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The recent US security policy document offers a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" policies represent an grave threat to European civilization. Yet, this argument rests on a fundamental misinterpretation of the situation. The true danger confronting the EU is not cultural but technological and economic lag.

A Glaring Growth Gap Separating Europe and the US

Statistics paint a stark picture. Between 2008 and 2023, US GDP grew by eighty-seven percent, compared to a paltry 13.5% increase for the EU. Over this time, EU GDP per capita dropped from 76.5% to just half of the American figure. Strikingly, even the poorest US state now boasts a higher per capita income than major European economies like Italy and France.

Currently, roughly half of the world’s top fifty tech companies are American, while only four are European.

The Technological Deficit: The Core Problem

This widening economic gap stems from stronger productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The landscape of global tech dominance is decidedly American. Over the past five decades, 241 US firms have scaled into companies valued at over $10bn, versus only fourteen in Europe.

This disparity raises a vital question: In the race for future industries like AI, semiconductors, and quantum computing, where does Europe stand? Most analysts concede it is essentially a two-horse race between the United States and China, with European nations entering at a clear disadvantage.

Underlying Factors of Europe's Technological Lag

Several major reasons account for this innovation chasm.

• Venture Capital: The US boasts a far deeper and agile system for financing new ventures. Europe has yet to establish a true unified investment market, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A American entrepreneur can introduce a product under one set of laws to access a market of hundreds of millions. The European Union, despite a bigger population size, is divided among 27 different national systems, creating huge internal barriers.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In parts of Europe, business failure was historically met with stigma, whereas in the US, it is often seen as a badge of experience.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its ability in pioneering research.

A Path Forward: Reasons for Hopefulness

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

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

Europe still possesses significant strengths: skilled human capital, excellent education systems, and premier research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements could unleash a surge of venture creation.

Importantly, even if the EU does not become the leader in creating next-generation technologies, it can still dramatically boost economic output by implementing and tailoring advancements from elsewhere.

An Inflection Point

Europe now faces a decisive crossroads. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". So far, Europe's slide in innovation has been steady. However, without bold steps to address its structural weaknesses, today's slow erosion could give way to a rapid and permanent loss of world influence.