Predictions of America’s economic decline have become a recurring genre, somewhere between disaster cinema and an annual subscription nobody remembers buying. The Great Depression, the oil shocks of the 1970s and the 2008 financial crisis all generated forecasts that US supremacy had finally hit the wall. Yet the country has repeatedly emerged from shocks with new corporate giants, deeper financial markets and another growth story ready for export.
That resilience matters enormously for Europe. The question is not whether Brussels, Berlin or Paris can recreate Silicon Valley in a trench coat. It is whether Europe can remain prosperous, strategically independent and technologically relevant while the US pours capital into artificial intelligence, chips, data centres and the energy needed to run them — and while China competes at continental scale in manufacturing and technology.
America’s advantage is a system, not a magic trick
The US did not become the world’s largest economy through a single lucky invention or a particularly persuasive business podcast. Its strength rests on a stack of advantages that reinforce one another: a huge integrated home market, plentiful natural resources, navigable waterways, extensive agricultural land and relative geographic security between two oceans.
It also has a common language and comparatively low barriers to commerce across state lines. For a company, success in one large American market can provide the revenue, data and investor attention needed to expand very quickly. Europe has a larger population than the US, but still operates through a patchwork of languages, legal frameworks, tax systems and capital markets. The single market is one of the EU’s great achievements; it is not yet frictionless enough to function like a single American commercial arena.
Then there is finance. US markets are exceptionally deep and liquid, drawing savings and investment from around the world. The dollar’s role as the dominant reserve currency amplifies that appeal. It has helped Washington borrow more cheaply than many countries could manage and gives the US considerable influence over global finance. The dollar’s international share has been gradually eroding over time, but no obvious replacement currently offers the same combination of scale, liquidity and institutional reach.
For Europe, this is a slightly inconvenient reality. The euro is a major global currency, but the EU does not yet offer a fully unified capital market or a common safe asset on the scale associated with US Treasury securities. A continent that wants more geopolitical weight must make it easier for its own savings to fund its own growth.
AI has made the investment gap impossible to ignore
Artificial intelligence is rapidly becoming the next test of economic power. The US is investing heavily in advanced chips, data centres, cloud capacity and power infrastructure. Its lead reflects more than clever algorithms: it comes from the ability to finance speculative, expensive projects at vast scale, alongside the presence of leading technology companies and research institutions.
AI may raise productivity across sectors from health and logistics to industrial design and public administration. But the boom also carries a bill. Data centres consume enormous amounts of electricity, expensive computing hardware is concentrated among a small number of suppliers, and the gains may flow disproportionately to large firms and highly skilled workers. An AI revolution that makes a few companies richer while hollowing out opportunities elsewhere would be a political as well as an economic problem.
Europe should resist two equally unhelpful instincts: declaring defeat because it lacks a home-grown equivalent of every US platform, or regulating first and asking where the computing capacity went later. Its opportunity lies in applying AI to areas where it already has serious industrial depth: advanced manufacturing, mobility, energy systems, pharmaceuticals, engineering, finance and public services.
- Compute: reliable access to high-performance computing and cloud infrastructure.
- Power: abundant, affordable low-carbon electricity for industry and data centres.
- Talent: research excellence paired with credible reasons for founders and engineers to build companies in Europe.
- Scale: rules that allow a promising company to sell across the continent without acquiring a second legal department for every border.
China is not merely a competitor; it changes the terms of the race
China is the first challenger in decades with the scale to contest US technological and economic leadership across multiple fronts. Its manufacturing capacity, large domestic market and state-backed industrial ambitions have made it a central force in supply chains that Europe depends upon, particularly in strategically sensitive technologies and clean-energy equipment.
That puts European policymakers in a three-way contest they did not design. Depend too heavily on Chinese production and Europe risks strategic exposure. Match American or Chinese subsidy programmes euro for euro and national budgets can begin to resemble an auction where the auctioneer is on fire. Retreat into protectionism, meanwhile, and European consumers and exporters pay the price.
The sensible route is selective rather than theatrical: protect critical capabilities, diversify suppliers, maintain open trade where it remains mutually beneficial, and build domestic capacity in areas with clear economic and security importance. “De-risking” is less catchy than a trade war, but it is usually less destructive too.
Europe’s problem is less invention than conversion
Europe does not lack knowledge, skilled workers or successful companies. It has world-class universities, strong research clusters and industrial champions. Its difficulty is often converting scientific achievement and early-stage innovation into global businesses that can raise large sums, take risks and remain European as they scale.
This is where a stronger capital markets union could matter as much as any headline-grabbing subsidy. European households hold substantial savings, yet too much capital remains fragmented or is invested outside the continent. Better cross-border investment channels, more integrated pension and equity markets, and simpler rules for growing businesses could help close the scale-up gap.
Industrial policy also needs discipline. Public money can accelerate infrastructure, research and strategically important production, but it cannot turn every national favourite into a winner. Governments should concentrate on the foundations that private enterprise can use: grids, ports, digital networks, skills, research, permitting and predictable rules. Picking a few glamorous factories while neglecting the electricity connection is a very European way to lose an industrial race.
Competing does not mean becoming America
The US model comes with weaknesses of its own: high government debt, widening inequality, political polarisation and the risks attached to an economy increasingly dominated by very large technology firms. Its capacity to adapt remains formidable, but advantages are not immortal. The global role of the dollar cannot be treated as a law of nature, and an AI investment frenzy will not automatically deliver broadly shared prosperity.
Europe’s competitive answer should therefore be distinct. It can aim to be faster at financing growth without abandoning labour standards, serious on innovation without treating energy security as an afterthought, and open to trade without being naive about dependency. That requires less rhetoric about sovereignty and more practical integration: one market, more investment, cheaper clean power and fewer obstacles to building at scale.
The United States may remain exceptionally hard to beat for the foreseeable future. But Europe does not need an American imitation to be a consequential economic power. It needs to stop behaving like 27 promising start-ups sharing a Wi-Fi password and start using the scale it already possesses.