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Donald Trump's security policy document presents a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" agendas pose an existential risk to European civilization. Yet, this perspective rests on a serious misreading of the reality. The actual danger facing Europe is not societal but technological and economic lag.

The Stark Growth Gap Between the US and Europe

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

Today, about half of the world’s top fifty technology firms are US-based, while a mere four are from Europe.

The Innovation Shortfall: The Core Problem

The growing economic gap is driven by superior efficiency gains in the United States, fueled by technological innovation and better use of resources. The scene of world technology leadership is overwhelmingly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at more than $10bn, compared with only fourteen in the European continent.

This disparity prompts a pressing issue: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, where does Europe stand? Experts widely concede it is essentially a two-horse race between the United States and China, with Europe entering at a significant disadvantage.

Root Causes of Europe's Technological Lag

A number of major factors explain this technological divide.

• Venture Capital: The United States has a far deeper and agile network for financing new ventures. Europe still lacks a true unified investment market, which caps the scale of new firms.
• Regulatory Fragmentation: Excessive and fragmented rules hinder European business. A US startup can launch a service under a single regulatory framework to access a consumer base of hundreds of millions. The European Union, despite a bigger population size, is split among twenty-seven separate systems, creating huge market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was once met with stigma, 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 chronic underinvestment in defense has eroded its ability in pioneering research.

The Road Ahead: Grounds for Hopefulness

Despite these hurdles, there are reasons for optimism. Policymakers are increasingly aware of the severe threat and have begun to propose substantial change. Key reports on European competitiveness and the single market highlight the necessity of major changes.

With the right policies and rule changes, Europe's strengths could support much higher degrees of business-led breakthroughs.

Europe retains considerable advantages: skilled workforce, excellent education systems, and premier labs. Alongside a vast domestic consumer base and high savings rates, these elements could unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not take the lead in creating next-generation technologies, it can still significantly boost productivity by implementing and tailoring innovations from elsewhere.

An Inflection Point

The European Union now stands at a critical crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. However, without bold steps to address its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.