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The recent US security policy document offers a flawed assessment of the European Union. The document asserts that open-border policies and so-called "woke" agendas pose an grave threat to European civilization. Yet, this argument is based on a fundamental misinterpretation of the reality. The actual danger facing Europe is not cultural but economic and technological backwardness.

A Glaring Economic Gap Between the US and Europe

The data reveal a sobering contrast. From 2008 and 2023, American economic output surged by 87%, while a mere thirteen and a half percent increase for the European Union. Over this period, European income per person fell from 76.5% to just 50% of the American figure. Remarkably, even the poorest US state now has a greater average income than major European economies like Italy and France.

Today, roughly 50% of the world’s 50 largest tech companies are American, while a mere four are from Europe.

The Technological Shortfall: The Core Problem

The growing disparity is driven by stronger productivity growth in the US, largely due to technological innovation and better use of resources. The landscape of world technology leadership is decidedly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at over ten billion dollars, versus only fourteen in the European continent.

This gap raises a vital question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, where does Europe stand? Experts widely agree it is essentially a contest between two between the US and China, with Europe starting at a significant disadvantage.

Root Causes of Europe's Innovation Gap

A number of major reasons account for this innovation chasm.

• Venture Capital: The US boasts a far deeper and agile system for financing new ventures. Europe still lacks a genuine capital markets union, which caps the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hinder Europe. A American entrepreneur can launch a service under one regulatory framework to access a market of over 330 million. The EU, despite a larger population size, is split among 27 different national regimes, creating significant market obstacles.
• Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was once met with stigma, whereas in the United States, it is often seen as a badge of experience.
• Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.

A Path Forward: Grounds for Cautious Optimism

In spite of these hurdles, one can find causes for optimism. European leaders are growing more conscious of the severe threat and have begun to advance substantial change. Key analyses on EU competitiveness and the single market highlight the need for sweeping changes.

With the right policies and regulatory reforms, Europe's strengths could support much higher levels of commercial innovation.

Europe still possesses significant strengths: high-quality workforce, top-tier education systems, and world-class research institutions. Coupled with a large internal market and substantial household savings, these foundations could trigger a surge of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in developing cutting-edge technologies, it can still significantly boost productivity by implementing and tailoring innovations from elsewhere.

A Critical Juncture

Europe now faces a critical crossroads. As the saying goes, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been steady. But, 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 loss of world influence.