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The recent US security policy document offers a misguided view of Europe. It claims that open-border policies and what it terms "progressive" policies pose an existential risk to the continent's identity. Yet, this perspective is based on a serious misreading of the situation. The true danger confronting the EU is not cultural but economic and technological lag.

The Stark Growth Divide Between Europe and the US

The data paint a sobering picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% increase for the EU. Over this time, EU GDP per capita fell from over three-quarters to just 50% of the US level. Remarkably, even the poorest US state now has a higher per capita income than major EU nations like Italy and France.

Currently, roughly half of the global 50 largest tech companies are US-based, while a mere four are from Europe.

The Technological Shortfall: The Core Question

This widening economic gap is driven by superior productivity growth in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology dominance is decidedly US-centric. In the last five decades, 241 US firms have scaled into enterprises valued at more than $10bn, compared with only fourteen in the European continent.

This gap prompts a vital issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is Europe positioned? Most analysts agree it is largely a two-horse race between the US and China, with European nations entering at a clear disadvantage.

Root Causes of Europe's Technological Lag

Several major factors explain this technological divide.

• Financing Ecosystem: The US boasts a far deeper and more dynamic system for financing new ventures. Europe still lacks a genuine capital markets union, which limits the growth potential of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hamper Europe. A US startup can launch a service under a single set of laws to access a consumer base of over 330 million. The EU, despite a larger population, is divided among 27 different national regimes, creating huge internal barriers.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was historically met with stigma, whereas in the United States, it is often considered a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its ability in breakthrough innovation.

A Path Forward: Grounds for Hopefulness

In spite of these hurdles, one can find reasons for optimism. Policymakers are increasingly aware of the existential challenge and have begun to propose serious reform. Key analyses on European competitiveness and the internal market point to the necessity of sweeping changes.

Given appropriate incentives and rule changes, these assets might enable far greater degrees of commercial innovation.

The continent retains significant advantages: high-quality human capital, excellent education systems, and world-class research institutions. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of venture creation.

Crucially, even if Europe does not take the lead in developing cutting-edge tech, it can still significantly boost economic output by adopting and adapting innovations from elsewhere.

A Critical Juncture

Europe now stands at a critical crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's slide in innovation has been steady. However, if it fails to take bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a sudden and irreversible decline in world influence.