
With the right incentives and regulatory reforms, these assets could support far greater degrees of business-led breakthroughs.
Europe still possesses considerable strengths: high-quality workforce, excellent schools and universities, and world-class labs. Alongside a large internal market and high savings rates, these elements have the potential to unleash a surge 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 implementing and tailoring advancements from other regions.
A Critical Juncture
The European Union now stands at a critical crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's slide in innovation has been gradual. But, if it fails to take bold steps to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in world influence.
