The recent US security policy document offers a misguided view of Europe. It claims that unrestrained immigration and what it terms "progressive" agendas represent an existential threat to the continent's identity. However, this argument rests on a serious misreading of the situation. The actual danger facing the EU is not societal but economic and technological backwardness.
The Stark Growth Gap Between the US and Europe
Statistics reveal a sobering picture. From 2008 and 2023, American economic output surged by 87%, while a mere 13.5% growth for the EU. Over this time, European income per person dropped from over three-quarters to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than several leading European economies like France and Italy.
Today, roughly 50% of the world’s top fifty tech companies are American, while a mere four are European.
The Innovation Shortfall: A Critical Problem
This widening disparity stems from stronger productivity growth in the US, fueled by breakthroughs and better use of resources. The scene of global tech dominance is decidedly US-centric. In the last five decades, hundreds of American startups have grown into enterprises valued at over $10bn, compared with only fourteen in the European continent.
This gap prompts a pressing issue: In the race for future industries like AI, semiconductors, and fusion energy, where does Europe stand? Experts widely concede it is largely a two-horse race between the United States and China, with European nations starting at a clear disadvantage.
Underlying Factors of Europe's Technological Lag
Several major reasons account for this technological divide.
- Financing Ecosystem: The US boasts a far deeper and more dynamic system for funding startups. The EU has yet to establish a true capital markets union, a factor that caps the scale of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can introduce a product under one set of laws to access a market of over 330 million. The EU, despite a bigger population size, is split among 27 different national regimes, creating significant internal barriers.
- Cultural Attitudes: Attitudes toward risk-taking vary greatly. In parts of Europe, business failure was once met with stigma, whereas in the US, it is often seen as a badge of experience.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its ability in pioneering research.
A Path Forward: Grounds for Hopefulness
Despite these hurdles, there are reasons for optimism. Policymakers are increasingly aware of the severe threat and have started to advance substantial change. Notable reports on EU competitiveness and the single market highlight the need for sweeping reforms.
Given appropriate policies and rule changes, Europe's strengths could support far greater levels of commercial innovation.
The continent retains considerable advantages: high-quality workforce, top-tier education systems, and world-class research institutions. Alongside a large internal market and high savings rates, these elements 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 tech, it can still dramatically boost productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
Europe now faces a critical crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's technological decline has been gradual. But, without decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of world influence.
