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The recent US security policy document presents a misguided assessment of Europe. The document asserts that unrestrained immigration and so-called "progressive" agendas pose an existential risk to European civilization. However, this argument is based on a fundamental misinterpretation of the situation. The actual danger confronting Europe is not cultural but technological and economic lag.

The Stark Growth Divide Separating Europe and the US

Statistics paint a sobering 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 time, European income per person fell from 76.5% to just 50% of the US level. Strikingly, even the poorest US state now boasts a greater average income than major EU nations like France and Italy.

Today, about 50% of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Shortfall: A Critical Problem

This widening economic gap is driven by stronger efficiency gains in the US, largely due to technological innovation and better use of resources. The scene of world technology leadership is decidedly US-centric. In the last five decades, hundreds of American startups have scaled into companies valued at over ten billion dollars, versus just 14 in Europe.

This gap prompts a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is Europe positioned? Experts widely agree it is largely a contest between two between the United States and China, with European nations entering at a significant handicap.

Underlying Factors of the Continent's Technological Lag

A number of major reasons account for this technological divide.

• Venture Capital: The US boasts a far deeper and more dynamic network for financing new ventures. Europe has yet to establish a true capital markets union, which caps the growth potential of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented rules hinder Europe. A US startup can launch a service under one set of laws to access a market of hundreds of millions. The EU, despite a larger population, is split among twenty-seven different national regimes, creating huge market obstacles.
• Mindset Differences: Attitudes toward entrepreneurial failure vary greatly. In some EU nations, a startup's collapse was once viewed with penalties, whereas in the United States, it is often considered a badge of experience.
• Military Investment: The United States enjoys a tightly woven innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its capacity for pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these hurdles, one can find causes for hope. Policymakers are growing more conscious of the severe threat and have begun to advance serious reform. Key analyses on EU competitiveness and the internal market point to the necessity of sweeping changes.

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

The continent still possesses significant strengths: skilled workforce, excellent schools and universities, and premier labs. Coupled with a large internal market and high savings rates, these elements could unleash a surge of investment and entrepreneurship.

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

An Inflection Point

The European Union now stands at a critical moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's technological decline has been steady. But, without decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in global economic relevance.