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Donald Trump's national security strategy offers a misguided assessment of Europe. The document asserts that open-border policies and what it terms "progressive" policies represent an existential threat to European civilization. Yet, this perspective is based on a fundamental misinterpretation of the situation. The actual challenge confronting Europe is not societal but technological and economic backwardness.

The Stark Growth Gap Between the US and Europe

Statistics reveal a stark picture. From 2008 and 2023, American economic output grew by 87%, while a paltry 13.5% increase for the EU. During this time, EU GDP per capita fell from over three-quarters to just 50% of the American figure. Strikingly, even the poorest US state now boasts a higher per capita income than major European economies like Italy and France.

Currently, roughly half of the world’s top fifty tech companies are American, while only four are from Europe.

The Technological Shortfall: A Critical Problem

The growing economic gap is driven by superior efficiency gains in the US, largely due to breakthroughs and better use of resources. The landscape of global tech leadership is decidedly American. In the last five decades, 241 US firms have scaled into companies valued at over $10bn, compared with just 14 in the European continent.

This disparity prompts a pressing issue: In the race for tomorrow's sectors like semiconductors, AI, and fusion energy, where does the EU stand? Experts widely concede it is essentially a two-horse race involving the US and China, with European nations starting at a significant disadvantage.

Underlying Factors of the Continent's Technological Lag

Several major factors account for this technological divide.

• Venture Capital: The US boasts a much more robust and more dynamic system for funding startups. The EU still lacks a true capital markets union, a factor that caps the growth potential of emerging companies.
• Bureaucratic Hurdles: Complex and divided rules hinder Europe. A US startup can launch a service under a single regulatory framework to access a market of hundreds of millions. The European Union, despite a bigger population, is split among twenty-seven different national regimes, creating significant internal barriers.
• Mindset Differences: Views on entrepreneurial failure vary greatly. In parts of Europe, business failure was historically viewed with stigma, whereas in the United States, it is often considered a valuable lesson.
• Military Investment: The United States enjoys a tightly woven innovation pipeline linking defense and academia. The continent's chronic underinvestment in defense has eroded its capacity for breakthrough innovation.

A Path Forward: Grounds for Hopefulness

In spite of these challenges, there are reasons for hope. European leaders are growing more conscious of the existential challenge and have begun to advance substantial change. Key reports on European competitiveness and the single market highlight the necessity of major changes.

With the right incentives and rule changes, Europe's strengths could support far greater degrees of business-led breakthroughs.

Europe retains considerable strengths: high-quality human capital, excellent education systems, and world-class labs. Coupled with a vast domestic consumer base and high savings rates, these foundations could trigger a surge of venture creation.

Crucially, even if Europe does not take the lead in creating next-generation tech, it can still significantly increase economic output by implementing and tailoring advancements from other regions.

A Critical Juncture

Europe now faces a decisive moment. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. But, without bold steps to tackle its structural weaknesses, today's slow erosion could give way to a sudden and irreversible decline in world influence.