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The recent US security policy document presents a misguided assessment of the European Union. The document asserts that unrestrained immigration and so-called "progressive" policies pose an existential threat to European civilization. Yet, this argument is based on a fundamental misreading of the reality. The true challenge facing Europe is not societal but economic and technological lag.

A Glaring Growth Divide Between Europe and the US

Statistics reveal a stark picture. Between 2008 and 2023, US GDP grew by eighty-seven percent, compared to a mere thirteen and a half percent increase for the EU. Over this time, European income per person fell from 76.5% to just 50% of the American figure. Remarkably, even the poorest US state now has a higher per capita income than major EU nations like Italy and France.

Today, about 50% of the global 50 largest technology firms are US-based, while only four are from Europe.

The Innovation Shortfall: A Critical Problem

This widening disparity stems from stronger productivity growth in the US, fueled by breakthroughs and better use of resources. The landscape of global tech leadership 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 Europe.

This disparity raises a pressing question: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is the EU positioned? Experts widely concede it is largely a two-horse race between the US and China, with European nations entering at a significant disadvantage.

Root Causes of Europe's Technological Lag

A number of key reasons account for this technological divide.

• Financing Ecosystem: The United States has a much more robust and agile network for financing new ventures. The EU still lacks a genuine unified investment market, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented rules hinder European business. A US startup can introduce a product under a single set of laws to access a consumer base of hundreds of millions. The EU, despite a bigger population, is split among twenty-seven separate systems, creating huge internal barriers.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was once viewed with stigma, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

In spite of these hurdles, there are reasons for hope. Policymakers are increasingly aware of the existential challenge and have begun to advance substantial change. Key reports on European competitiveness and the internal market point to the need for major changes.

Given appropriate policies and rule changes, these assets might enable much higher levels of commercial innovation.

Europe still possesses considerable advantages: high-quality workforce, top-tier education systems, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these foundations could unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically boost economic output by implementing and tailoring advancements from elsewhere.

An Inflection Point

Europe now stands at a critical moment. To paraphrase a famous line, economic erosion often happens "gradually and then suddenly". To date, the continent's slide in innovation has been steady. However, if it fails to take decisive action to tackle its deep-seated problems, today's gradual weakening could give way to a sudden and irreversible loss of world influence.