🔗 Share this article

The recent US security policy document offers a flawed view of Europe. It claims that open-border policies and so-called "woke" policies pose an grave risk to European civilization. However, this perspective rests on a serious misreading of the reality. The actual challenge confronting the EU is not societal but technological and economic backwardness.

A Glaring Growth Divide Between the US and Europe

The data reveal a stark picture. Between 2008 and 2023, American economic output grew by 87%, compared to a mere 13.5% growth for the European Union. Over this period, European income per person dropped from over three-quarters to just 50% of the American figure. Remarkably, even Mississippi now has a greater average income than major European economies like Italy and France.

Currently, about half of the global top fifty tech companies are American, while a mere four are European.

The Technological Deficit: The Core Question

This widening disparity stems from stronger productivity growth in the US, largely due to technological innovation and higher total factor productivity. The landscape of world technology leadership is overwhelmingly US-centric. In the last five decades, 241 US firms have grown into companies valued at over ten billion dollars, versus only fourteen in the European continent.

This gap raises a vital issue: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU positioned? Most analysts agree it is largely a two-horse race involving the US and China, with Europe starting at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

Several major factors explain this technological divide.

• Venture Capital: The US boasts a far deeper and agile system for funding startups. The EU still lacks a true unified investment market, which limits the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided regulation hinder Europe. A American entrepreneur can launch a product under one set of laws to access a market of over 330 million. The European Union, despite a larger population size, is split among twenty-seven different national regimes, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, business failure was once viewed with penalties, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in defense has weakened its ability in pioneering research.

The Road Ahead: Grounds for Hopefulness

In spite of these hurdles, there are reasons for optimism. Policymakers are growing more conscious 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.

Given appropriate policies and rule changes, Europe's strengths might enable far greater levels of business-led breakthroughs.

The continent still possesses significant strengths: skilled workforce, excellent schools and universities, and premier labs. Coupled with a vast domestic consumer base and high savings rates, these foundations could unleash a surge of venture creation.

Crucially, even if Europe does not take the lead in creating cutting-edge technologies, it can still significantly increase productivity by adopting and adapting advancements from elsewhere.

A Critical Juncture

Europe now faces a decisive crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's slide in innovation has been steady. But, if it fails to take bold steps to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in world influence.