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The recent US national security strategy presents a flawed assessment of the European Union. The document asserts that open-border policies and what it terms "progressive" policies pose an grave threat to European civilization. Yet, this argument is based on a fundamental misreading of the situation. The actual danger facing the EU is not cultural but technological and economic backwardness.

The Stark Economic Divide Separating the US and Europe

The data reveal a stark picture. Between 2008 and 2023, US GDP surged by 87%, while a mere 13.5% increase for the EU. During this period, European income per person fell from over three-quarters to just half of the US level. Strikingly, even the poorest US state now has a greater average income than several leading EU nations like Italy and France.

Currently, about half of the world’s 50 largest technology firms are American, while a mere four are from Europe.

The Innovation Shortfall: A Critical Problem

This widening disparity is driven by superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of global tech dominance is decidedly American. Over the past five decades, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with just 14 in Europe.

This gap raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU stand? Experts widely concede it is essentially a two-horse race involving the United States and China, with European nations starting at a significant handicap.

Underlying Factors of Europe's Technological Lag

A number of key factors explain this innovation chasm.

• Venture Capital: The US boasts a much more robust and agile network for financing new ventures. Europe has yet to establish a true capital markets union, which limits the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hinder European business. A US startup can launch a product under a single regulatory framework to access a market of over 330 million. The EU, despite a larger population size, is split among twenty-seven separate systems, creating huge internal barriers.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, business failure was historically viewed with penalties, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.

A Path Forward: Grounds for Hopefulness

In spite of these challenges, there are causes for hope. European leaders are growing more conscious of the existential challenge and have started to propose substantial change. Notable analyses on EU competitiveness and the single market point to the need for sweeping changes.

Given appropriate incentives and rule changes, Europe's strengths might enable far greater levels of commercial innovation.

Europe still possesses significant strengths: high-quality human capital, top-tier education systems, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these elements have the potential to unleash a surge of venture creation.

Crucially, even if the EU does not take the lead in developing next-generation tech, it can still significantly boost economic output by adopting and adapting advancements from other regions.

A Critical Juncture

The European Union now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's slide in innovation has been steady. But, without bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a sudden and irreversible loss of world influence.