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Donald Trump's security policy document offers a flawed view of Europe. It claims that open-border policies and what it terms "progressive" agendas pose an existential risk to European civilization. Yet, this perspective rests on a fundamental misreading of the reality. The actual challenge facing Europe is not societal but economic and technological lag.

A Glaring Economic Gap Separating Europe and the US

Statistics paint a stark contrast. From 2008 and 2023, American economic output grew by 87%, while a paltry thirteen and a half percent growth for the European Union. Over this time, European income per person fell from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now boasts a higher per capita income than major EU nations like Italy and France.

Today, roughly 50% of the global top fifty tech companies are US-based, while a mere four are European.

The Technological Shortfall: The Core Problem

This widening economic gap stems from stronger productivity growth in the United States, largely due to breakthroughs and better use of resources. The scene of world technology leadership is overwhelmingly American. Over the past fifty years, hundreds of American startups have scaled into enterprises valued at more than $10bn, compared with only fourteen in the European continent.

This disparity prompts a pressing question: As the competition for future industries like AI, semiconductors, and quantum computing, what is the EU positioned? Experts widely agree it is essentially a contest between two involving the US and China, with Europe starting at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

A number of key factors explain this innovation chasm.

• Venture Capital: The United States has a far deeper and more dynamic system for financing new ventures. Europe has yet to establish a genuine capital markets union, which limits the scale of new firms.
• Bureaucratic Hurdles: Excessive and fragmented rules hamper European business. A American entrepreneur can launch a product under a single regulatory framework to access a market of over 330 million. The European Union, despite a bigger population size, is divided among 27 different national systems, creating significant internal barriers.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, a startup's collapse was historically met with penalties, whereas in the United States, it is often considered a valuable lesson.
• Military Investment: The US benefits from a deeply integrated innovation pipeline linking defense and academia. Europe's long-term lack of spending in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Cautious Optimism

Despite these hurdles, one can find causes for hope. Policymakers are growing more conscious of the existential challenge and have begun to propose substantial change. Notable reports on EU competitiveness and the single market highlight the need for major changes.

With the right policies and regulatory reforms, these assets could support much higher levels of business-led breakthroughs.

The continent retains significant strengths: skilled workforce, excellent schools and universities, and premier research institutions. Alongside a large internal market and high savings rates, these elements have the potential to unleash a surge of venture creation.

Crucially, even if the EU does not take the lead in creating next-generation tech, it can still dramatically boost productivity by adopting and adapting advancements from elsewhere.

A Critical Juncture

The European Union now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, the continent's slide in innovation has been gradual. However, without decisive action to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent decline in global economic relevance.