Europe Can’t Get Out of Its Own Way

Foreign Affairs | Andrew McAfee

European Union labor productivity has fallen to 20 percent below United States levels, reversing a turn-of-the-century trajectory that previously reached nearly 95 percent parity. This broadening economic divergence stems primarily from Europe's systemic failure to establish a footprint in critical high-tech sectors. Structural deficits in industrial innovation have left the bloc without global-scale enterprises in cloud computing, online advertising, mobile devices, or semiconductor design.

The productivity gap widened steadily. Only two of the world's 100 most valuable high-tech companies are currently headquartered within European Union borders. Lacking competitive tech giants severely constrains European economic competitiveness and future strategic autonomy in emerging commercial technology sectors. Persistent structural barriers and regulatory friction continue to prevent effective scale across member states. Absent structural reforms to foster private capital accumulation and technological enterprise, the bloc risks enduring economic stagnation relative to global peers.

Comment

The absence of European commercial tech giants directly restricts the continent's dual-use industrial capacity. While advanced chip manufacturing depends heavily on specialised equipment suppliers like ASML, the lack of downstream platform companies creates a structural gap in processing self-reliance. Commercial cloud infrastructure and AI models are increasingly integrated into military command networks and electronic warfare systems. Without sovereign scaling mechanisms, European technological development remains dependent on non-European supply chains.

This institutional vulnerability impairs long-term technological sovereign capacity across member state defence programs. As software-defined capabilities replace hardware-centric platform superiority, defence research and development budgets face diminishing domestic returns. Consequently, European procurement agencies like the European Defence Agency will increasingly rely on foreign software architectures for next-generation battle management platforms.

Strategic Question for Discussion

If downstream commercial cloud and software scale continues to lag in Europe, how can the European Defence Agency maintain sovereign command-and-control architectures without defaulting to non-European digital platforms?

The available evidence points toward an inevitable reliance on foreign cloud providers for high-compute battle management systems, despite sovereign policy rhetoric. While hardware champions like ASML anchor local high-tech manufacturing, the absence of native hyperscale cloud infrastructure forces defence planners into strategic compromises between software capability and operational autonomy. In my assessment, European military integration will increasingly operate on licensed allied architectures rather than sovereign software stacks.

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