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The recent US national security strategy offers a misguided assessment of Europe. It claims that open-border policies and so-called "woke" agendas pose an grave risk to European civilization. Yet, this perspective is based on a fundamental misinterpretation of the reality. The true danger confronting the EU is not cultural but economic and technological backwardness.

The Stark Economic Divide Between Europe and the US

The data reveal a sobering picture. From 2008 and 2023, American economic output grew by 87%, compared to a paltry thirteen and a half percent increase for the European Union. During this period, European income per person dropped from over three-quarters to just half of the American figure. Remarkably, even Mississippi now has a higher per capita income than several leading EU nations like France and Italy.

Today, about 50% of the world’s top fifty technology firms are US-based, while a mere four are European.

The Innovation Shortfall: A Critical Question

The growing economic gap is driven by superior efficiency gains in the United States, largely due to technological innovation and better use of resources. The scene of world technology dominance is overwhelmingly American. Over the past five decades, 241 US firms have scaled into enterprises valued at over ten billion dollars, compared with only fourteen in the European continent.

This gap prompts a pressing issue: In the race for future industries like semiconductors, AI, and fusion energy, where does Europe positioned? Experts widely agree it is largely a contest between two involving the United States and China, with Europe starting at a clear handicap.

Root Causes of Europe's Innovation Gap

Several major factors account for this technological divide.

• Financing Ecosystem: The US boasts a much more robust and agile system for funding startups. The EU has yet to establish a genuine capital markets union, a factor that limits the scale of new firms.
• Regulatory Fragmentation: Complex and divided regulation hamper Europe. A American entrepreneur can launch a product under one regulatory framework to access a consumer base of over 330 million. The European Union, despite a bigger population, is divided among 27 separate systems, creating significant internal barriers.
• Cultural Attitudes: Views on entrepreneurial failure differ sharply. In some EU nations, business failure was once viewed with stigma, whereas in the United States, it is often seen as a valuable lesson.
• Military Investment: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. Europe's long-term lack of spending in defense has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Cautious Optimism

Despite these challenges, one can find reasons for optimism. European leaders are increasingly aware of the severe threat and have started to propose substantial change. Notable reports on EU competitiveness and the single market highlight the need for major reforms.

Given appropriate incentives and regulatory reforms, Europe's strengths might enable far greater degrees of commercial innovation.

Europe still possesses significant strengths: skilled workforce, excellent schools and universities, and world-class labs. Alongside a vast domestic consumer base and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.

Crucially, even if the EU does not become the leader in creating cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring advancements 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 technological decline has been gradual. But, without decisive action to tackle its deep-seated problems, today's slow erosion could give way to a rapid and permanent loss of world influence.