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The recent US national security strategy presents a flawed assessment of the European Union. It claims that open-border policies and so-called "woke" policies pose an existential risk to European civilization. Yet, this argument rests on a fundamental misinterpretation of the situation. The actual danger facing Europe is not societal but technological and economic backwardness.

The Stark Economic Gap Between Europe and the US

Statistics reveal a sobering contrast. From 2008 and 2023, US GDP grew by 87%, while a paltry 13.5% increase for the European Union. Over this period, European income per person fell from over three-quarters to just half of the US level. Remarkably, even the poorest US state now boasts a higher per capita income than several leading European economies like France and Italy.

Today, about half of the world’s top fifty tech companies are American, while a mere four are from Europe.

The Technological Deficit: The Core Question

This widening economic gap is driven by stronger productivity growth in the United States, largely due to technological innovation and better use of resources. The landscape of world technology leadership is overwhelmingly US-centric. Over the past five decades, 241 US firms have scaled into enterprises valued at over $10bn, versus just 14 in the European continent.

This disparity raises a vital question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does the EU positioned? Experts widely agree it is largely a two-horse race involving the US and China, with Europe entering at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

A number of major factors account for this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for funding startups. Europe has yet to establish a genuine capital markets union, a factor that limits the growth potential of new firms.
• Regulatory Fragmentation: Complex and divided regulation hinder Europe. A American entrepreneur can launch a product under a single set of laws to access a consumer base of hundreds of millions. The European Union, despite a larger population, is split among twenty-seven different national regimes, creating significant internal barriers.
• Cultural Attitudes: Attitudes toward risk-taking vary greatly. In parts of Europe, a startup's collapse was historically met with penalties, 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. The continent's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.

The Road Ahead: Reasons for Hopefulness

Despite these challenges, one can find causes for hope. European leaders are growing more conscious of the existential challenge and have started to advance substantial change. Key reports on EU competitiveness and the internal market highlight the necessity of sweeping reforms.

With the right policies and regulatory reforms, Europe's strengths might enable much higher degrees of commercial innovation.

The continent retains considerable advantages: high-quality human capital, excellent schools and universities, and world-class labs. 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 the EU does not become the leader in developing cutting-edge tech, it can still significantly boost productivity by adopting and adapting advancements from elsewhere.

An Inflection Point

Europe now faces 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, if it fails to take decisive action to address its structural weaknesses, today's gradual weakening could turn into a sudden and irreversible loss of world influence.