The recent US security policy document offers a flawed view of the European Union. The document asserts that unrestrained immigration and so-called "progressive" policies pose an existential risk to European civilization. Yet, this perspective rests on a fundamental misreading of the reality. The actual danger facing Europe is not cultural but economic and technological backwardness.
A Glaring Growth Divide Between the US and Europe
The data reveal a sobering picture. Between 2008 and 2023, US GDP grew by eighty-seven percent, while a mere 13.5% increase for the EU. Over this time, European income per person fell from 76.5% to just half of the US level. Strikingly, even the poorest US state now boasts a greater average income than several leading European economies like Italy and France.
Currently, about 50% of the world’s top fifty technology firms are American, while a mere four are from Europe.
The Technological Deficit: A Critical Question
The growing disparity stems from stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of world technology leadership is overwhelmingly American. Over the past fifty years, hundreds of American startups have grown into companies valued at over ten billion dollars, versus just 14 in the European continent.
This disparity prompts a pressing question: In the race for future industries like semiconductors, AI, and fusion energy, what is Europe stand? Experts widely concede it is largely a two-horse race involving the United States and China, with European nations starting at a significant handicap.
Root Causes of the Continent's Technological Lag
A number of major reasons explain this technological divide.
- Venture Capital: The United States has a much more robust and agile network for funding startups. The EU still lacks a true capital markets union, a factor that limits the scale of new firms.
- Regulatory Fragmentation: Complex and divided regulation hamper European business. A American entrepreneur can launch a product under a single regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population size, is split among 27 different national regimes, creating significant internal barriers.
- Cultural Attitudes: Attitudes toward risk-taking differ sharply. In some EU nations, business failure was once viewed with stigma, whereas in the US, it is often seen as a badge of experience.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in military capabilities has eroded its ability in breakthrough innovation.
A Path Forward: Grounds for Hopefulness
In spite of these hurdles, there are causes for optimism. European leaders are increasingly aware of the severe threat and have started to advance serious reform. Key analyses on EU competitiveness and the internal market point to the necessity of major changes.
With the right incentives and regulatory reforms, these assets might enable far greater degrees of business-led breakthroughs.
Europe retains significant advantages: skilled workforce, top-tier schools and universities, and world-class labs. Alongside a vast domestic consumer base and high savings rates, these foundations could unleash a new wave of venture creation.
Crucially, even if Europe does not become the leader in developing cutting-edge technologies, it can still significantly boost productivity by implementing and tailoring advancements from other regions.
A Critical Juncture
The European Union now stands at a decisive crossroads. As the saying goes, decline often happens "gradually and then suddenly". To date, the continent's technological decline has been steady. However, if it fails to take bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of world influence.
