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Donald Trump's national security strategy presents a misguided view of the European Union. The document asserts that open-border policies and so-called "progressive" policies pose an grave threat to the continent's identity. Yet, this argument is based on a fundamental misreading of the reality. The true danger facing the EU is not societal but economic and technological backwardness.

A Glaring Economic Divide Between the US and Europe

The data paint a stark picture. From 2008 and 2023, American economic output grew by 87%, compared to a mere 13.5% increase for the European Union. During this period, EU GDP per capita dropped from over three-quarters to just half of the American figure. Remarkably, even the poorest US state now boasts a higher per capita income than major European economies like Italy and France.

Today, about 50% of the world’s top fifty technology firms are American, while only four are from Europe.

The Technological Deficit: A Critical Problem

The growing economic gap stems from stronger efficiency gains in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology dominance is overwhelmingly American. Over the past fifty years, hundreds of American startups have grown into companies valued at more than ten billion dollars, compared with only fourteen in Europe.

This gap prompts a pressing question: In the race for tomorrow's sectors like AI, semiconductors, and fusion energy, where does the EU stand? Experts widely agree it is largely a contest between two involving the United States and China, with Europe entering at a clear handicap.

Underlying Factors of the Continent's Technological Lag

A number of key factors explain this innovation chasm.

• Financing Ecosystem: The US boasts a much more robust and agile network for financing new ventures. Europe has yet to establish a true unified investment market, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hinder Europe. A American entrepreneur can launch a product under a single regulatory framework to access a market of hundreds of millions. The European Union, despite a bigger population size, is divided among twenty-seven different national regimes, creating huge internal barriers.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was historically viewed with penalties, whereas in the United States, it is often seen as a badge of experience.
• Defense Spending: The US benefits from a deeply integrated innovation pipeline linking defense and academia. Europe's chronic underinvestment in military capabilities has eroded its ability in breakthrough innovation.

The Road Ahead: Reasons for Cautious Optimism

In spite of these hurdles, one can find causes for hope. European leaders are increasingly aware of the existential challenge and have started to advance serious reform. Notable analyses on EU competitiveness and the internal market point to the necessity of major reforms.

With the right policies and regulatory reforms, Europe's strengths might enable much higher levels of business-led breakthroughs.

Europe retains significant strengths: skilled human capital, top-tier schools and universities, and premier labs. Alongside a vast domestic consumer base and substantial household savings, these elements could unleash a new wave of venture creation.

Crucially, even if Europe does not take the lead in developing cutting-edge tech, it can still significantly boost productivity by adopting and adapting innovations from elsewhere.

A Critical Juncture

The European Union now stands at a decisive moment. To paraphrase a famous line, decline often happens "slowly, then all at once". To date, Europe's technological decline has been steady. However, if it fails to take decisive action to address its deep-seated problems, today's slow erosion could turn into a rapid and permanent loss of world influence.