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The recent US national security strategy presents a misguided assessment of the European Union. The document asserts that open-border policies and what it terms "woke" policies represent an grave threat to the continent's identity. However, this perspective is based on a fundamental misinterpretation of the reality. The actual danger facing Europe is not cultural but economic and technological backwardness.

The Stark Growth Divide Between the US and Europe

The data reveal a sobering picture. From 2008 and 2023, American economic output grew by 87%, compared to a paltry 13.5% growth for the EU. Over this period, EU GDP per capita dropped from 76.5% to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than several leading EU nations like France and Italy.

Today, roughly 50% of the world’s top fifty technology firms are American, while a mere four are European.

The Technological Deficit: The Core Question

The growing economic gap is driven by superior productivity growth in the United States, fueled by technological innovation and better use of resources. The scene of global tech dominance is overwhelmingly US-centric. Over the past five decades, 241 US firms have grown into enterprises valued at more than $10bn, compared with just 14 in Europe.

This gap raises a vital issue: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, where does Europe stand? Experts widely concede it is largely a two-horse race involving the United States and China, with European nations starting at a clear handicap.

Underlying Factors of Europe's Technological Lag

Several major reasons explain this technological divide.

• Venture Capital: The US boasts a far deeper and more dynamic network for financing new ventures. Europe has yet to establish a true unified investment market, which limits the growth potential of emerging companies.
• Bureaucratic Hurdles: Excessive and fragmented rules hinder European business. A US startup can introduce a product under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population, is divided among 27 different national regimes, creating significant market obstacles.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the US, it is often considered a valuable lesson.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's long-term lack of spending in military capabilities has weakened its ability in breakthrough innovation.

A Path Forward: Reasons for Cautious Optimism

In spite of these challenges, one can find reasons for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance serious reform. Notable reports on European competitiveness and the single market point to the need for major changes.

With the right policies and rule changes, these assets might enable much higher degrees of commercial innovation.

The continent retains significant strengths: high-quality human capital, excellent education systems, and world-class research institutions. Coupled with a vast domestic consumer base and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in creating next-generation technologies, it can still dramatically boost productivity by implementing and tailoring innovations from other regions.

A Critical Juncture

Europe now stands at a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. However, without decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of global economic relevance.