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Donald Trump's security policy document offers a flawed assessment of Europe. It claims that open-border policies and so-called "progressive" policies pose an grave risk to European civilization. Yet, this argument rests on a fundamental misreading of the reality. The true danger confronting the EU is not cultural but economic and technological backwardness.

The Stark Economic Gap Between Europe and the US

The data paint a stark picture. Between 2008 and 2023, US GDP grew by eighty-seven percent, compared to a paltry 13.5% growth for the European Union. Over this period, European income per person fell from over three-quarters to just half of the US level. Remarkably, even the poorest US state now boasts a higher per capita income than several leading European economies like Italy and France.

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

The Innovation Deficit: A Critical Problem

The growing disparity is driven by superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of world technology leadership is overwhelmingly American. In the last fifty years, 241 US firms have scaled into companies valued at more than $10bn, versus just 14 in Europe.

This gap prompts a vital question: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, what is Europe stand? Experts widely concede it is essentially a contest between two involving the United States and China, with Europe starting at a clear disadvantage.

Underlying Factors of Europe's Innovation Gap

A number of major reasons account for this innovation chasm.

• Venture Capital: The US boasts a far deeper and more dynamic system for funding startups. The EU still lacks a genuine unified investment market, a factor that caps the growth potential of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hinder European business. A American entrepreneur can introduce 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 separate systems, creating significant market obstacles.
• Mindset Differences: Attitudes toward entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the US, it is often considered a valuable lesson.
• Military Investment: The US benefits from a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Cautious Optimism

Despite these challenges, one can find causes for hope. Policymakers are growing more conscious of the existential challenge and have started to propose substantial change. Key reports on EU competitiveness and the single market highlight the need for sweeping reforms.

With the right policies and regulatory reforms, these assets might enable much higher degrees of commercial innovation.

Europe still possesses significant advantages: skilled human capital, excellent schools and universities, and premier research institutions. Coupled with a large internal market and high savings rates, these foundations could unleash a new wave of venture creation.

Importantly, even if the EU does not become the leader in developing next-generation tech, it can still dramatically increase productivity by adopting and adapting advancements from elsewhere.

An Inflection Point

Europe now stands at a decisive crossroads. As the saying goes, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been steady. But, without decisive action to tackle its deep-seated problems, today's gradual weakening could turn into a sudden and irreversible loss of world influence.