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The recent US security policy document presents a misguided view of Europe. It claims that open-border policies and so-called "progressive" agendas represent an grave threat to the continent's identity. However, this argument rests on a serious misreading of the situation. The true danger confronting the EU is not societal but technological and economic backwardness.

A Glaring Economic Divide Separating Europe and the US

The data reveal a sobering picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% growth for the EU. During this period, EU GDP per capita fell from over three-quarters to just 50% of the US level. Remarkably, even Mississippi now has a greater average income than several leading EU nations like France and Italy.

Today, about 50% of the global 50 largest tech companies are American, while a mere four are European.

The Technological Deficit: A Critical Problem

The growing disparity is driven by superior productivity growth in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology dominance is overwhelmingly American. Over the past fifty years, 241 US firms have grown into companies valued at more than ten billion dollars, compared with only fourteen in the European continent.

This gap raises a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, where does Europe stand? Experts widely agree it is essentially a two-horse race involving the US and China, with Europe starting at a clear disadvantage.

Underlying Factors of Europe's Technological Lag

Several key reasons explain this innovation chasm.

• Financing Ecosystem: The US boasts a much more robust and agile system for financing new ventures. Europe still lacks a true unified investment market, which limits the growth potential of emerging companies.
• Regulatory Fragmentation: Complex and divided rules hamper European business. A US startup can launch a service under one set of laws to access a market of over 330 million. The European Union, despite a larger population size, is divided among twenty-seven separate regimes, creating significant internal barriers.
• Mindset Differences: Views on risk-taking vary greatly. In parts of Europe, business failure was historically 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 innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has eroded its ability in pioneering research.

The Road Ahead: Grounds for Hopefulness

Despite these hurdles, one can find reasons for optimism. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Key analyses on European competitiveness and the internal market point to the necessity of sweeping changes.

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

Europe retains considerable strengths: skilled human capital, top-tier schools and universities, and world-class research institutions. Coupled with a large internal market and substantial household savings, these elements have the potential to unleash a new wave of venture creation.

Importantly, even if Europe does not take the lead in developing next-generation tech, it can still dramatically boost productivity by implementing and tailoring advancements from other regions.

An Inflection Point

The European Union now faces a decisive moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. But, without decisive action to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of world influence.