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The recent US national security strategy presents a misguided assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies represent an existential threat to European civilization. However, this argument is based on a fundamental misinterpretation of the reality. The actual challenge confronting Europe is not cultural but economic and technological backwardness.

A Glaring Economic Gap Between Europe and the US

Statistics paint a stark picture. From 2008 and 2023, American economic output grew by eighty-seven percent, while a mere 13.5% increase 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 Mississippi now has a greater average income than several leading European economies like France and Italy.

Currently, roughly half of the world’s 50 largest tech companies are American, while only four are from Europe.

The Innovation Shortfall: A Critical Problem

This widening disparity stems from superior productivity growth in the United States, fueled by breakthroughs and better use of resources. The scene of global tech leadership is overwhelmingly American. Over the past fifty years, hundreds of American startups have grown into companies valued at more than $10bn, compared with just 14 in Europe.

This disparity prompts a vital issue: As the competition for future industries like AI, semiconductors, and quantum computing, where does the EU stand? Experts widely concede it is largely a two-horse race between the US and China, with European nations entering at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

A number of major factors explain this technological divide.

• Venture Capital: The United States has a much more robust and agile system for funding startups. Europe still lacks a true capital markets union, which caps the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hinder European business. A US startup can introduce a product under a single set of laws to access a market of hundreds of millions. The European Union, despite a larger population, is split among twenty-seven separate regimes, creating significant internal barriers.
• Cultural Attitudes: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the United States, it is often considered a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in defense has eroded its ability in breakthrough innovation.

A Path Forward: Grounds for Hopefulness

Despite these hurdles, one can find reasons for optimism. Policymakers are increasingly aware of the severe threat and have started to propose serious reform. Notable reports on European competitiveness and the internal market highlight the necessity of sweeping reforms.

Given appropriate incentives and rule changes, these assets might enable far greater levels of business-led breakthroughs.

The continent still possesses considerable advantages: high-quality workforce, excellent education systems, and world-class research institutions. Alongside a vast domestic consumer base and high savings rates, these foundations have the potential to trigger a new wave of venture creation.

Crucially, even if the EU does not become the leader in creating next-generation tech, it can still dramatically boost productivity by implementing and tailoring innovations from elsewhere.

An Inflection Point

Europe now stands at a critical crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's slide in innovation has been gradual. However, if it fails to take bold steps to address its structural weaknesses, today's slow erosion could turn into a rapid and permanent loss of world influence.