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Donald Trump's security policy document offers a misguided view of the European Union. It claims that unrestrained immigration and what it terms "progressive" policies pose an existential threat to European civilization. However, this perspective is based on a fundamental misreading of the reality. The true danger confronting the EU is not societal but technological and economic lag.

A Glaring Growth Gap Separating the US and Europe

The data reveal a stark picture. From 2008 and 2023, US GDP surged by eighty-seven percent, compared to a mere thirteen and a half percent growth for the European Union. During this time, European income per person fell from 76.5% to just 50% of the American figure. Remarkably, even the poorest US state now boasts a greater average income than major European economies like Italy and France.

Currently, roughly half of the world’s 50 largest technology firms are American, while only four are from Europe.

The Innovation Deficit: A Critical Question

The growing economic gap is driven by stronger productivity growth in the US, fueled by breakthroughs and better use of resources. The scene of world technology dominance is overwhelmingly US-centric. Over the past fifty years, hundreds of American startups have grown into enterprises valued at more than ten billion dollars, compared with just 14 in the European continent.

This gap raises a pressing issue: In the race for future industries like semiconductors, AI, and fusion energy, where does the EU stand? Experts widely agree it is essentially a two-horse race involving the US and China, with European nations entering at a significant handicap.

Root Causes 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 more dynamic system for financing new ventures. The EU still lacks a genuine capital markets union, which caps the scale of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hinder Europe. A American entrepreneur can introduce a product under a single set of laws to access a market of over 330 million. The EU, despite a bigger population, is split among 27 different national regimes, creating significant 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 US, it is often seen as a badge of experience.
• Military Investment: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's chronic underinvestment in defense has weakened its ability in breakthrough innovation.

A Path Forward: Reasons for Hopefulness

In spite of these challenges, there are causes for hope. Policymakers are increasingly aware of the severe threat and have begun to advance serious reform. Notable reports on European competitiveness and the internal market highlight the need for major reforms.

Given appropriate policies and rule changes, these assets might enable much higher levels of business-led breakthroughs.

The continent still possesses considerable strengths: high-quality workforce, excellent education systems, and premier research institutions. Coupled with a vast domestic consumer base and substantial household savings, these elements could unleash a surge of venture creation.

Importantly, even if Europe does not take the lead in developing next-generation technologies, it can still dramatically boost productivity by implementing and tailoring innovations from other regions.

An Inflection Point

The European Union now faces a decisive crossroads. As the saying goes, decline often happens "slowly, then all at once". To date, the continent's slide in innovation has been gradual. However, if it fails to take decisive action to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible loss of global economic relevance.