🔗 Share this article

The recent US security policy document presents a misguided assessment of the European Union. It claims that open-border policies and so-called "woke" agendas represent an existential threat to the continent's identity. Yet, this argument rests on a serious misreading of the reality. The actual danger facing the EU is not societal but economic and technological lag.

A Glaring Growth Divide Separating the US and Europe

Statistics reveal a stark picture. Between 2008 and 2023, US GDP surged by 87%, while a paltry thirteen and a half percent growth for the European Union. During this period, European income per person dropped from 76.5% to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than major EU nations like Italy and France.

Currently, about 50% of the global 50 largest tech companies are American, while only four are from Europe.

The Innovation Shortfall: The Core Question

The growing economic gap is driven by superior productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The scene of world technology dominance is overwhelmingly American. Over the past fifty years, hundreds of American startups have grown into enterprises valued at over $10bn, versus only fourteen in Europe.

This gap prompts a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe positioned? Most analysts concede it is essentially a two-horse race involving the US and China, with Europe starting at a clear disadvantage.

Root Causes of the Continent's Technological Lag

A number of key reasons account for this technological divide.

• Financing Ecosystem: The US boasts a far deeper and agile system for financing new ventures. The EU still lacks a true capital markets union, which caps the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can launch a service under one set of laws to access a consumer base of hundreds of millions. The EU, despite a larger population size, is divided among 27 separate systems, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward risk-taking vary greatly. In parts of Europe, a startup's collapse was historically viewed with stigma, whereas in the US, it is often seen as a badge of experience.
• Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its capacity for pioneering research.

The Road Ahead: Grounds for Cautious Optimism

In spite of these challenges, there are reasons for hope. Policymakers are growing more conscious of the severe threat and have begun to advance substantial change. Key analyses on EU competitiveness and the internal market highlight the necessity of sweeping reforms.

With the right policies and regulatory reforms, these assets could support much higher degrees of commercial innovation.

Europe retains considerable advantages: skilled human capital, top-tier schools and universities, and premier research institutions. Coupled with a large internal market and substantial household savings, these elements could unleash a new wave of investment and entrepreneurship.

Importantly, even if the EU does not become the leader in developing next-generation tech, it can still dramatically increase economic output by implementing and tailoring innovations from other regions.

An Inflection Point

The European Union now stands at a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's slide in innovation has been steady. But, without bold steps to address its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.