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The recent US security policy document presents a flawed view of Europe. The document asserts that unrestrained immigration and so-called "progressive" policies pose an existential threat to European civilization. However, this argument is based on a serious misinterpretation of the situation. The true challenge facing the EU is not societal but technological and economic lag.

A Glaring Growth Divide Separating Europe and the US

Statistics paint a sobering picture. From 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% increase for the EU. Over this period, EU GDP per capita fell from over three-quarters to just half of the American figure. Strikingly, even Mississippi now boasts a higher per capita income than several leading European economies like France and Italy.

Today, roughly 50% of the global 50 largest technology firms are American, while only four are European.

The Technological Shortfall: The Core Question

This widening economic gap stems from superior productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at more than $10bn, versus just 14 in the European continent.

This gap raises a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is Europe positioned? Most analysts concede it is largely a contest between two involving the United States and China, with European nations entering at a clear disadvantage.

Root Causes of Europe's Technological Lag

A number of key factors account for this technological divide.

• Venture Capital: The US boasts a much more robust and agile system for funding startups. The EU has yet to establish a true capital markets union, a factor that limits the growth potential of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A American entrepreneur can introduce a service under one set of laws to access a market of hundreds of millions. The European Union, despite a larger population, is divided among twenty-seven different national systems, creating huge market obstacles.
• Cultural Attitudes: Views on risk-taking differ sharply. In some EU nations, business failure was once met with stigma, whereas in the United States, it is often considered a valuable lesson.
• Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in defense has weakened its capacity for pioneering research.

The Road Ahead: Reasons for Hopefulness

Despite these hurdles, one can find reasons for optimism. European leaders are growing more conscious of the severe threat and have begun to propose serious reform. Key analyses on EU competitiveness and the single market highlight the need for major changes.

With the right policies and regulatory reforms, Europe's strengths could support much higher levels of commercial innovation.

The continent retains considerable advantages: skilled workforce, top-tier education systems, and premier research institutions. Alongside a vast domestic consumer base and high savings rates, these foundations have the potential to trigger a new wave of venture creation.

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

An Inflection Point

The European Union now stands at a decisive crossroads. As the saying goes, decline often happens "slowly, then all at once". To date, Europe's technological decline has been steady. But, without bold steps to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in world influence.