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The recent US national security strategy offers a misguided view of the European Union. The document asserts that open-border policies and what it terms "progressive" agendas represent an grave threat to the continent's identity. However, this perspective rests on a serious misreading of the situation. The true challenge confronting the EU is not cultural but technological and economic backwardness.

The Stark Growth Gap Separating the US and Europe

Statistics paint a stark picture. From 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% 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 has a greater average income than several leading EU nations like Italy and France.

Today, roughly half of the global 50 largest tech companies are American, while only four are European.

The Innovation Shortfall: The Core Problem

This widening disparity stems from superior productivity growth in the United States, fueled by technological innovation and better use of resources. The scene of global tech dominance is decidedly American. Over the past fifty years, 241 US firms have scaled into enterprises valued at more than $10bn, compared with just 14 in the European continent.

This gap raises a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU stand? Most analysts agree it is largely a two-horse race between the US and China, with Europe starting at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

A number of key reasons explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. The EU has yet to establish a genuine capital markets union, which caps the growth potential of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can introduce a service under one set of laws to access a market of over 330 million. The EU, despite a bigger population, is split among 27 separate regimes, creating significant market obstacles.
• Cultural Attitudes: Views on risk-taking vary greatly. In parts of Europe, a startup's collapse was once viewed with stigma, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The US benefits from a tightly woven academic-military-industrial complex. The continent's chronic underinvestment in defense has eroded its capacity for pioneering research.

A Path Forward: Grounds for Cautious Optimism

Despite these challenges, one can find causes for hope. European leaders are increasingly aware of the severe threat and have started to propose serious reform. Key analyses on EU competitiveness and the internal market point to the necessity of sweeping changes.

With the right policies and rule changes, these assets could support much higher levels of commercial innovation.

Europe retains significant advantages: high-quality workforce, excellent education systems, and world-class research institutions. Coupled with a vast domestic consumer base and high savings rates, these elements have the potential to unleash a surge of venture creation.

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

A Critical Juncture

The European Union now stands at a critical moment. As the saying goes, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. But, if it fails to take bold steps to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.