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The recent US national security strategy presents a flawed view of Europe. The document asserts that open-border policies and so-called "progressive" policies represent an grave risk to European civilization. Yet, this argument is based on a serious misinterpretation of the reality. The true challenge confronting Europe is not societal but economic and technological backwardness.

A Glaring Growth Divide Separating the US and Europe

Statistics reveal a sobering contrast. Between 2008 and 2023, US GDP surged by 87%, while a paltry thirteen and a half percent increase for the EU. During this time, European income per person dropped from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major EU nations like France and Italy.

Today, about half of the global top fifty tech companies are American, while a mere four are European.

The Technological Shortfall: The Core Question

The growing disparity stems from stronger productivity growth in the United States, fueled by technological innovation and higher total factor productivity. The scene of global tech leadership is decidedly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at over $10bn, compared with just 14 in Europe.

This disparity raises a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and fusion energy, where does Europe stand? Most analysts agree it is largely a contest between two between the United States and China, with European nations starting at a clear handicap.

Underlying Factors of the Continent's Innovation Gap

Several key factors explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for funding startups. The EU still lacks a true capital markets union, which limits the growth potential of emerging companies.
• Bureaucratic Hurdles: Excessive and fragmented rules hamper European business. A American entrepreneur can launch a service under one set of laws to access a market of over 330 million. The European Union, despite a bigger population size, is split among twenty-seven separate regimes, creating huge market obstacles.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, business failure was once viewed with penalties, whereas in the US, it is often seen as a badge of experience.
• Military Investment: The US benefits from a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in military capabilities has eroded its capacity for pioneering research.

The Road Ahead: Grounds for Cautious Optimism

Despite these challenges, one can find causes for hope. Policymakers are increasingly aware of the severe threat and have started to propose substantial change. Key analyses on EU competitiveness and the single market point to the need for major changes.

Given appropriate policies and regulatory reforms, Europe's strengths might enable much higher degrees of business-led breakthroughs.

The continent still possesses considerable advantages: high-quality human capital, top-tier schools and universities, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements have the potential to unleash a new wave of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in creating next-generation tech, it can still significantly boost productivity by adopting and adapting innovations from other regions.

An Inflection Point

Europe now faces a critical moment. As the saying goes, economic erosion often happens "slowly, then all at once". So far, the continent's technological decline has been gradual. However, if it fails to take decisive action to address its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of global economic relevance.