The recent US national security strategy presents a misguided assessment of Europe. It claims that open-border policies and what it terms "woke" policies represent an existential threat to the continent's identity. However, this perspective rests on a serious misinterpretation of the reality. The actual challenge facing the EU is not societal but technological and economic lag.
The Stark Growth Gap Between the US and Europe
Statistics paint a stark picture. Between 2008 and 2023, American economic output grew by 87%, compared to a paltry 13.5% increase for the European Union. Over this period, European income per person dropped from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now boasts a greater average income than several leading European economies like France and Italy.
Today, about 50% of the global 50 largest tech companies are American, while only four are from Europe.
The Technological Deficit: A Critical Problem
This widening economic gap is driven by stronger efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of global tech leadership is overwhelmingly American. In the last fifty years, hundreds of American startups have grown into enterprises valued at over $10bn, versus just 14 in the European continent.
This disparity prompts a pressing question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU positioned? Experts widely agree it is largely a contest between two between the United States and China, with Europe starting at a clear disadvantage.
Root Causes of Europe's Technological Lag
A number of key reasons account for this technological divide.
- Financing Ecosystem: The US boasts a much more robust and more dynamic system for financing new ventures. The EU has yet to establish a true unified investment market, which caps the growth potential of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented rules hinder European business. A American entrepreneur can launch a product under one regulatory framework to access a market of over 330 million. The EU, despite a bigger population, is split among twenty-seven separate systems, creating significant market obstacles.
- Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the United States, it is often considered a badge of experience.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for breakthrough innovation.
A Path Forward: Grounds for Cautious Optimism
In spite of these challenges, one can find reasons for optimism. European leaders are growing more conscious of the existential challenge and have begun to advance substantial change. Notable analyses on EU competitiveness and the single market point to the necessity of major changes.
With the right incentives and regulatory reforms, Europe's strengths could support much higher levels of commercial innovation.
The continent still possesses significant advantages: high-quality human capital, excellent schools and universities, and premier labs. Coupled with a large internal market and substantial household savings, these elements have the potential to unleash a surge of venture creation.
Importantly, even if Europe does not become the leader in creating cutting-edge technologies, it can still dramatically boost economic output by adopting and adapting advancements from other regions.
A Critical Juncture
Europe now stands at a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's slide in innovation has been gradual. However, if it fails to take bold steps to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.
