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The recent US security policy document presents a flawed view of the European Union. It claims that open-border policies and so-called "woke" agendas pose an existential risk to the continent's identity. Yet, this argument is based on a fundamental misinterpretation of the situation. The actual challenge confronting the EU is not cultural but technological and economic backwardness.

The Stark Growth Divide Separating Europe and the US

Statistics paint a sobering contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, while a paltry 13.5% growth for the European Union. Over this time, European income per person dropped from over three-quarters to just 50% of the American figure. Remarkably, even Mississippi now boasts a greater average income than several leading European economies like France and Italy.

Currently, roughly 50% of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.

The Technological Deficit: The Core Problem

The growing disparity is driven by superior efficiency gains in the US, largely due to breakthroughs and better use of resources. The landscape of global tech dominance is overwhelmingly US-centric. In the last five decades, 241 US firms have grown into enterprises valued at more than ten billion dollars, versus only fourteen in Europe.

This gap raises a pressing question: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is Europe stand? Most analysts agree it is largely a contest between two involving the United States and China, with Europe starting at a significant disadvantage.

Root Causes of the Continent's Technological Lag

Several key factors account for this technological divide.

• Venture Capital: The United States has a much more robust and agile system for financing new ventures. Europe 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 hinder European business. A American entrepreneur can introduce a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population, is divided among 27 separate systems, creating significant internal barriers.
• Mindset Differences: Views on risk-taking differ sharply. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has weakened its capacity for pioneering research.

The Road Ahead: Grounds for Hopefulness

In spite of these challenges, one can find reasons for optimism. European leaders are growing more conscious of the existential challenge and have begun to propose serious reform. Key analyses on EU competitiveness and the single market highlight the need for sweeping reforms.

With the right incentives and regulatory reforms, these assets could support much higher degrees of business-led breakthroughs.

Europe still possesses considerable advantages: high-quality human capital, top-tier schools and universities, and premier research institutions. Coupled with a large internal market and substantial household savings, these elements have the potential to trigger a surge of venture creation.

Importantly, even if Europe does not become the leader in developing cutting-edge tech, it can still significantly increase productivity by adopting and adapting innovations from elsewhere.

A Critical Juncture

Europe now faces a critical moment. As the saying goes, decline often happens "gradually and then suddenly". So far, the continent's technological decline has been gradual. However, without bold steps to address its structural weaknesses, today's slow erosion could turn into a rapid and permanent decline in global economic relevance.