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Donald Trump's security policy document offers a flawed view of the European Union. The document asserts that unrestrained immigration and so-called "progressive" agendas represent an grave threat to European civilization. However, this perspective rests on a serious misreading of the reality. The actual danger facing Europe is not societal but economic and technological lag.

The Stark Growth Divide Separating Europe and the US

The data reveal a sobering picture. Between 2008 and 2023, US GDP grew by 87%, compared to a paltry thirteen and a half percent increase for the EU. Over this period, European income per person dropped from 76.5% to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than several leading European economies like Italy and France.

Today, roughly half of the global 50 largest technology firms are US-based, while a mere four are from Europe.

The Innovation Deficit: The Core Question

This widening economic gap stems from stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly US-centric. Over the past fifty years, hundreds of American startups have scaled into companies valued at over $10bn, compared with just 14 in the European continent.

This disparity raises a pressing issue: As the competition for future industries like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely concede it is largely a two-horse race involving the US and China, with European nations starting at a clear handicap.

Root Causes of Europe's Innovation Gap

Several major reasons explain this technological divide.

• Venture Capital: The US boasts a much more robust and more dynamic system for funding startups. Europe still lacks a true unified investment market, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hinder European business. A American entrepreneur can launch a product under a single regulatory framework to access a market of over 330 million. The European Union, despite a larger population size, is split among 27 different national regimes, creating significant market obstacles.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the United States, it is often considered a badge of experience.
• Military Investment: 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 weakened its capacity for breakthrough innovation.

A Path Forward: Reasons for Hopefulness

In spite of these hurdles, there are causes for hope. European leaders are increasingly aware of the severe threat and have started to advance substantial change. Notable reports on European competitiveness and the single market highlight the necessity of sweeping changes.

Given appropriate incentives and regulatory reforms, Europe's strengths might enable much higher degrees of commercial innovation.

Europe still possesses significant strengths: high-quality workforce, top-tier schools and universities, and premier labs. Coupled with a vast domestic consumer base and high savings rates, these elements could unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically boost productivity by implementing and tailoring advancements from other regions.

An Inflection Point

The European Union now stands at a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's slide in innovation has been steady. However, if it fails to take decisive action to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in global economic relevance.