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Donald Trump's security policy document offers a flawed assessment of Europe. It claims that open-border policies and what it terms "woke" agendas pose an grave threat to European civilization. However, this perspective rests on a fundamental misreading of the reality. The true challenge facing the EU is not societal but technological and economic backwardness.

The Stark Economic Gap Between the US and Europe

Statistics paint a stark contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent growth for the European Union. During this period, European income per person dropped from 76.5% to just 50% of the US level. Remarkably, even the poorest US state now boasts a greater average income than major EU nations like France and Italy.

Today, about 50% of the world’s 50 largest tech companies are US-based, while a mere four are European.

The Technological Deficit: The Core Question

The growing economic gap is driven by stronger efficiency gains in the US, largely due to technological innovation and higher total factor productivity. The landscape of global tech dominance is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have grown into companies valued at more than ten billion dollars, versus just 14 in the European continent.

This gap raises a pressing issue: As the competition for future industries like semiconductors, AI, and fusion energy, what is the EU stand? Most analysts concede it is largely a two-horse race involving the US and China, with Europe starting at a clear handicap.

Underlying Factors of the Continent's Innovation Gap

A number of major reasons explain this technological divide.

• Financing Ecosystem: The US boasts a much more robust and more dynamic network for financing new ventures. Europe has yet to establish a genuine capital markets union, which limits the growth potential of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hinder European business. A American entrepreneur can introduce a service under a single regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population size, is divided among 27 different national systems, creating huge internal barriers.
• Mindset Differences: Views on risk-taking differ sharply. In some EU nations, a startup's collapse was once viewed with stigma, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its capacity for pioneering research.

The Road Ahead: Reasons for Hopefulness

Despite these challenges, one can find causes for optimism. European leaders are growing more conscious of the existential challenge and have begun to propose substantial change. Notable analyses on EU competitiveness and the internal market point to the need for major changes.

Given appropriate incentives and rule changes, Europe's strengths could support far greater levels of commercial innovation.

Europe still possesses considerable strengths: high-quality workforce, excellent education systems, and world-class labs. Coupled with a large internal market and high savings rates, these foundations have the potential to unleash a new wave of venture creation.

Importantly, even if Europe does not take the lead in creating cutting-edge technologies, it can still significantly increase economic output by adopting and adapting advancements from elsewhere.

An Inflection Point

The European Union now stands at a critical crossroads. As the saying goes, economic erosion often happens "gradually and then suddenly". To date, Europe's technological decline has been steady. However, without bold steps to address its deep-seated problems, today's gradual weakening could give way to a rapid and permanent loss of global economic relevance.