🔗 Share this article

The recent US security policy document offers a misguided assessment of the European Union. It claims that unrestrained immigration and so-called "progressive" agendas represent an grave risk to European civilization. However, this perspective rests on a fundamental misinterpretation of the situation. The actual danger confronting the EU is not societal but technological and economic lag.

A Glaring Growth Gap Between Europe and the US

The data reveal a stark contrast. Between 2008 and 2023, American economic output grew by eighty-seven percent, while a mere 13.5% increase for the EU. During this time, European income per person dropped from over three-quarters to just half of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major EU nations like France and Italy.

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

The Technological Shortfall: The Core Question

The growing economic gap is driven by superior productivity growth in the US, largely due to breakthroughs and higher total factor productivity. The landscape of world technology dominance is overwhelmingly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at more than $10bn, compared with only fourteen in the European continent.

This gap raises a vital question: In the race for future industries like semiconductors, AI, and quantum computing, where does the EU stand? Experts widely agree it is essentially a contest between two between the United States and China, with European nations starting at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

A number of major reasons account for this technological divide.

• Financing Ecosystem: The US boasts a much more robust and more dynamic system for financing new ventures. The EU has yet to establish a genuine capital markets union, a factor that limits the scale of new firms.
• Regulatory Fragmentation: Complex and divided regulation hinder European business. A American entrepreneur can introduce a product under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a larger population, is divided among twenty-seven different national systems, creating significant market obstacles.
• Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was once met with stigma, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its ability in breakthrough innovation.

The Road Ahead: Reasons 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. Key reports on European competitiveness and the internal market point to the need for sweeping reforms.

With the right policies and regulatory reforms, Europe's strengths might enable far greater degrees of business-led breakthroughs.

Europe retains considerable advantages: high-quality workforce, top-tier schools and universities, and world-class labs. Alongside a vast domestic consumer base and high savings rates, these foundations could trigger a new wave of venture creation.

Crucially, even if Europe does not become the leader in creating next-generation tech, it can still significantly boost economic output by implementing and tailoring advancements from other regions.

A Critical Juncture

Europe now stands at a decisive crossroads. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. But, without decisive action to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.