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Donald Trump's security policy document presents a flawed assessment of Europe. The document asserts that open-border policies and so-called "progressive" policies pose an existential risk to the continent's identity. Yet, this argument is based on a serious misinterpretation of the reality. The true challenge facing Europe is not cultural but economic and technological lag.

The Stark Growth Divide Separating Europe and the US

The data reveal a sobering picture. Between 2008 and 2023, American economic output grew by eighty-seven percent, while a paltry thirteen and a half percent increase for the EU. During this time, EU GDP per capita fell from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now has a greater average income than major European economies like France and Italy.

Today, about 50% of the global 50 largest tech companies are American, while a mere four are from Europe.

The Technological Deficit: A Critical Problem

This widening economic gap is driven by superior productivity growth in the US, largely due to breakthroughs and higher total factor productivity. The scene of world technology dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into enterprises valued at over $10bn, versus just 14 in the European continent.

This disparity raises a vital question: As the competition for future industries like AI, semiconductors, and quantum computing, what is Europe positioned? Experts widely concede it is essentially a contest between two between the US and China, with Europe entering at a clear disadvantage.

Underlying Factors of Europe's Innovation Gap

Several major reasons explain this technological divide.

• Financing Ecosystem: The US boasts a much more robust and agile network for funding startups. The EU still lacks a genuine unified investment market, a factor that caps the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can launch a product under a single regulatory framework to access a market of over 330 million. The EU, despite a larger population, is split among twenty-seven separate regimes, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often considered a badge of experience.
• Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has weakened its ability in pioneering research.

The Road Ahead: Grounds for Hopefulness

In spite of these hurdles, one can find causes for optimism. European leaders are increasingly aware of the severe threat and have started to advance serious reform. Notable reports on EU competitiveness and the single market point to the necessity of major reforms.

Given appropriate incentives and rule changes, Europe's strengths could support far greater levels of business-led breakthroughs.

Europe still possesses considerable advantages: high-quality workforce, excellent schools and universities, and world-class research institutions. Alongside a large internal market and high savings rates, these foundations have the potential to trigger a new wave of investment and entrepreneurship.

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

A Critical Juncture

The European Union now faces a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been steady. But, without decisive action to tackle its structural weaknesses, today's slow erosion could give way to a rapid and permanent loss of global economic relevance.