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The recent US security policy document presents a misguided view of the European Union. It claims that open-border policies and what it terms "woke" policies pose an existential threat to European civilization. However, this argument rests on a serious misreading of the reality. The actual danger confronting Europe is not societal but economic and technological backwardness.

The Stark Growth Divide Separating Europe and the US

Statistics paint a sobering contrast. Between 2008 and 2023, American economic output surged by 87%, compared to a mere thirteen and a half percent increase for the European Union. Over this time, European income per person dropped from over three-quarters to just half of the US level. Strikingly, even Mississippi now has a higher per capita income than several leading European economies like Italy and France.

Today, roughly half of the global 50 largest tech companies are American, while a mere four are from Europe.

The Innovation Shortfall: The Core Question

This widening disparity stems from stronger efficiency gains in the US, fueled by technological innovation and higher total factor productivity. The landscape of world technology dominance is overwhelmingly American. Over the past five decades, 241 US firms have scaled into companies valued at over $10bn, compared with only fourteen in Europe.

This disparity raises a vital question: In the race for future industries like AI, semiconductors, and fusion energy, where does the EU positioned? Most analysts concede it is largely a contest between two between the United States and China, with Europe entering at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

A number of major factors account for this technological divide.

• Financing Ecosystem: The United States has a far deeper and agile network for funding startups. Europe still lacks a true capital markets union, which limits the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided rules hinder European business. A US startup can introduce a service under a single set of laws to access a market of hundreds of millions. The European Union, despite a bigger population size, is split among 27 different national systems, creating huge internal barriers.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was once viewed with stigma, 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 chronic underinvestment in military capabilities has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Cautious Optimism

In spite of these hurdles, there are reasons for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance substantial change. Key analyses on EU competitiveness and the single market highlight the need for major changes.

With the right policies and rule changes, Europe's strengths could support far greater levels of business-led breakthroughs.

The continent still possesses significant advantages: high-quality workforce, excellent schools and universities, and premier labs. Alongside a vast domestic consumer base and high savings rates, these foundations could trigger a surge of investment and entrepreneurship.

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

An Inflection Point

Europe now faces a decisive crossroads. As the saying goes, decline often happens "gradually and then suddenly". So far, the continent's slide in innovation has been gradual. However, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a sudden and irreversible decline in global economic relevance.