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The recent US security policy document offers a misguided assessment of the European Union. The document asserts that open-border policies and so-called "woke" policies represent an existential risk to the continent's identity. Yet, this argument rests on a serious misinterpretation of the reality. The true danger facing Europe is not cultural but economic and technological backwardness.

A Glaring Growth Divide Between the US and Europe

Statistics paint a stark picture. From 2008 and 2023, American economic output grew by eighty-seven percent, while a paltry 13.5% increase for the EU. Over this period, European income per person dropped from over three-quarters to just half of the American figure. Strikingly, even the poorest US state now boasts a greater average income than several leading EU nations like Italy and France.

Today, about 50% of the global top fifty technology firms are American, while a mere four are European.

The Technological Deficit: A Critical Problem

This widening economic gap is driven by superior productivity growth in the United States, largely due to technological innovation and higher total factor productivity. The landscape of global tech leadership is decidedly American. In the last fifty years, hundreds of American startups have grown into companies valued at more than ten billion dollars, compared with just 14 in the European continent.

This disparity prompts a vital question: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe positioned? Most analysts concede it is essentially a contest between two between the United States and China, with Europe entering at a significant disadvantage.

Root Causes of Europe's Technological Lag

Several major factors explain this technological divide.

• Venture Capital: The United States has a much more robust and more dynamic network for funding startups. Europe still lacks a true capital markets union, a factor that caps the growth potential of new firms.
• Bureaucratic Hurdles: Excessive and fragmented regulation hamper Europe. A American entrepreneur can launch a product under one set of laws to access a market of over 330 million. The European Union, despite a larger population, is divided among twenty-seven different national systems, creating huge internal barriers.
• Mindset Differences: Views on risk-taking differ sharply. In some EU nations, a startup's collapse was historically viewed with penalties, whereas in the US, it is often considered a badge of experience.
• Defense Spending: The US benefits from a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in military capabilities has eroded its ability in pioneering research.

A Path Forward: Reasons for Hopefulness

Despite these challenges, there are causes for optimism. Policymakers are increasingly aware of the severe threat and have started to advance serious reform. Key analyses on EU competitiveness and the single market point to the need for sweeping changes.

Given appropriate policies and regulatory reforms, these assets could support far greater levels of business-led breakthroughs.

Europe retains considerable advantages: high-quality workforce, top-tier schools and universities, and world-class research institutions. Coupled with a large internal market and high savings rates, these foundations have the potential to trigger a surge of investment and entrepreneurship.

Importantly, even if the EU does not become the leader in creating next-generation technologies, it can still dramatically boost productivity by implementing and tailoring advancements from elsewhere.

A Critical Juncture

The European Union now faces a decisive moment. As the saying goes, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been gradual. However, if it fails to take decisive action to tackle its deep-seated problems, today's gradual weakening could give way to a rapid and permanent decline in global economic relevance.