The recent US security policy document presents a flawed assessment of Europe. It claims that open-border policies and what it terms "woke" policies pose an grave risk to European civilization. Yet, this argument rests on a fundamental misreading of the situation. The true challenge confronting Europe is not societal but technological and economic backwardness.
A Glaring Growth Gap Separating the US and Europe
The data paint a sobering picture. Between 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% increase for the EU. Over this period, EU GDP per capita dropped from over three-quarters to just 50% of the US level. Remarkably, even the poorest US state now has a higher per capita income than major European economies like Italy and France.
Currently, roughly half of the global 50 largest technology firms are US-based, while only four are from Europe.
The Innovation Shortfall: A Critical Question
The growing disparity is driven by superior productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The landscape of world technology dominance is decidedly American. In the last fifty years, 241 US firms have grown into companies valued at over ten billion dollars, compared with only fourteen in Europe.
This disparity raises a pressing question: As the competition for future industries like AI, semiconductors, and fusion energy, what is the EU positioned? Experts widely agree it is largely a two-horse race involving the US and China, with Europe entering at a clear disadvantage.
Underlying Factors of Europe's Innovation Gap
Several key reasons explain this technological divide.
- Financing Ecosystem: The United States has a far deeper and agile system for financing new ventures. The EU still lacks a true capital markets union, which limits the scale of emerging companies.
- Bureaucratic Hurdles: Excessive and fragmented rules hinder European business. A American entrepreneur can launch a product under a single set of laws to access a consumer base of over 330 million. The EU, despite a larger population, is divided among 27 separate regimes, creating huge market obstacles.
- Cultural Attitudes: Views on risk-taking differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the US, it is often considered a valuable lesson.
- Defense Spending: The United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its ability in pioneering research.
The Road Ahead: Grounds for Cautious Optimism
In spite of these challenges, one can find causes for hope. Policymakers are growing more conscious of the existential challenge and have begun to advance substantial change. Notable analyses on EU competitiveness and the single market point to the necessity of major changes.
With the right incentives and rule changes, these assets might enable much higher degrees of business-led breakthroughs.
The continent still possesses significant strengths: high-quality workforce, top-tier education systems, and premier research institutions. Alongside a large internal market and high savings rates, these elements could unleash a new wave of investment and entrepreneurship.
Crucially, even if the EU does not become the leader in creating next-generation tech, it can still significantly boost productivity by adopting and adapting innovations from elsewhere.
A Critical Juncture
Europe now faces a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, the continent's technological decline 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 loss of world influence.
