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Donald Trump's security policy document offers a flawed view of Europe. It claims that open-border policies and so-called "progressive" policies pose an existential threat to European civilization. However, this argument rests on a serious misreading of the reality. The actual danger confronting Europe is not cultural but technological and economic lag.

A Glaring Economic Gap Separating the US and Europe

The data paint a stark picture. Between 2008 and 2023, American economic output surged by 87%, while a paltry thirteen and a half percent increase for the EU. During this time, EU GDP per capita dropped from 76.5% to just 50% of the US level. Remarkably, even Mississippi now boasts a greater average income than major EU nations like France and Italy.

Currently, roughly 50% of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Deficit: A Critical Question

The growing economic gap stems from stronger productivity growth in the US, fueled by breakthroughs and better use of resources. The landscape of world technology leadership is decidedly US-centric. Over the past fifty years, 241 US firms have grown into enterprises valued at more than $10bn, compared with 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 the EU stand? Experts widely agree it is largely a contest between two between the United States and China, with Europe entering at a clear disadvantage.

Underlying Factors of Europe's Technological Lag

A number of key factors explain this innovation chasm.

• Venture Capital: The US boasts a much more robust and more dynamic network for financing new ventures. The EU still lacks a true capital markets union, which limits the scale of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hinder European business. A American entrepreneur can introduce a product under one set of laws to access a consumer base of hundreds of millions. The EU, despite a larger population, is split among 27 different national regimes, creating significant market obstacles.
• Cultural Attitudes: Views on risk-taking differ sharply. In parts of Europe, 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 United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has eroded its ability in pioneering research.

The Road Ahead: Reasons for Cautious Optimism

Despite these challenges, one can find reasons for hope. European leaders are growing more conscious of the severe threat and have started to propose serious reform. Key analyses on European competitiveness and the internal market point to the need for sweeping reforms.

Given appropriate policies and rule changes, these assets might enable far greater levels of business-led breakthroughs.

Europe still possesses considerable strengths: skilled workforce, excellent education systems, and world-class labs. Coupled with a large internal market and substantial household savings, these elements could unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in creating cutting-edge tech, it can still dramatically increase economic output by implementing and tailoring advancements from other regions.

An Inflection Point

The European Union now stands at a critical moment. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, Europe's slide in innovation has been gradual. However, without decisive action to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.