Donald Trump's national security strategy presents a misguided assessment of the European Union. It claims that open-border policies and what it terms "woke" policies represent an grave risk to European civilization. Yet, this argument is based on a serious misreading of the situation. The actual challenge confronting Europe is not cultural but technological and economic lag.
The Stark Growth Gap Separating Europe and the US
Statistics reveal a stark picture. Between 2008 and 2023, US GDP surged by eighty-seven percent, compared to a mere 13.5% growth for the European Union. During this time, EU GDP per capita dropped from 76.5% to just 50% of the US level. Strikingly, even the poorest US state now boasts a greater average income than major EU nations like France and Italy.
Today, roughly 50% of the global top fifty technology firms are US-based, while a mere four are European.
The Innovation Deficit: A Critical Problem
This widening disparity is driven by stronger efficiency gains in the United States, largely due to breakthroughs and higher total factor productivity. The scene of world technology dominance is overwhelmingly US-centric. Over the past fifty years, 241 US firms have grown into companies valued at over $10bn, versus just 14 in Europe.
This disparity raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU stand? Experts widely agree it is largely a two-horse race between the United States and China, with European nations entering at a clear handicap.
Underlying Factors of the Continent's Technological Lag
Several major reasons explain this innovation chasm.
- Venture Capital: The US boasts a far deeper and more dynamic system for financing new ventures. Europe still lacks a true capital markets union, a factor that limits the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented rules hamper European business. A American entrepreneur can launch a service under one regulatory framework to access a market of hundreds of millions. The European Union, despite a bigger population, is split among twenty-seven different national regimes, creating significant market obstacles.
- Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, business failure was once met with stigma, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.
A Path Forward: Reasons for Hopefulness
In spite of these challenges, there are reasons for optimism. Policymakers are growing more conscious of the severe threat and have begun to propose serious reform. Key reports on European competitiveness and the single market highlight the need for sweeping changes.
With the right policies and rule changes, Europe's strengths could support much higher levels of business-led breakthroughs.
Europe still possesses significant advantages: skilled workforce, top-tier schools and universities, and premier research institutions. Coupled with a large internal market and substantial household savings, these foundations have the potential to trigger a new wave of venture creation.
Crucially, even if the EU does not become the leader in developing next-generation technologies, it can still dramatically increase economic output by implementing and tailoring innovations from elsewhere.
An Inflection Point
Europe now stands at a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, the continent's slide in innovation has been gradual. However, without decisive action to address its deep-seated problems, today's slow erosion could give way to a sudden and irreversible loss of global economic relevance.