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The recent US security policy document presents a misguided view of the European Union. The document asserts that open-border policies and so-called "progressive" agendas pose an existential threat to European civilization. Yet, this argument is based on a fundamental misinterpretation of the situation. The actual danger facing the EU is not cultural but technological and economic backwardness.

A Glaring Growth Gap Separating the US and Europe

The data reveal a stark picture. From 2008 and 2023, American economic output surged by eighty-seven percent, while a paltry thirteen and a half percent increase for the EU. During this period, EU GDP per capita fell from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major European economies like Italy and France.

Today, about 50% of the world’s 50 largest technology firms are American, while only four are from Europe.

The Innovation Shortfall: A Critical Question

The growing disparity stems from superior productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The scene of world technology leadership is decidedly US-centric. In the last five decades, 241 US firms have scaled into enterprises valued at over $10bn, compared with only fourteen in Europe.

This disparity prompts a vital question: In the race for future industries like semiconductors, AI, and fusion energy, what is the EU positioned? Experts widely agree it is essentially a two-horse race involving the United States and China, with European nations entering at a significant handicap.

Root Causes of Europe's Technological Lag

A number of key reasons account for this innovation chasm.

• Financing Ecosystem: The United States has a much more robust and agile system for financing new ventures. Europe has yet to establish a genuine capital markets union, which limits the growth potential of new firms.
• Regulatory Fragmentation: Complex and divided regulation hamper Europe. A American entrepreneur can introduce a service under a single set of laws to access a market of over 330 million. The European Union, despite a bigger population size, is split among twenty-seven different national regimes, creating huge market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was once met with penalties, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its capacity for breakthrough innovation.

A Path Forward: Reasons for Hopefulness

In spite of these hurdles, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have begun to advance substantial change. Key analyses on EU competitiveness and the internal market highlight the necessity of sweeping changes.

Given appropriate incentives and rule changes, these assets could support far greater degrees of business-led breakthroughs.

The continent still possesses significant strengths: skilled workforce, top-tier education systems, and premier labs. Coupled with a large internal market and high savings rates, these foundations could unleash a surge of venture creation.

Crucially, even if Europe does not become the leader in creating cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring innovations from elsewhere.

A Critical Juncture

Europe now stands at a decisive moment. As the saying goes, economic erosion often happens "slowly, then all at once". To date, Europe's slide in innovation has been gradual. But, without bold steps to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in world influence.