The American Dream is Still Alive

Tom Teluk

20 May 2024

Why is it still better to start innovative companies in the USA than in the European Union? There are many reasons for this.

For centuries, people from around the world have seen their promised land across the Ocean. They still pursue their dreams, like the first adventurers in the Wild West, as brilliantly depicted in Taylor Sheridan’s epic trilogy (“1883”, “1923”, “Yellowstone”). Today, migrants also storm the borders of the United States in search of a better life.

The same applies to business. Is it better to start a company in the USA or in European countries? There are many differences, and most of them favor America. The USA has a tradition of a free market, based on the respect for property rights, the freedom to make contracts, and minimal regulations. Modern Europe is the homeland of centrally planned economies, where regulations and state intervention play a significant role.

Not everyone can thrive in such an environment. The model of fostering innovation in the EU is controversial and relies on public subsidies. Start-ups can count on local and European grants to start developing their business. The next milestone is selling the company by transforming it into a joint-stock company. This way, few enterprises end up successful. Unfortunately, many businesspeople take advantage of such a system, not finishing projects but immediately starting another one. The interests of shareholders, who are often left with worthless shares, are also not properly protected.

The philosophy of success across the Ocean is different. There, credibility and reputation are invaluable. Initial investments are not charitable but purely business-oriented. When a project succeeds, the reward for success is enormous. The rules of operation are clear and transparent. There is greater access to private capital. It is no wonder that the United States is a leader in innovation.

While the EU is mired in stagnation, the American GDP grows by a few percent annually. This does not happen spontaneously and does not mean that the USA does not subsidize its economy. Only last year, they allocated $739 billion for this purpose, and if we add tax breaks, the amount of support would hover around a trillion. However, the driving force is a highly developed capital market, where most Americans’ savings are invested.

If we add to this a greater propensity for consumption and a flexible labor market, it is no wonder that many investors prefer to start their companies in the USA rather than in the EU. It is still the largest economy in the world with unlimited possibilities. Therefore, the United States has the most unicorns, and the largest ones, Apple, Microsoft or Alphabet, set the tone for the technological revolution worldwide.