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Donald Trump's national security strategy presents a misguided assessment of the European Union. The document asserts that open-border policies and so-called "progressive" policies pose an existential risk to European civilization. However, this perspective rests on a serious misinterpretation of the situation. The true danger facing Europe is not cultural but technological and economic lag.

A Glaring Growth Gap Between the US and Europe

Statistics reveal a stark picture. Between 2008 and 2023, American economic output surged by eighty-seven percent, compared to a mere thirteen and a half percent growth for the EU. Over this time, European income per person dropped from over three-quarters to just 50% of the American figure. Remarkably, even Mississippi now has a greater average income than several leading European economies like Italy and France.

Today, about half of the global 50 largest tech companies are US-based, while a mere four are from Europe.

The Technological Deficit: A Critical Problem

The growing economic gap stems from stronger efficiency gains in the United States, fueled by breakthroughs and higher total factor productivity. The scene of global tech leadership is decidedly American. Over the past fifty years, 241 US firms have scaled into enterprises valued at over $10bn, versus only fourteen in the European continent.

This disparity raises a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU stand? Experts widely concede it is largely a contest between two involving the US and China, with European nations starting at a clear disadvantage.

Root Causes of Europe's Technological Lag

A number of key factors explain this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. Europe still lacks a true unified investment market, a factor that caps the scale of new firms.
• Regulatory Fragmentation: Excessive and fragmented regulation hamper European business. A American entrepreneur can launch a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a larger population size, is divided among twenty-seven separate regimes, creating significant internal barriers.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In some EU nations, business failure was once viewed with penalties, whereas in the United States, it is often considered a valuable lesson.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has weakened its capacity for breakthrough innovation.

The Road Ahead: Grounds for Cautious Optimism

In spite of these challenges, one can find causes for optimism. Policymakers are increasingly aware of the existential challenge and have started to advance serious reform. Key analyses on European competitiveness and the internal market highlight the need for major changes.

Given appropriate policies and rule changes, these assets could support far greater degrees of business-led breakthroughs.

The continent still possesses considerable advantages: high-quality workforce, excellent education systems, and premier labs. Coupled with a large internal market and substantial household savings, these elements have the potential to unleash a new wave of investment and entrepreneurship.

Crucially, even if the EU does not become the leader in creating cutting-edge technologies, it can still dramatically increase productivity by implementing and tailoring advancements from elsewhere.

An Inflection Point

Europe now stands at a decisive moment. To paraphrase a famous line, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. But, without decisive action to tackle its deep-seated problems, today's gradual weakening could turn into a rapid and permanent loss of world influence.