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The recent US security policy document presents a misguided view of the European Union. The document asserts that open-border policies and so-called "woke" policies represent an existential threat to the continent's identity. Yet, this perspective rests on a fundamental misinterpretation of the situation. The true danger facing the EU is not cultural but technological and economic backwardness.

The Stark Economic Gap Separating the US and Europe

Statistics reveal a stark picture. Between 2008 and 2023, American economic output grew by 87%, compared to a paltry 13.5% growth for the European Union. Over this period, EU GDP per capita fell from 76.5% to just 50% of the American figure. Strikingly, even the poorest US state now boasts a higher per capita income than major European economies like Italy and France.

Today, roughly 50% of the world’s 50 largest technology firms are American, while a mere four are from Europe.

The Technological Shortfall: A Critical Problem

The growing disparity is driven by stronger productivity growth in the US, largely due to technological innovation and better use of resources. The scene of world technology leadership is decidedly US-centric. Over the past five decades, 241 US firms have scaled into companies valued at over ten billion dollars, compared with just 14 in the European continent.

This gap prompts a pressing question: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU positioned? Most analysts concede it is largely a contest between two involving the US and China, with Europe entering at a significant disadvantage.

Root Causes of the Continent's Innovation Gap

A number of key reasons explain this technological divide.

• Venture Capital: The United States has a much more robust and agile network for funding startups. Europe has yet to establish a genuine unified investment market, a factor that limits the scale of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hinder Europe. A US startup can introduce a product under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population, is split among twenty-seven separate regimes, creating significant internal barriers.
• Cultural Attitudes: Views on risk-taking vary greatly. In some EU nations, a startup's collapse was once met with stigma, whereas in the US, it is often considered a valuable lesson.
• Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's chronic underinvestment in defense has eroded its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

In spite of these hurdles, there are causes for optimism. European leaders are growing more conscious of the existential challenge and have started to propose substantial change. Key analyses on European competitiveness and the internal market highlight the necessity of major reforms.

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

Europe still possesses considerable strengths: high-quality workforce, excellent education systems, and world-class labs. Alongside a large internal market and substantial household savings, these foundations have the potential to unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in developing cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring advancements from other regions.

A Critical Juncture

The European Union now faces a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's technological decline has been steady. However, if it fails to take bold steps to address its structural weaknesses, today's gradual weakening could give way to a sudden and irreversible loss of world influence.