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Donald Trump's security policy document offers a flawed assessment of the European Union. It claims that open-border policies and what it terms "progressive" policies pose an existential risk to the continent's identity. However, this argument is based on a fundamental misreading of the reality. The true danger facing Europe is not cultural but economic and technological lag.

A Glaring Economic Gap Separating Europe and the US

Statistics paint a sobering contrast. Between 2008 and 2023, American economic output surged by 87%, while a paltry thirteen and a half percent increase for the European Union. Over this time, EU GDP per capita fell from over three-quarters to just half of the US level. Strikingly, even Mississippi now boasts a greater average income than several leading EU nations like Italy and France.

Currently, roughly half of the world’s top fifty technology firms are American, while a mere four are from Europe.

The Technological Shortfall: The Core Question

The growing disparity stems from stronger productivity growth in the United States, fueled by technological innovation and better use of resources. The landscape of global tech dominance is decidedly US-centric. In the last fifty years, hundreds of American startups have grown into companies valued at more than $10bn, versus only fourteen in the European continent.

This gap prompts a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is Europe positioned? Experts widely concede it is largely a two-horse race between the United States and China, with Europe entering at a significant disadvantage.

Root Causes of Europe's Technological Lag

A number of key factors explain this innovation chasm.

• Financing Ecosystem: The United States has a much more robust and more dynamic system for financing new ventures. Europe has yet to establish a true unified investment market, a factor that limits the growth potential of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A American entrepreneur can launch a product under a single set of laws to access a consumer base of over 330 million. The EU, despite a bigger population, is split among twenty-seven separate systems, creating significant internal barriers.
• Cultural Attitudes: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was once viewed with stigma, whereas in the United States, it is often considered a badge of experience.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has weakened its capacity for breakthrough innovation.

The Road Ahead: Reasons for Hopefulness

In spite of these hurdles, one can find causes for optimism. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Key reports on EU competitiveness and the single market highlight the need for sweeping changes.

Given appropriate incentives and rule changes, these assets could support much higher levels of commercial innovation.

Europe still possesses significant strengths: skilled human capital, top-tier education systems, and premier labs. Alongside a large internal market and substantial household savings, these foundations could trigger a new wave of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in developing next-generation technologies, it can still dramatically boost productivity by implementing and tailoring innovations from elsewhere.

An Inflection Point

The European Union now stands at a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. But, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could turn into a rapid and permanent loss of world influence.