The recent US security policy document offers a misguided view of Europe. The document asserts that open-border policies and so-called "woke" policies represent an existential threat to European civilization. Yet, this argument rests on a serious misreading of the reality. The true danger confronting the EU is not societal but technological and economic lag.
A Glaring Economic Divide Between Europe and the US
Statistics paint a sobering picture. From 2008 and 2023, American economic output grew by 87%, compared to a mere thirteen and a half percent 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 EU nations like Italy and France.
Today, roughly half of the global top fifty tech companies are American, while only four are from Europe.
The Technological Deficit: A Critical Question
The growing disparity is driven by stronger productivity growth in the United States, fueled by breakthroughs and better use of resources. The scene of world technology leadership is decidedly US-centric. Over the past five decades, hundreds of American startups have scaled into companies valued at over ten billion dollars, compared with just 14 in the European continent.
This disparity raises a vital question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU stand? Most analysts agree it is essentially a contest between two involving the US and China, with Europe entering at a clear handicap.
Root Causes of the Continent's Technological Lag
Several major reasons account for this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and more dynamic network for funding startups. The EU has yet to establish a genuine unified investment market, a factor that limits the growth potential of emerging companies.
- Regulatory Fragmentation: Excessive and fragmented regulation hamper European business. A US startup can introduce a service under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a larger population size, is divided among twenty-seven different national systems, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward risk-taking vary greatly. In some EU nations, business failure was once viewed with penalties, whereas in the United States, it is often considered a valuable lesson.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its ability in pioneering research.
A Path Forward: Grounds for Cautious Optimism
Despite these hurdles, one can find reasons for optimism. Policymakers are growing more conscious of the existential challenge and have begun to propose serious reform. Notable reports on EU competitiveness and the single market point to the need for sweeping reforms.
Given appropriate policies and regulatory reforms, these assets might enable much higher levels of business-led breakthroughs.
The continent retains considerable advantages: high-quality workforce, excellent education systems, and world-class research institutions. Alongside a vast domestic consumer base and substantial household savings, these elements have the potential to trigger a new wave of venture creation.
Crucially, even if the EU does not become the leader in developing cutting-edge tech, it can still significantly boost economic output by adopting and adapting innovations from elsewhere.
An Inflection Point
The European Union now stands at a decisive moment. As the saying goes, decline often happens "slowly, then all at once". To date, Europe's technological decline has been steady. But, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.
