The recent US security policy document offers a misguided view of Europe. The document asserts that open-border policies and so-called "progressive" policies represent an existential risk to the continent's identity. However, this argument rests on a serious misreading of the situation. The actual danger confronting the EU is not societal but economic and technological lag.
The Stark Economic Gap Between the US and Europe
The data reveal a sobering contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, compared to a mere thirteen and a half percent increase for the European Union. During this time, European income per person fell from 76.5% to just 50% of the US level. Strikingly, even Mississippi now has a greater average income than major European economies like Italy and France.
Today, about 50% of the global top fifty technology firms are American, while a mere four are from Europe.
The Technological Shortfall: The Core Problem
This widening disparity stems from superior efficiency gains in the United States, largely due to breakthroughs and better use of resources. The scene of world technology dominance is decidedly American. In the last five decades, hundreds of American startups have grown into enterprises valued at over ten billion dollars, versus just 14 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? Most analysts concede it is largely a contest between two between the United States and China, with European nations starting at a clear disadvantage.
Underlying Factors of Europe's Technological Lag
Several major reasons explain this technological divide.
- Venture Capital: The US boasts a much more robust and agile network for funding startups. The EU has yet to establish a genuine capital markets union, a factor that caps the scale of new firms.
- Regulatory Fragmentation: Complex and divided rules hinder Europe. A American entrepreneur can introduce a service under one set of laws to access a consumer base of over 330 million. The European Union, despite a bigger population, is split among twenty-seven different national regimes, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In parts of Europe, business failure was historically met with stigma, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has eroded its ability in breakthrough innovation.
The Road Ahead: Reasons for Cautious Optimism
Despite these challenges, one can find causes for hope. European leaders are growing more conscious of the severe threat and have started to advance substantial change. Notable analyses on EU competitiveness and the single market point to the need for sweeping changes.
Given appropriate incentives and rule changes, Europe's strengths could support much higher degrees of commercial innovation.
Europe retains considerable strengths: high-quality human capital, excellent education systems, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements could unleash a new wave of investment and entrepreneurship.
Importantly, even if the EU does not become the leader in creating next-generation tech, it can still significantly increase productivity by adopting and adapting innovations from other regions.
A Critical Juncture
Europe now stands at a decisive crossroads. As the saying goes, economic erosion often happens "gradually and then suddenly". To date, the continent's technological decline has been gradual. But, if it fails to take bold steps to address its structural weaknesses, today's slow erosion could give way to a sudden and irreversible decline in world influence.
