Renowned economist Nouriel Roubini has issued a sharp critique, stating that the United States administration is fundamentally misdiagnosing Europe's most pressing existential threat. He argues that the real danger lies not in immigration, but in the continent's growing economic and technological backwardness compared to global leaders like the United States and China.
The Misplaced Focus on Immigration
Roubini, a professor emeritus at New York University's Stern School of Business, directly challenges the perspective outlined in the recent US National Security Strategy. The strategy had suggested that unrestrained immigration and so-called "woke" policies could lead to "civilizational erasure" in Europe within decades.
He counters this by pointing out a simple fact: the share of foreign-born residents in the US is actually slightly higher than in Europe. This, according to him, indicates that the immigration argument is a misreading of Europe's core challenges. The continent's struggle is rooted in a lack of dynamism, not demographic change.
The Stark Reality of Europe's Economic Decline
The data presented by Roubini paints a concerning picture of Europe's relative decline. Between 2008 and 2023, the United States saw its GDP surge by an impressive 87%. In stark contrast, the European Union managed growth of only 13.5% over the same fifteen-year period.
The gap in prosperity is widening dramatically. The EU's GDP per capita has fallen from 76.5% of the US level to just 50%. To put this in perspective, Mississippi, the poorest US state, now has a higher per capita income than major European economies like France and Italy, as well as the EU average. This divergence is driven not by population trends but by a significant productivity gap, fueled primarily by superior tech innovation in America.
The Glaring Technology and Innovation Deficit
Europe's position in the global technology race is precarious. Today, roughly half of the world's 50 largest tech firms are American, while a mere four are European. Over the past fifty years, 241 US startups have grown into companies valued at $10 billion or more, compared to only 14 in Europe.
The race for future dominance spans critical fields like artificial intelligence, semiconductors, quantum computing, and defence technologies. While the US and China are seen as the two frontrunners, with other nations like Japan, India, and Israel also in the mix, Europe finds itself at a clear disadvantage. Innovation within Europe is largely confined to the UK, Germany, France, and Switzerland, with two of those being outside the EU bloc.
Roubini identifies four key structural weaknesses holding Europe back:
- Weak Capital Markets: The US boasts a deeper, more dynamic ecosystem for funding startups. Europe lacks a true capital markets union, stifling the scale and speed of growth for new firms.
- Excessive and Fragmented Regulation: A US company can launch a product under one rulebook for a market of 330 million. The EU's 450 million people are divided among 27 different national regulatory regimes, creating internal barriers equivalent to high tariffs.
- Risk-Averse Culture: Attitudes toward failure differ sharply. In parts of Europe, entrepreneurial failure was recently met with criminal penalties, whereas in Silicon Valley, it is often seen as a learning experience.
- Underinvestment in Defence: The US benefits from a integrated academic-military-industrial complex. Europe's chronic underfunding of defence has limited the spillover of military research into civilian technological breakthroughs.
A Path Forward and a Warning
Despite the grim assessment, Roubini sees reasons for cautious optimism. Policymakers are increasingly aware of the challenge, as evidenced by major 2024 reform proposals from former Italian prime ministers Mario Draghi and Enrico Letta. Europe possesses strengths like excellent education, research institutions, and high savings rates that could be harnessed.
He suggests that even if Europe does not lead in creating cutting-edge tech, it can still boost productivity by rapidly adopting innovations from elsewhere. However, he concludes with a stark warning, paraphrasing Ernest Hemingway: decline happens "gradually and then suddenly."
If Europe fails to confront its structural weaknesses in technology and innovation, today's slow economic erosion could give way to a sudden and irreversible loss of global relevance. The choice, Roubini implies, is between embracing reform and dynamism or accepting prolonged stagnation.
