The recent US national security strategy offers a misguided view of Europe. The document asserts that unrestrained immigration and so-called "progressive" agendas pose an grave threat to the continent's identity. However, this argument rests on a fundamental misinterpretation of the reality. The true danger facing the EU is not cultural but economic and technological lag.
The Stark Growth Gap Between the US and Europe
The data reveal a sobering contrast. From 2008 and 2023, American economic output grew by 87%, compared to a mere thirteen and a half percent increase for the EU. Over this period, EU GDP per capita dropped from over three-quarters to just half of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major European economies like Italy and France.
Currently, roughly 50% of the world’s top fifty tech companies are American, while a mere four are from Europe.
The Technological Shortfall: The Core Problem
The growing economic gap stems from stronger efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The landscape of world technology leadership is overwhelmingly American. In the last five decades, 241 US firms have scaled into companies valued at over ten billion dollars, compared with only fourteen in Europe.
This gap prompts a vital question: In the race for future industries like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely concede it is essentially a contest between two between the United States and China, with Europe starting at a significant disadvantage.
Underlying Factors of the Continent's Technological Lag
A number of major reasons account for this technological divide.
- Financing Ecosystem: The United States has a much more robust and agile network for funding startups. The EU still lacks a true unified investment market, a factor that limits the scale of emerging companies.
- Bureaucratic Hurdles: Complex and divided regulation hinder European business. A US startup can introduce a product under one set of laws to access a consumer base of over 330 million. The EU, despite a larger population, is split among twenty-seven separate systems, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, business failure was once viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in military capabilities has eroded its capacity for pioneering research.
The Road Ahead: Grounds for Hopefulness
Despite these challenges, there are causes for hope. European leaders are increasingly aware of the severe threat and have begun to advance serious reform. Notable analyses on EU competitiveness and the internal market point to the need for major reforms.
With the right incentives and regulatory reforms, Europe's strengths might enable much higher levels of business-led breakthroughs.
The continent still possesses considerable advantages: high-quality workforce, excellent education systems, and premier labs. Alongside a large internal market and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.
Importantly, even if Europe does not take the lead in developing cutting-edge tech, it can still significantly boost economic output by implementing and tailoring innovations from elsewhere.
A Critical Juncture
Europe now faces a critical crossroads. As the saying goes, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. But, without bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a sudden and irreversible loss of global economic relevance.
