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The recent US national security strategy presents a misguided view of the European Union. The document asserts that unrestrained immigration and what it terms "progressive" agendas pose an grave risk to European civilization. However, this argument rests on a fundamental misreading of the reality. The true danger facing Europe is not cultural but technological and economic lag.

A Glaring Growth Gap Between Europe and the US

The data reveal a sobering picture. Between 2008 and 2023, American economic output surged by 87%, compared to a paltry 13.5% increase for the European Union. Over this period, European income per person fell from over three-quarters to just 50% of the American figure. Remarkably, even Mississippi now has a greater average income than major European economies like Italy and France.

Today, about half of the global 50 largest technology firms are American, while only four are European.

The Innovation Deficit: A Critical Question

The growing disparity stems from superior efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly American. Over the past five decades, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with just 14 in the European continent.

This disparity raises a vital issue: In the race for future industries like semiconductors, AI, and quantum computing, what is Europe positioned? Most analysts agree it is largely a contest between two involving the United States and China, with European nations starting at a significant handicap.

Underlying Factors of the Continent's Innovation Gap

Several major factors account for this innovation chasm.

• Venture Capital: The United States has a much more robust and more dynamic network for financing new ventures. The EU still lacks a genuine capital markets union, which caps the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A US startup can introduce a service under one regulatory framework to access a consumer base of hundreds of millions. The EU, despite a bigger population size, is divided among 27 different national regimes, creating huge market obstacles.
• Cultural Attitudes: Views on entrepreneurial failure differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the US, 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 long-term lack of spending in military capabilities has weakened its ability in pioneering research.

The Road Ahead: Reasons for Hopefulness

In spite of these challenges, there are causes for optimism. European leaders are increasingly aware of the severe threat and have started to advance substantial change. Key analyses on European competitiveness and the internal market highlight the necessity of sweeping changes.

Given appropriate incentives and rule changes, these assets could support much higher levels of commercial innovation.

The continent retains significant strengths: skilled human capital, excellent education systems, and world-class labs. Coupled with a vast domestic consumer base and high savings rates, these foundations could unleash a new wave of investment and entrepreneurship.

Crucially, even if Europe does not take the lead in developing cutting-edge technologies, it can still dramatically increase productivity by adopting and adapting innovations from elsewhere.

A Critical Juncture

Europe now stands at a decisive crossroads. To paraphrase a famous line, 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 address its deep-seated problems, today's slow erosion could give way to a rapid and permanent decline in global economic relevance.