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The recent US national security strategy offers a flawed assessment of the European Union. It claims that open-border policies and so-called "progressive" policies represent an existential threat to European civilization. Yet, this argument is based on a fundamental misreading of the situation. The true danger confronting Europe is not societal but technological and economic backwardness.

A Glaring Economic Divide Separating the US and Europe

Statistics reveal a sobering contrast. Between 2008 and 2023, US GDP surged by 87%, while a mere thirteen and a half percent growth for the EU. During this period, European income per person fell from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a greater average income than major European economies like Italy and France.

Currently, roughly half of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Shortfall: The Core Problem

This widening disparity stems from stronger efficiency gains in the United States, fueled by breakthroughs and better use of resources. The landscape of global tech dominance is decidedly US-centric. In the last five decades, 241 US firms have scaled into companies valued at over $10bn, versus just 14 in the European continent.

This disparity prompts a pressing issue: As the competition for tomorrow's sectors like semiconductors, AI, and quantum computing, where does the EU stand? Most analysts agree it is essentially a two-horse race between the United States and China, with Europe starting at a clear handicap.

Root Causes of the Continent's Innovation Gap

A number of key reasons account for this technological divide.

• Financing Ecosystem: The US boasts a far deeper and agile network for financing new ventures. The EU still lacks a genuine unified investment market, which caps the growth potential of new firms.
• Bureaucratic Hurdles: Complex and divided rules hamper Europe. A American entrepreneur can launch a product under one regulatory framework to access a market of hundreds of millions. The EU, despite a larger population, is divided among 27 separate systems, creating significant market obstacles.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In some EU nations, business failure was historically viewed with penalties, whereas in the United States, it is often seen as a valuable lesson.
• Military Investment: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in defense has eroded its ability in breakthrough innovation.

A Path Forward: Reasons for Hopefulness

Despite these hurdles, there are reasons for hope. European leaders are growing more conscious of the severe threat and have begun to advance serious reform. Key analyses on EU competitiveness and the single market point to the necessity of major reforms.

Given appropriate policies and rule changes, these assets could support far greater degrees of business-led breakthroughs.

Europe still possesses considerable strengths: high-quality workforce, top-tier education systems, and world-class research institutions. Coupled with a large internal market and substantial household savings, these elements have the potential to unleash a surge of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in creating cutting-edge technologies, it can still significantly increase productivity by implementing and tailoring innovations from other regions.

An Inflection Point

The European Union now stands at a critical crossroads. As the saying goes, decline often happens "slowly, then all at once". So far, Europe's slide in innovation has been steady. However, if it fails to take decisive action to address its structural weaknesses, today's slow erosion could give way to a rapid and permanent decline in global economic relevance.