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Donald Trump's security policy document offers a misguided view of the European Union. The document asserts that open-border policies and what it terms "woke" policies represent an existential risk to the continent's identity. However, this perspective is based on a serious misreading of the reality. The actual challenge facing the EU is not cultural but technological and economic backwardness.

A Glaring Growth Divide Separating Europe and the US

The data reveal a stark contrast. From 2008 and 2023, US GDP grew by eighty-seven percent, compared to a mere thirteen and a half percent increase for the European Union. Over this period, European income per person fell from 76.5% to just half of the US level. Strikingly, even the poorest US state now boasts a higher per capita income than major European economies like France and Italy.

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

The Technological Shortfall: The Core Problem

The growing disparity is driven by stronger efficiency gains in the United States, fueled by breakthroughs and better use of resources. The scene of global tech dominance is decidedly US-centric. Over the past fifty years, hundreds of American startups have grown into enterprises valued at over ten billion dollars, compared with just 14 in the European continent.

This disparity prompts a vital issue: As the competition for tomorrow's sectors like semiconductors, AI, and fusion energy, where does Europe stand? Most analysts concede it is essentially a contest between two involving the US and China, with European nations starting at a significant disadvantage.

Root Causes of Europe's Technological Lag

A number of major factors explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and agile system for funding startups. The EU still lacks a true capital markets union, which caps the scale of new firms.
• Regulatory Fragmentation: Excessive and fragmented regulation hamper Europe. A US startup can launch a product under one set of laws to access a market of over 330 million. The European Union, despite a larger population size, is split among 27 separate regimes, creating huge internal barriers.
• Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
• Military Investment: The United States enjoys a tightly woven innovation pipeline linking defense and academia. Europe's chronic underinvestment in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these challenges, there are causes for hope. Policymakers are increasingly aware of the existential challenge and have begun to advance substantial change. Key reports on European competitiveness and the internal market point to the necessity of sweeping changes.

With the right incentives and rule changes, Europe's strengths might enable much higher degrees of business-led breakthroughs.

The continent retains considerable advantages: skilled human capital, excellent schools and universities, and premier research institutions. Alongside a large internal market and high savings rates, these elements have the potential to trigger a surge of investment and entrepreneurship.

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

An Inflection Point

Europe now faces a critical crossroads. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. But, without decisive action to tackle its structural weaknesses, today's gradual weakening could give way to a rapid and permanent decline in global economic relevance.