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The recent US security policy document presents a flawed view of the European Union. The document asserts that open-border policies and so-called "progressive" agendas pose an grave threat to the continent's identity. Yet, this argument rests on a fundamental misreading of the situation. The true challenge facing Europe is not societal but technological and economic lag.

A Glaring Growth Divide Separating the US and Europe

Statistics reveal a stark contrast. From 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% growth for the EU. Over this time, EU GDP per capita fell from 76.5% to just half of the US level. Remarkably, even Mississippi now boasts a higher per capita income than major European economies like Italy and France.

Currently, about 50% of the global top fifty tech companies are American, while only four are from Europe.

The Technological Shortfall: The Core Question

This widening economic gap stems from stronger productivity growth in the US, largely due to technological innovation and higher total factor productivity. The landscape of global tech leadership is overwhelmingly American. In the last fifty years, 241 US firms have grown into enterprises valued at over $10bn, compared with just 14 in Europe.

This gap raises a vital issue: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU positioned? Experts widely concede it is largely a contest between two involving the US and China, with Europe starting at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

Several key factors account for this technological divide.

• Financing Ecosystem: The United States has a far deeper and agile network for funding startups. Europe has yet to establish a genuine unified investment market, which caps the scale of new firms.
• Bureaucratic Hurdles: Excessive and fragmented rules hinder Europe. A US startup can introduce a product under a single regulatory framework to access a consumer base of over 330 million. The European Union, despite a larger population, is split among 27 different national systems, creating huge market obstacles.
• Mindset Differences: Views on risk-taking vary greatly. In some EU nations, business failure was historically viewed with penalties, whereas in the US, it is often considered a badge of experience.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has eroded its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these hurdles, one can find reasons for hope. European leaders are increasingly aware of the existential challenge and have begun to advance serious reform. Notable analyses on European competitiveness and the single market point to the necessity of sweeping reforms.

With the right incentives and rule changes, Europe's strengths could support much higher levels of business-led breakthroughs.

Europe still possesses considerable advantages: skilled human capital, top-tier education systems, and premier labs. Alongside a large internal market and substantial household savings, these foundations could trigger a new wave of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in developing next-generation technologies, it can still significantly increase economic output by adopting and adapting innovations from other regions.

An Inflection Point

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