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The recent US security policy document offers a misguided view of the European Union. The document asserts that open-border policies and so-called "progressive" agendas represent an existential risk to European civilization. However, this perspective is based on a fundamental misreading of the situation. The actual challenge confronting the EU is not societal but economic and technological backwardness.

A Glaring Economic Divide Between the US and Europe

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

Currently, roughly half of the global top fifty tech companies are US-based, while only four are from Europe.

The Innovation Deficit: A Critical Problem

The growing economic gap stems from superior efficiency gains in the US, fueled by technological innovation and higher total factor productivity. The landscape of global tech leadership is overwhelmingly American. Over the past five decades, 241 US firms have grown into enterprises valued at over ten billion dollars, versus just 14 in Europe.

This gap raises a vital question: As the competition for tomorrow's sectors like AI, semiconductors, and quantum computing, what is the EU stand? Most analysts concede it is largely a contest between two between the United States and China, with Europe entering at a clear disadvantage.

Underlying Factors of the Continent's Technological Lag

Several key factors account for this innovation chasm.

• Venture Capital: The United States has a much more robust and agile system for financing new ventures. Europe has yet to establish a true capital markets union, which caps the scale of new firms.
• 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 EU, despite a larger population, is split among 27 different national regimes, creating significant market obstacles.
• Mindset Differences: Attitudes toward entrepreneurial failure differ sharply. In parts of Europe, business failure was historically met with stigma, whereas in the United States, it is often considered a valuable lesson.
• Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has eroded its ability in pioneering research.

A Path Forward: Grounds for Hopefulness

Despite these challenges, there are causes for hope. Policymakers are growing more conscious of the existential challenge and have begun to propose substantial change. Key analyses on European competitiveness and the internal market highlight the need for sweeping reforms.

Given appropriate policies and regulatory reforms, Europe's strengths might enable far greater levels of commercial innovation.

Europe still possesses significant advantages: skilled human capital, excellent schools and universities, and world-class research institutions. Alongside a large internal market and substantial household savings, these foundations could trigger a surge of investment and entrepreneurship.

Importantly, even if the EU does not take the lead in developing cutting-edge technologies, it can still significantly boost productivity by implementing and tailoring innovations from elsewhere.

A Critical Juncture

Europe now faces a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". To date, the continent's technological decline has been steady. However, without decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a sudden and irreversible decline in world influence.