Donald Trump's national security strategy presents a flawed view of the European Union. The document asserts that unrestrained immigration and so-called "progressive" agendas pose an existential risk to the continent's identity. Yet, this perspective is based on a fundamental misreading of the reality. The actual danger confronting the EU is not societal but economic and technological backwardness.
A Glaring Growth Gap Separating Europe and the US
Statistics paint a stark contrast. From 2008 and 2023, US GDP surged by 87%, compared to a paltry thirteen and a half percent increase for the EU. Over this time, EU GDP per capita dropped from over three-quarters to just half of the American figure. Remarkably, even Mississippi now boasts a higher per capita income than major EU nations like Italy and France.
Today, roughly half of the world’s top fifty tech companies are American, while only four are European.
The Technological Deficit: The Core Question
This widening economic gap stems from stronger productivity growth in the US, largely due to breakthroughs and higher total factor productivity. The landscape of global tech leadership is overwhelmingly American. In the last five decades, 241 US firms have grown into companies valued at over $10bn, compared with just 14 in the European continent.
This disparity raises a pressing question: As the competition for future industries like AI, semiconductors, and quantum computing, where does Europe stand? Most analysts agree it is essentially a contest between two between the US and China, with European nations entering at a clear handicap.
Root Causes of Europe's Innovation Gap
A number of key reasons explain this innovation chasm.
- Financing Ecosystem: The United States has a much more robust and more dynamic network for financing new ventures. The EU has yet to establish a true unified investment market, a factor that caps the scale of new firms.
- Bureaucratic Hurdles: Complex and divided rules hamper Europe. A US startup can launch a service under one regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population size, is split among 27 separate systems, creating huge internal barriers.
- Mindset Differences: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the United States, it is often seen as a badge of experience.
- Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its ability in breakthrough innovation.
A Path Forward: Grounds for Hopefulness
In spite of these challenges, one can find causes for hope. Policymakers are increasingly aware of the existential challenge and have started to propose substantial change. Notable reports on EU competitiveness and the single market point to the need for major changes.
With the right policies and rule changes, Europe's strengths might enable far greater levels of business-led breakthroughs.
The continent still possesses significant strengths: high-quality human capital, excellent schools and universities, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a surge of investment and entrepreneurship.
Importantly, even if Europe does not become the leader in creating cutting-edge tech, it can still dramatically increase productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
The European Union now stands at a critical moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's slide in innovation has been gradual. But, without bold steps to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.
