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Donald Trump's security policy document offers a misguided assessment of the European Union. It claims that open-border policies and so-called "progressive" policies pose an grave threat to European civilization. However, this perspective is based on a fundamental misreading of the reality. The actual danger facing the EU is not cultural but economic and technological lag.

The Stark Growth Divide Between Europe and the US

The data reveal a stark picture. From 2008 and 2023, American economic output surged by eighty-seven percent, compared to a mere thirteen and a half percent increase for the EU. During this time, European income per person dropped from 76.5% to just half of the US level. Strikingly, even the poorest US state now has a higher per capita income than several leading European economies like France and Italy.

Currently, about 50% of the world’s top fifty tech companies are American, while a mere four are from Europe.

The Innovation Deficit: A Critical Problem

This widening disparity is driven by stronger efficiency gains in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is overwhelmingly American. In the last five decades, hundreds of American startups have grown into enterprises valued at more than $10bn, versus just 14 in Europe.

This gap raises a pressing issue: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU stand? Most analysts concede it is essentially a two-horse race between the United States and China, with Europe starting at a significant handicap.

Root Causes of Europe's Innovation Gap

Several key reasons account for this innovation chasm.

• Financing Ecosystem: The United States has a far deeper and more dynamic network for financing new ventures. The EU still lacks a true unified investment market, which caps the growth potential of emerging companies.
• Bureaucratic Hurdles: Complex and divided rules hinder European business. A American entrepreneur can introduce a service under a single set of laws to access a market of hundreds of millions. The EU, despite a larger population size, is split among 27 separate regimes, creating significant market obstacles.
• Cultural Attitudes: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was once viewed with stigma, 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 long-term lack of spending in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

In spite of these hurdles, there are reasons for hope. Policymakers are increasingly aware of the severe threat and have begun to propose substantial change. Key analyses on EU competitiveness and the single market highlight the need for sweeping reforms.

Given appropriate incentives and regulatory reforms, Europe's strengths could support much higher levels of commercial innovation.

Europe still possesses considerable advantages: high-quality human capital, top-tier schools and universities, and premier labs. Alongside a vast domestic consumer base and substantial household savings, these foundations have the potential to unleash a surge of venture creation.

Importantly, even if the EU does not become the leader in creating cutting-edge technologies, it can still dramatically boost productivity by implementing and tailoring innovations from other regions.

A Critical Juncture

The European Union now faces a critical moment. To paraphrase a famous line, decline often happens "gradually and then suddenly". So far, Europe's slide in innovation has been steady. But, without bold steps to tackle its deep-seated problems, today's gradual weakening could turn into a sudden and irreversible decline in world influence.