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Donald Trump's security policy document offers a misguided assessment of Europe. The document asserts that open-border policies and so-called "progressive" policies represent an grave threat to the continent's identity. However, this perspective is based on a serious misinterpretation of the situation. The true danger confronting Europe is not societal but technological and economic lag.

The Stark Economic Gap Between the US and Europe

Statistics paint a sobering picture. Between 2008 and 2023, American economic output grew by 87%, compared to a paltry thirteen and a half percent growth for the European Union. Over this time, European income per person dropped from 76.5% to just half of the US level. Strikingly, even the poorest US state now boasts a higher per capita income than major EU nations like Italy and France.

Currently, roughly half of the global top fifty technology firms are American, while a mere four are European.

The Technological Deficit: The Core Problem

This widening economic gap stems from superior productivity growth in the United States, largely due to breakthroughs and better use of resources. The landscape of world technology leadership is decidedly American. Over the past fifty years, hundreds of American startups have scaled into companies valued at over ten billion dollars, compared with just 14 in the European continent.

This gap prompts a pressing question: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, where does the EU stand? Most analysts agree it is largely a two-horse race between the United States and China, with Europe starting at a significant handicap.

Root Causes of the Continent's Technological Lag

Several major reasons explain this technological divide.

• Venture Capital: The US boasts a much more robust and more dynamic system for financing new ventures. Europe still lacks a true capital markets union, a factor that limits the scale of emerging companies.
• Regulatory Fragmentation: Excessive and fragmented regulation hamper Europe. A US startup can launch a product under a single regulatory framework to access a market of hundreds of millions. The EU, despite a bigger population, is divided among twenty-seven separate regimes, creating huge internal barriers.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, business failure was once met with penalties, whereas in the US, it is often considered a valuable lesson.
• Defense Spending: The US benefits from a tightly woven innovation pipeline linking defense and academia. The continent's chronic underinvestment in military capabilities has weakened its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these hurdles, there are causes for optimism. Policymakers are growing more conscious of the severe threat and have started to advance substantial change. Key analyses on EU competitiveness and the single market point to the need for sweeping reforms.

With the right incentives and regulatory reforms, these assets might enable much higher degrees of commercial innovation.

Europe still possesses significant strengths: high-quality workforce, top-tier schools and universities, and premier labs. Coupled with a large internal market and substantial household savings, these foundations could unleash a new wave of investment and entrepreneurship.

Importantly, even if Europe does not become the leader in developing cutting-edge technologies, it can still significantly increase economic output by implementing and tailoring innovations from other regions.

An Inflection Point

The European Union now stands at a decisive moment. As the saying goes, decline often happens "slowly, then all at once". So far, Europe's slide in innovation has been steady. However, without bold steps to tackle its structural weaknesses, today's slow erosion could give way to a sudden and irreversible decline in world influence.