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The recent US security policy document offers a misguided view of Europe. The document asserts that open-border policies and what it terms "progressive" policies pose an grave threat to the continent's identity. Yet, this argument rests on a serious misinterpretation of the reality. The actual danger confronting the EU is not societal but technological and economic backwardness.

A Glaring Growth Gap Separating the US and Europe

Statistics reveal a sobering contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, compared to a paltry 13.5% increase for the EU. Over this period, European income per person dropped from 76.5% to just half of the American figure. Strikingly, even Mississippi now boasts a greater average income than several leading EU nations like Italy and France.

Currently, roughly 50% of the global top fifty technology firms are American, while only four are from Europe.

The Technological Deficit: A Critical Question

The growing disparity is driven by superior efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The scene of world technology dominance is decidedly US-centric. In the last five decades, 241 US firms have grown into companies valued at over ten billion dollars, versus only fourteen in the European continent.

This disparity raises a vital question: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, what is the EU positioned? Most analysts concede it is largely a contest between two between the US and China, with Europe starting at a significant handicap.

Underlying Factors of Europe's Technological Lag

Several major factors account for this innovation chasm.

• Venture Capital: The United States has a much more robust and more dynamic system for funding startups. Europe has yet to establish a true capital markets union, a factor that limits the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided rules hinder Europe. A US startup can launch a product under a single set of laws to access a market of over 330 million. The European Union, despite a larger population size, is divided among 27 separate regimes, creating significant market obstacles.
• Mindset Differences: Attitudes toward 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.
• Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in defense has weakened its ability in breakthrough innovation.

The Road Ahead: Reasons for Cautious Optimism

Despite these hurdles, there are reasons for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance substantial change. Notable reports on European competitiveness and the single market point to the necessity of sweeping reforms.

Given appropriate policies and rule changes, Europe's strengths might enable far greater degrees of business-led breakthroughs.

Europe still possesses significant advantages: skilled human capital, top-tier education systems, and world-class research institutions. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a surge of venture creation.

Crucially, even if the EU does not become the leader in developing next-generation technologies, it can still dramatically increase economic output by adopting and adapting advancements from elsewhere.

An Inflection Point

The European Union now faces a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's slide in innovation has been steady. But, if it fails to take bold steps to address its deep-seated problems, today's slow erosion could give way to a rapid and permanent loss of global economic relevance.