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The recent US national security strategy presents a flawed assessment of Europe. The document asserts that unrestrained immigration and so-called "woke" policies represent an existential risk to the continent's identity. Yet, this perspective is based on a fundamental misinterpretation of the reality. The actual danger facing Europe is not cultural but economic and technological lag.

A Glaring Growth Divide Separating the US and Europe

The data paint a sobering picture. From 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% increase for the European Union. During this period, EU GDP per capita dropped from 76.5% to just half of the American figure. Remarkably, even the poorest US state now boasts a higher per capita income than major European economies like France and Italy.

Today, roughly 50% of the global 50 largest tech companies are US-based, while only four are European.

The Technological Shortfall: The Core Question

This widening disparity is driven by stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of world technology leadership is decidedly US-centric. Over the past five decades, hundreds of American startups have scaled into enterprises valued at more than $10bn, compared with only fourteen in the European continent.

This disparity prompts a pressing issue: In the race for future industries like AI, semiconductors, and fusion energy, what is the EU stand? Experts widely agree it is essentially a contest between two involving the United States and China, with European nations entering at a clear handicap.

Underlying Factors of Europe's Technological Lag

A number of major reasons explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for funding startups. The EU has yet to establish a genuine unified investment market, which limits the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A US startup can introduce a service under a single regulatory framework to access a market of hundreds of millions. The European Union, despite a larger population size, is divided among twenty-seven separate systems, creating significant internal barriers.
• Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was historically met with stigma, whereas in the United States, it is often considered a valuable lesson.
• Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has weakened its capacity for pioneering research.

The Road Ahead: Reasons for Cautious Optimism

In spite of these hurdles, there are reasons for hope. Policymakers are growing more conscious of the existential challenge and have begun to advance serious reform. Notable reports on EU competitiveness and the single market highlight the necessity of major reforms.

With the right incentives and regulatory reforms, Europe's strengths could support much higher levels of business-led breakthroughs.

Europe retains considerable strengths: high-quality workforce, excellent schools and universities, and world-class labs. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of investment and entrepreneurship.

Importantly, even if the EU does not become the leader in creating next-generation technologies, it can still dramatically increase productivity by adopting and adapting advancements from other regions.

An Inflection Point

The European Union now faces a critical moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. However, if it fails to take bold steps to tackle its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible decline in world influence.