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Donald Trump's national security strategy offers a misguided view of the European Union. The document asserts that open-border policies and so-called "woke" policies represent an existential threat to the continent's identity. However, this perspective is based on a fundamental misinterpretation of the reality. The actual danger facing the EU is not societal but economic and technological backwardness.

The Stark Growth Divide Separating Europe and the US

The data paint a sobering contrast. From 2008 and 2023, US GDP grew by 87%, while a mere thirteen and a half percent increase for the EU. Over this period, EU GDP per capita fell from 76.5% to just 50% of the American figure. Remarkably, even Mississippi now has a greater average income than major European economies like France and Italy.

Today, about half of the world’s top fifty tech companies are US-based, while only four are European.

The Technological Shortfall: The Core Question

The growing disparity is driven by superior productivity growth in the US, fueled by technological innovation and higher total factor productivity. The landscape of global tech dominance is decidedly US-centric. Over the past fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, versus just 14 in Europe.

This gap prompts a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is Europe stand? Experts widely agree it is essentially a contest between two between the US and China, with European nations entering at a clear disadvantage.

Root Causes of Europe's Technological Lag

A number of major factors explain this technological divide.

• Venture Capital: The US boasts a far deeper and agile network for financing new ventures. Europe still lacks a genuine capital markets union, which caps the growth potential of new firms.
• Regulatory Fragmentation: Complex and divided regulation hamper European business. A American entrepreneur can launch a service under a single regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population, is split among twenty-seven separate regimes, creating huge market obstacles.
• Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was historically viewed with penalties, whereas in the United States, it is often considered a badge of experience.
• Defense Spending: The United States enjoys a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its capacity for breakthrough innovation.

A Path Forward: Grounds for Hopefulness

Despite these hurdles, one can find reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to propose serious reform. Key reports on European competitiveness and the internal market highlight the need for major reforms.

Given appropriate policies and rule changes, these assets could support much higher degrees of business-led breakthroughs.

The continent still possesses considerable strengths: high-quality human capital, top-tier schools and universities, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these foundations could trigger a surge of venture creation.

Crucially, even if Europe does not become the leader in creating cutting-edge tech, it can still significantly increase economic output by adopting and adapting innovations from other regions.

A Critical Juncture

Europe now stands at a critical moment. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, the continent's slide in innovation has been gradual. But, without bold steps to tackle its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible loss of global economic relevance.