The recent US national security strategy offers a flawed view of the European Union. The document asserts that open-border policies and so-called "progressive" policies pose an existential risk to the continent's identity. Yet, this perspective is based on a serious misreading of the situation. The actual danger facing the EU is not societal but technological and economic lag.
The Stark Growth Gap Separating Europe and the US
Statistics reveal a stark contrast. From 2008 and 2023, American economic output surged by 87%, compared to a paltry thirteen and a half percent growth for the European Union. During this period, European income per person dropped from over three-quarters to just half of the American figure. Strikingly, even the poorest US state now has a higher per capita income than several leading European economies like France and Italy.
Currently, about half of the world’s top fifty technology firms are US-based, while only four are European.
The Technological Shortfall: The Core Question
This widening disparity stems from stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The scene of global tech dominance is decidedly US-centric. Over the past five decades, 241 US firms have scaled into companies valued at over $10bn, versus just 14 in Europe.
This gap prompts a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely agree it is essentially a contest between two between the United States and China, with European nations entering at a significant handicap.
Root Causes of the Continent's Technological Lag
A number of key factors account for this technological divide.
- Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. The EU has yet to establish a genuine capital markets union, a factor that caps the growth potential of emerging companies.
- Regulatory Fragmentation: Complex and divided rules hamper 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 European Union, despite a bigger population size, is divided among 27 separate regimes, creating huge market obstacles.
- Cultural Attitudes: Views on risk-taking vary greatly. In parts of Europe, business failure was once viewed with penalties, whereas in the US, it is often seen as a badge of experience.
- Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.
The Road Ahead: Reasons for Hopefulness
Despite these challenges, one can find causes for hope. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Key reports on EU competitiveness and the internal market point to the necessity of major changes.
Given appropriate incentives and rule changes, these assets could support far greater levels of commercial innovation.
The continent still possesses considerable advantages: skilled human capital, excellent schools and universities, and premier labs. Coupled with a large internal market and high savings rates, these elements have the potential to trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not become the leader in developing next-generation technologies, it can still significantly boost economic output by adopting and adapting advancements from other regions.
A Critical Juncture
The European Union now faces a critical moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, the continent's slide in innovation has been gradual. However, without decisive action to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.
