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The recent US security policy document offers a misguided view of Europe. It claims that open-border policies and so-called "progressive" policies pose an existential threat to European civilization. Yet, this argument is based on a serious misinterpretation of the situation. The true danger confronting the EU is not cultural but economic and technological backwardness.

A Glaring Economic Divide Between Europe and the US

The data paint a stark picture. From 2008 and 2023, US GDP surged by eighty-seven percent, while a paltry thirteen and a half percent increase for the European Union. During this time, EU GDP per capita dropped from 76.5% to just half of the US level. Remarkably, even Mississippi now has a higher per capita income than major EU nations like France and Italy.

Currently, roughly 50% of the global 50 largest tech companies are US-based, while only four are from Europe.

The Technological Shortfall: The Core Problem

This widening economic gap stems from stronger productivity growth in the US, largely due to breakthroughs and better use of resources. The scene of world technology dominance is overwhelmingly US-centric. Over the past five decades, hundreds of American startups have scaled into companies valued at more than $10bn, compared with just 14 in the European continent.

This gap raises a vital question: In the race for future industries like AI, semiconductors, and fusion energy, what is the EU stand? Most analysts concede it is essentially a contest between two involving the US and China, with Europe entering at a clear disadvantage.

Root Causes of the Continent's Innovation Gap

Several key factors account for this technological divide.

• Financing Ecosystem: The US boasts a far deeper and agile system for financing new ventures. Europe has yet to establish a true unified investment market, a factor that limits the scale of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A US startup can introduce a product under one regulatory framework to access a market of over 330 million. The EU, despite a larger population, is split among twenty-seven different national regimes, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward risk-taking differ sharply. In some EU nations, a startup's collapse was once 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 innovation pipeline linking defense and academia. Europe's long-term lack of spending in military capabilities has eroded its capacity for breakthrough innovation.

The Road Ahead: Reasons for Hopefulness

In spite of these hurdles, there are causes for hope. Policymakers are increasingly aware of the severe threat and have begun to propose serious reform. Key analyses on European competitiveness and the single market highlight the need for major reforms.

With the right incentives and regulatory reforms, these assets could support far greater degrees of commercial innovation.

Europe retains considerable advantages: high-quality workforce, top-tier education systems, and premier labs. Coupled with a vast domestic consumer base and substantial household savings, these elements have the potential to unleash 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 increase productivity by implementing and tailoring innovations from other regions.

A Critical Juncture

Europe now stands at a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's slide in innovation has been steady. However, without decisive action to tackle its deep-seated problems, today's slow erosion could give way to a sudden and irreversible decline in world influence.