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The recent US security policy document offers a misguided assessment of Europe. The document asserts that open-border policies and what it terms "woke" policies represent an existential threat to European civilization. Yet, this argument is based on a fundamental misinterpretation of the situation. The true danger confronting the EU is not cultural but economic and technological backwardness.

The Stark Economic Gap Separating the US and Europe

The data paint a stark picture. From 2008 and 2023, American economic output grew by 87%, compared to a paltry thirteen and a half percent increase for the EU. Over this period, EU GDP per capita dropped from 76.5% to just 50% of the American figure. Strikingly, even the poorest US state now boasts a greater average income than major European economies like Italy and France.

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

The Innovation Shortfall: The Core Question

This widening economic gap stems from stronger productivity growth in the US, largely due to technological innovation and better use of resources. The landscape of world technology dominance is overwhelmingly US-centric. In the last fifty years, 241 US firms have scaled into enterprises valued at over $10bn, compared with only fourteen in Europe.

This disparity raises a pressing issue: As the competition for future industries like AI, semiconductors, and fusion energy, where does Europe stand? Experts widely agree it is largely a two-horse race involving the United States and China, with European nations starting at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

Several key factors account for this technological divide.

• Venture Capital: The US boasts a far deeper and more dynamic system for financing new ventures. Europe still lacks a genuine unified investment market, a factor that caps the scale of emerging companies.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper European business. A American entrepreneur can launch a product under a single set of laws to access a consumer base of hundreds of millions. The EU, despite a larger population size, is split among twenty-seven different national systems, creating huge market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was historically viewed with stigma, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in defense has eroded its ability in pioneering research.

The Road Ahead: Reasons for Hopefulness

Despite these challenges, there are causes for optimism. Policymakers are growing more conscious of the existential challenge and have started to advance serious reform. Key reports on European competitiveness and the internal market highlight the need for sweeping reforms.

With the right policies and regulatory reforms, these assets could support much higher levels of business-led breakthroughs.

Europe still possesses significant advantages: high-quality workforce, top-tier schools and universities, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these elements could trigger a surge of investment and entrepreneurship.

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

An Inflection Point

The European Union now faces a critical moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. However, without decisive action to address its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.