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Donald Trump's national security strategy presents a flawed assessment of Europe. The document asserts that open-border policies and so-called "progressive" policies pose an existential threat to European civilization. However, this argument rests on a serious misreading of the reality. The actual challenge confronting the EU is not societal but economic and technological backwardness.

A Glaring Growth Gap Between the US and Europe

Statistics reveal a stark contrast. From 2008 and 2023, US GDP grew by eighty-seven percent, compared to a mere 13.5% increase for the European Union. Over this period, EU GDP per capita dropped from 76.5% to just 50% of the American figure. Strikingly, even Mississippi now boasts a greater average income than major European economies like Italy and France.

Today, about half of the global top fifty technology firms are American, while a mere four are from Europe.

The Technological Deficit: A Critical Problem

This widening economic gap stems from superior productivity growth in the United States, largely due to breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly American. In the last five decades, 241 US firms have scaled into enterprises valued at over $10bn, compared with only fourteen in Europe.

This disparity prompts a vital question: In the race for future industries like semiconductors, AI, and fusion energy, what is Europe stand? Experts widely concede it is largely a contest between two involving the United States and China, with European nations entering at a significant handicap.

Root Causes of Europe's Innovation Gap

A number of key factors explain this technological divide.

• Venture Capital: The US boasts a much more robust and agile system for financing new ventures. The EU still lacks a true capital markets union, which limits the scale of new firms.
• Bureaucratic Hurdles: Complex and divided rules hamper European business. A US startup can introduce a product under a single regulatory framework to access a market of over 330 million. The European Union, despite a larger population size, is divided among 27 separate regimes, creating significant internal barriers.
• Mindset Differences: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the United States, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in military capabilities has eroded its capacity for breakthrough innovation.

A Path Forward: Reasons for Cautious Optimism

Despite these hurdles, there are reasons for optimism. European leaders are growing more conscious of the existential challenge and have started to propose serious reform. Key reports on European competitiveness and the internal market point to the need for major reforms.

Given appropriate policies and regulatory reforms, Europe's strengths might enable much higher degrees of business-led breakthroughs.

Europe retains considerable strengths: high-quality human capital, top-tier education systems, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these foundations have the potential to unleash a surge of investment and entrepreneurship.

Crucially, even if the EU does not take the lead in creating cutting-edge tech, it can still dramatically increase productivity by adopting and adapting innovations from other regions.

An Inflection Point

Europe now stands at a decisive crossroads. As the saying goes, decline often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. But, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could give way to a rapid and permanent decline in global economic relevance.