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The recent US security policy document presents a misguided view of Europe. The document asserts that unrestrained immigration and so-called "progressive" agendas represent an existential threat to the continent's identity. However, this argument is based on a fundamental misinterpretation of the reality. The actual danger facing Europe is not societal but economic and technological backwardness.

The Stark Growth Gap Separating the US and Europe

Statistics paint a stark contrast. From 2008 and 2023, American economic output grew by 87%, compared to a mere thirteen and a half percent growth for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now has a higher per capita income than major EU nations like Italy and France.

Today, about half of the world’s 50 largest technology firms are US-based, while only four are European.

The Innovation Deficit: A Critical Problem

This widening disparity is driven by superior productivity growth in the United States, fueled by breakthroughs and higher total factor productivity. The scene of global tech leadership is overwhelmingly US-centric. Over the past five decades, 241 US firms have scaled into enterprises valued at over $10bn, compared with only fourteen in the European continent.

This disparity prompts a pressing issue: In the race for future industries like semiconductors, AI, and quantum computing, what is the EU stand? Experts widely concede it is essentially a two-horse race between the United States and China, with European nations entering at a clear disadvantage.

Root Causes of Europe's Technological Lag

A number of key factors account for this technological divide.

• Venture Capital: The US boasts a much more robust and agile network for funding startups. The EU has yet to establish a true unified investment market, a factor that caps the growth potential of new firms.
• Regulatory Fragmentation: Excessive and fragmented regulation hamper Europe. A US startup can introduce a service under one set of laws to access a consumer base of over 330 million. The EU, despite a larger population size, is split among twenty-seven separate regimes, creating huge market obstacles.
• Cultural Attitudes: Attitudes toward risk-taking differ sharply. In parts of Europe, business failure was historically viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.

A Path Forward: Reasons for Cautious Optimism

Despite these challenges, one can find causes for hope. Policymakers are growing more conscious of the severe threat and have begun to advance serious reform. Notable reports on European competitiveness and the internal market point to the need for sweeping reforms.

Given appropriate policies and regulatory reforms, Europe's strengths might enable much higher degrees of commercial innovation.

Europe still possesses considerable advantages: skilled workforce, excellent education systems, and premier labs. Coupled with a large internal market and substantial household savings, these elements have the potential to trigger a new wave of venture creation.

Crucially, even if the EU does not take the lead in developing next-generation technologies, it can still significantly increase economic output by adopting and adapting innovations from other regions.

An Inflection Point

Europe now faces a decisive moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, the continent's technological decline has been steady. But, without bold steps to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in world influence.