Donald Trump's security policy document offers a flawed view of the European Union. It claims that unrestrained immigration and so-called "woke" agendas represent an existential risk to European civilization. Yet, this perspective is based on a fundamental misreading of the situation. The actual danger confronting the EU is not cultural but technological and economic lag.
A Glaring Growth Gap Separating Europe and the US
The data reveal a sobering picture. From 2008 and 2023, US GDP surged by 87%, compared to a paltry 13.5% increase for the EU. During this time, European income per person dropped from 76.5% to just half of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major European economies like France and Italy.
Today, about 50% of the global 50 largest technology firms are US-based, while only four are from Europe.
The Technological Shortfall: A Critical Problem
This widening disparity stems from stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology dominance is overwhelmingly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at over ten billion dollars, compared with only fourteen in the European continent.
This gap raises a vital issue: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, what is the EU positioned? Experts widely concede it is largely a contest between two between the United States and China, with Europe entering at a significant disadvantage.
Underlying Factors of Europe's Technological Lag
A number of major factors explain this technological divide.
- Venture Capital: The US boasts a far deeper and agile system for funding startups. Europe has yet to establish a true capital markets union, which caps the growth potential of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder European business. A US startup can launch a product under one set of laws to access a market of hundreds of millions. The European Union, despite a bigger population, is divided among 27 different national regimes, creating significant market obstacles.
- Cultural Attitudes: Attitudes toward risk-taking vary greatly. In parts of Europe, a startup's collapse was once met 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 long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.
A Path Forward: Grounds for Cautious Optimism
In spite of these hurdles, there are causes for optimism. European leaders are increasingly aware of the existential challenge and have begun to propose substantial change. Key reports on European competitiveness and the single market point to the need for major reforms.
Given appropriate policies and rule changes, these assets could support far greater degrees of business-led breakthroughs.
The continent still possesses significant advantages: high-quality human capital, top-tier schools and universities, and world-class research institutions. Alongside a large internal market and substantial household savings, these foundations have the potential to trigger a surge of investment and entrepreneurship.
Importantly, even if the EU does not become the leader in creating cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring advancements from elsewhere.
An Inflection Point
The European Union now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. But, without decisive action to tackle its structural weaknesses, today's slow erosion could give way to a sudden and irreversible decline in global economic relevance.