🔗 Share this article

The recent US national security strategy presents a flawed view of the European Union. It claims that unrestrained immigration and so-called "progressive" policies represent an grave threat to European civilization. Yet, this perspective is based on a serious misreading of the situation. The true challenge facing the EU is not cultural but economic and technological backwardness.

A Glaring Growth Divide Between Europe and the US

The data reveal a sobering picture. From 2008 and 2023, US GDP grew by 87%, compared to a mere thirteen and a half percent growth for the EU. During this time, EU GDP per capita fell from 76.5% to just 50% of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major European economies like France and Italy.

Today, about 50% of the world’s top fifty technology firms are US-based, while a mere four are European.

The Technological Shortfall: The Core Problem

The growing disparity is driven by stronger productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The scene of world technology dominance is decidedly American. In the last five decades, hundreds of American startups have scaled into companies valued at more than ten billion dollars, compared with just 14 in the European continent.

This disparity raises a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, where does the EU stand? Most analysts agree it is essentially a two-horse race involving the US and China, with European nations starting at a significant handicap.

Root Causes of the Continent's Technological Lag

Several key factors account for this innovation chasm.

• Financing Ecosystem: The United States has a much more robust and agile network for funding startups. Europe still lacks a genuine unified investment market, which limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can launch a service under one regulatory framework to access a market of hundreds of millions. The EU, despite a larger population, is divided among 27 different national systems, creating huge internal barriers.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was historically met with penalties, whereas in the United States, it is often seen as a valuable lesson.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has weakened its ability in pioneering research.

The Road Ahead: Reasons for Hopefulness

Despite these challenges, one can find causes for hope. Policymakers are increasingly aware of the existential challenge and have begun to propose serious reform. Key analyses on European competitiveness and the internal market highlight the necessity of major reforms.

Given appropriate incentives and rule changes, these assets might enable much higher degrees of business-led breakthroughs.

Europe retains significant advantages: high-quality human capital, 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 the EU does not take the lead in developing cutting-edge tech, it can still significantly increase economic output by adopting and adapting innovations from other regions.

A Critical Juncture

Europe now stands at a decisive moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been steady. However, without bold steps to tackle its deep-seated problems, today's slow erosion could give way to a sudden and irreversible decline in global economic relevance.