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The recent US national security strategy offers a misguided assessment of Europe. It claims that unrestrained immigration and what it terms "progressive" agendas pose an grave threat to the continent's identity. Yet, this perspective rests on a serious misinterpretation of the situation. The actual challenge confronting the EU is not societal but economic and technological lag.

A Glaring Growth Divide Between the US and Europe

Statistics paint a sobering contrast. From 2008 and 2023, American economic output grew by eighty-seven percent, compared to a mere 13.5% growth for the European Union. During this time, European income per person fell from over three-quarters to just half of the American figure. Strikingly, even Mississippi now boasts a greater average income than major European economies like France and Italy.

Today, about half of the global top fifty tech companies are American, while only four are from Europe.

The Technological Shortfall: The Core Problem

This widening economic gap is driven by stronger efficiency gains in the United States, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly US-centric. Over the past five decades, 241 US firms have scaled into enterprises valued at over $10bn, versus just 14 in Europe.

This disparity raises a pressing issue: As the competition for future industries like AI, semiconductors, and fusion energy, where does Europe positioned? Experts widely concede it is largely a contest between two between the United States and China, with Europe starting at a significant handicap.

Root Causes of Europe's Technological Lag

Several major reasons account for this technological divide.

• Venture Capital: The US boasts a far deeper and agile system for financing new ventures. The EU still lacks a true unified investment market, a factor that caps the scale of new firms.
• Regulatory Fragmentation: Complex and divided rules hinder European business. 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 twenty-seven separate regimes, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, business failure was once met with stigma, whereas in the United States, it is often considered a badge of experience.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in defense has weakened its capacity for pioneering research.

The Road Ahead: Reasons for Hopefulness

In spite of these hurdles, there are causes for hope. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Notable analyses on EU competitiveness and the internal market highlight the need for major reforms.

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

Europe retains significant advantages: high-quality human capital, top-tier schools and universities, and world-class labs. Alongside a large internal market and high savings rates, these foundations could trigger a surge of investment and entrepreneurship.

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

A Critical Juncture

Europe now faces a critical crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, Europe's technological decline has been gradual. However, if it fails to take bold steps to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent loss of world influence.