The recent US security policy document presents a misguided view of Europe. The document asserts that open-border policies and what it terms "progressive" policies pose an grave threat to European civilization. However, this argument is based on a fundamental misinterpretation of the reality. The actual challenge confronting Europe is not cultural but technological and economic backwardness.
A Glaring Economic Divide Between the US and Europe
Statistics reveal a sobering contrast. From 2008 and 2023, American economic output surged by 87%, compared to a mere thirteen and a half percent increase for the EU. Over this period, European income per person dropped from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now boasts a greater average income than several leading EU nations like France and Italy.
Today, roughly half of the world’s 50 largest tech companies are US-based, while a mere four are from Europe.
The Technological Shortfall: A Critical Question
The growing disparity stems from stronger productivity growth in the US, fueled by breakthroughs and better use of resources. The scene of world technology dominance is overwhelmingly US-centric. In the last five decades, 241 US firms have scaled into companies valued at more than $10bn, versus just 14 in Europe.
This disparity prompts a pressing issue: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, what is the EU stand? Most analysts concede it is largely a contest between two between the US and China, with Europe starting at a clear disadvantage.
Root Causes of Europe's Technological Lag
Several major factors explain this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic network for financing new ventures. Europe still lacks a genuine capital markets union, a factor that caps the scale of new firms.
- Regulatory Fragmentation: Excessive and fragmented rules hinder European business. A American entrepreneur can introduce a service under one regulatory framework to access a market of over 330 million. The European Union, despite a bigger population, is split among 27 different national regimes, creating huge market obstacles.
- Cultural Attitudes: Views on risk-taking differ sharply. In parts of Europe, a startup's collapse was historically met with stigma, whereas in the US, it is often seen as a valuable lesson.
- Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for pioneering research.
A Path Forward: Grounds for Hopefulness
Despite these hurdles, one can find causes for optimism. European leaders are growing more conscious of the existential challenge and have started to propose substantial change. Notable analyses on European competitiveness and the single market point to the need for sweeping reforms.
Given appropriate policies and regulatory reforms, Europe's strengths might enable far greater levels of business-led breakthroughs.
The continent retains significant advantages: skilled workforce, top-tier schools and universities, and world-class labs. Coupled with a vast domestic consumer base and substantial household savings, these foundations could unleash a new wave of investment and entrepreneurship.
Importantly, even if Europe does not become the leader in creating cutting-edge technologies, it can still dramatically increase economic output by implementing and tailoring innovations from elsewhere.
A Critical Juncture
Europe now stands at a decisive crossroads. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, Europe's technological decline has been gradual. However, without bold steps to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of global economic relevance.
