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Donald Trump's security policy document offers a misguided view of the European Union. It claims that open-border policies and what it terms "progressive" agendas represent an existential threat to European civilization. However, this argument rests on a serious misreading of the reality. The true challenge facing the EU is not cultural but technological and economic lag.

A Glaring Growth Divide Separating the US and Europe

The data paint a sobering contrast. From 2008 and 2023, US GDP grew by 87%, while a paltry thirteen and a half percent increase for the European Union. Over this time, EU GDP per capita fell from over three-quarters to just half of the American figure. Strikingly, even the poorest US state now has a greater average income than several leading European economies like France and Italy.

Today, about half of the global 50 largest tech companies are US-based, while only four are from Europe.

The Technological Deficit: A Critical Question

This widening disparity stems from superior productivity growth in the US, largely due to breakthroughs and better use of resources. The scene of global tech dominance is decidedly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at over $10bn, versus just 14 in Europe.

This disparity raises a vital question: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is Europe stand? Experts widely concede it is essentially a two-horse race between the United States and China, with Europe entering at a significant handicap.

Underlying Factors of Europe's Technological Lag

A number of major reasons account for this technological divide.

• Venture Capital: The US boasts a far deeper and more dynamic system for funding startups. The EU has yet to establish a true unified investment market, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented rules hinder European business. A American entrepreneur can launch a service under one set of laws to access a market of over 330 million. The EU, despite a larger population, is split among 27 separate systems, creating huge internal barriers.
• Cultural Attitudes: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, business failure was once met with penalties, whereas in the US, it is often considered a valuable lesson.
• Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.

The Road Ahead: Grounds for Cautious Optimism

Despite these hurdles, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have started to propose serious reform. Notable analyses on EU competitiveness and the internal market point to the necessity of sweeping reforms.

Given appropriate policies and rule changes, Europe's strengths might enable much higher levels of commercial innovation.

The continent still possesses considerable strengths: skilled workforce, top-tier schools and universities, and world-class research institutions. Coupled with a large internal market and high savings rates, these elements could unleash a new wave of venture creation.

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

A Critical Juncture

Europe now faces a critical crossroads. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, the continent's slide in innovation has been steady. However, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could give way to a sudden and irreversible loss of world influence.