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The recent US national security strategy presents a misguided assessment of the European Union. The document asserts that open-border policies and what it terms "progressive" policies represent an grave threat to European civilization. However, this perspective rests on a fundamental misinterpretation of the situation. The actual danger confronting the EU is not societal but technological and economic lag.

A Glaring Growth Gap Separating Europe and the US

The data paint a sobering contrast. From 2008 and 2023, American economic output grew by 87%, compared to a mere 13.5% growth for the European Union. Over this time, EU GDP per capita dropped from over three-quarters to just 50% of the American figure. Strikingly, even Mississippi now boasts a higher per capita income than major EU nations like France and Italy.

Currently, roughly half of the global top fifty technology firms are American, while only four are European.

The Technological Shortfall: A Critical Question

The growing economic gap stems from superior productivity growth in the United States, fueled by technological innovation and better use of resources. The scene of world technology dominance is decidedly American. Over the past fifty years, hundreds of American startups have grown into companies valued at more than $10bn, versus just 14 in the European continent.

This gap raises a vital question: As the competition for future industries like semiconductors, AI, and fusion energy, what is Europe positioned? Most analysts agree it is essentially a two-horse race between the United States and China, with Europe entering at a clear handicap.

Root Causes of the Continent's Innovation Gap

A number of major factors account for this technological divide.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. Europe still lacks a genuine unified investment market, which limits the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hamper Europe. A US startup can launch a product under a single set of laws to access a market of over 330 million. The EU, despite a larger population, is divided among 27 different national systems, creating huge internal barriers.
• Mindset Differences: Attitudes toward risk-taking differ sharply. In parts of Europe, a startup's collapse was once met 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 academic-military-industrial complex. Europe's chronic underinvestment in military capabilities has eroded its ability in pioneering research.

A Path Forward: Grounds for Cautious Optimism

In spite of these challenges, one can find reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to advance substantial change. Key analyses on EU competitiveness and the single market highlight the need for major reforms.

With the right incentives and regulatory reforms, these assets might enable far greater degrees of business-led breakthroughs.

Europe retains considerable advantages: high-quality workforce, excellent education systems, and world-class labs. Coupled with a large internal market and high savings rates, these elements have the potential to trigger a surge of investment and entrepreneurship.

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

A Critical Juncture

The European Union now stands at a critical moment. As the saying goes, economic erosion often happens "gradually and then suddenly". So far, Europe's slide in innovation has been gradual. But, without bold steps to address its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in world influence.