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Donald Trump's national security strategy presents a flawed assessment of the European Union. It claims that unrestrained immigration and what it terms "progressive" agendas pose an existential threat to European civilization. However, this argument is based on a serious misinterpretation of the reality. The true danger facing Europe is not societal but economic and technological backwardness.

A Glaring Growth Gap Between Europe and the US

The data reveal a sobering picture. From 2008 and 2023, US GDP surged by eighty-seven percent, compared to a paltry 13.5% increase for the European Union. During this period, European income per person dropped from over three-quarters to just half 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, roughly 50% of the world’s 50 largest tech companies are US-based, while only four are European.

The Innovation Shortfall: The Core Problem

The growing economic gap stems from superior productivity growth in the United States, fueled by technological innovation and higher total factor productivity. The scene of world technology leadership is decidedly American. In the last five decades, 241 US firms have grown into enterprises valued at more than $10bn, versus only fourteen in the European continent.

This disparity raises a vital issue: In the race for future industries like semiconductors, AI, and fusion energy, where does Europe stand? Most analysts agree it is largely a two-horse race between the US and China, with Europe entering at a significant handicap.

Underlying Factors of the Continent's Technological Lag

A number of key reasons explain this innovation chasm.

• Venture Capital: The United States has a far deeper and agile network for funding startups. The EU has yet to establish a genuine capital markets union, a factor that caps the scale of emerging companies.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can introduce a service under one set of laws to access a consumer base of hundreds of millions. The European Union, despite a larger population size, is split among 27 different national regimes, creating huge internal barriers.
• Cultural Attitudes: Views on entrepreneurial failure vary greatly. In parts of Europe, a startup's collapse was once met with stigma, whereas in the United States, it is often seen as a valuable lesson.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has eroded its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these challenges, one can find causes for optimism. European leaders are growing more conscious of the existential challenge and have started to propose serious reform. Key analyses on EU competitiveness and the single market point to the need for major reforms.

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

Europe still possesses considerable advantages: high-quality workforce, excellent schools and universities, and world-class research institutions. Coupled with a large internal market and substantial household savings, these elements could unleash a surge of investment and entrepreneurship.

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

An Inflection Point

The European Union now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "gradually and then suddenly". To date, Europe's technological decline has been gradual. However, without bold steps to address its deep-seated problems, today's slow erosion could give way to a rapid and permanent decline in global economic relevance.