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The recent US security policy document offers a flawed assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies pose an grave risk to European civilization. Yet, this perspective is based on a fundamental misreading of the situation. The true danger confronting the EU is not societal but technological and economic backwardness.

The Stark Growth Divide Between Europe and the US

The data paint a stark contrast. Between 2008 and 2023, American economic output grew by eighty-seven percent, while a mere thirteen and a half percent increase for the EU. Over this time, European income per person dropped from over three-quarters to just 50% of the US level. Remarkably, even the poorest US state now has a higher per capita income than major European economies like Italy and France.

Currently, about half of the global top fifty technology firms are American, while a mere four are European.

The Innovation Shortfall: The Core Question

This widening economic gap stems from stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology leadership is decidedly American. In the last fifty years, 241 US firms have scaled into companies valued at over $10bn, versus only fourteen in the European continent.

This disparity prompts a pressing question: As the competition for future industries like semiconductors, AI, and quantum computing, what is the EU stand? Most analysts agree it is essentially a contest between two involving the United States and China, with Europe entering at a clear handicap.

Root Causes of Europe's Innovation Gap

Several key reasons account for this innovation chasm.

• Financing Ecosystem: The US boasts a much more robust and more dynamic network for financing new ventures. The EU still lacks a genuine unified investment market, which limits the growth potential of new firms.
• Regulatory Fragmentation: Complex and divided regulation hamper European business. A US startup can introduce a product under a single regulatory framework to access a consumer base of hundreds of millions. The EU, despite a larger population, is divided among 27 separate regimes, creating huge market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, a startup's collapse was once met with penalties, whereas in the United States, it is often seen as a badge of experience.
• Defense Spending: The United States enjoys a tightly woven innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its ability in breakthrough innovation.

A Path Forward: Grounds for Hopefulness

In spite of these challenges, there are reasons for optimism. Policymakers are growing more conscious of the existential challenge and have begun to advance substantial change. Notable reports on EU competitiveness and the single market point to the need for major changes.

With the right incentives and regulatory reforms, these assets could support far greater levels of commercial innovation.

Europe still possesses considerable advantages: skilled workforce, excellent education systems, and world-class labs. Coupled with a vast domestic consumer base and high savings rates, these foundations have the potential to trigger a surge of venture creation.

Importantly, even if Europe does not become the leader in developing next-generation tech, it can still dramatically boost economic output by adopting and adapting advancements from elsewhere.

A Critical Juncture

The European Union now faces a critical moment. As the saying goes, decline often happens "slowly, then all at once". So far, Europe's technological decline has been steady. However, without bold steps to tackle its structural weaknesses, today's slow erosion could give way to a rapid and permanent loss of world influence.