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Donald Trump's security policy document offers a misguided assessment of Europe. The document asserts that open-border policies and so-called "progressive" policies pose an existential threat to European civilization. However, this perspective rests on a fundamental misreading of the situation. The actual danger facing Europe is not cultural but technological and economic backwardness.

The Stark Economic Divide Separating Europe and the US

Statistics paint a stark picture. From 2008 and 2023, US GDP surged by 87%, while a paltry 13.5% growth for the European Union. Over this period, EU GDP per capita dropped from over three-quarters to just half of the American figure. Strikingly, even the poorest US state now has a higher per capita income than several leading European economies like Italy and France.

Currently, roughly 50% of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Deficit: The Core Question

This widening economic gap stems from stronger productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of world technology dominance is overwhelmingly American. In the last five decades, 241 US firms have scaled into companies valued at over ten billion dollars, versus only fourteen in Europe.

This disparity raises a pressing question: In the race for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Experts widely concede it is essentially a contest between two between the United States and China, with European nations entering at a clear handicap.

Root Causes of Europe's Technological Lag

Several key reasons account for this innovation chasm.

• Venture Capital: The United States has a far deeper and agile network for funding startups. The EU has yet to establish a true capital markets union, a factor that caps the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided regulation hinder Europe. A US startup can launch a product under a single set of laws to access a market of over 330 million. The EU, despite a larger population, is divided among 27 separate systems, creating huge market obstacles.
• Mindset Differences: Attitudes toward risk-taking differ sharply. In some EU nations, a startup's collapse was historically viewed with penalties, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Hopefulness

In spite of these hurdles, there are reasons for hope. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Notable analyses on EU competitiveness and the single market highlight the need for sweeping reforms.

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

The continent still possesses significant advantages: high-quality human capital, top-tier schools and universities, and premier labs. Alongside a large internal market and high savings rates, these elements could unleash a surge of investment and entrepreneurship.

Crucially, even if the EU does not take the lead in developing next-generation tech, it can still significantly increase productivity by adopting and adapting innovations from elsewhere.

An Inflection Point

The European Union now stands at a decisive moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". So far, the continent's slide in innovation has been gradual. But, if it fails to take bold steps to address its structural weaknesses, today's slow erosion could give way to a rapid and permanent loss of global economic relevance.