Over the weekend I come across an article published by the Foundation for Economic Education two years ago, titled “Most of Europe Is a Lot Poorer than Most of the United States”, in turn reporting on some number crunching done by the American Enterprise Institute, which used the Purchasing Power Parity (PPP) measure to accurately compare GDP per capita of all the states of the United States with the member states of the European Union and other developed countries. The conclusion was rather stark:
Most European countries (including Germany, Sweden, Denmark and Belgium) if they joined the US, would rank among the poorest one-third of US states on a per-capita GDP basis, and the UK, France, Japan and New Zealand would all rank among America’s very poorest states, below No. 47 West Virginia, and not too far above No. 50 Mississippi. Countries like Italy, S. Korea, Spain, Portugal and Greece would each rank below Mississippi as the poorest states in the country.
This is the actual comparison table produced by the AEI:
The numbers move every year, so I was interested in seeing to what extent such comparison might have changed since the 2014 data used above.
For starters, this is the PPP GDP per person ranking provided by the good people at the Central Intelligence Agencies (though unfortunately not all data is from the same year):
The first thing you notice in this table that a lot of the countries aren’t real countries but micro-states with minuscule populations that benefit from being tax havens (Lichtenstein, Monaco, Luxembourg, once described as the only bank in the world with its own airport, etc.), others are not really separate states (Macau and Hong Kong belong to China, Gibraltar, Isle of Man and the Falklands to Great Britain). Qatar, Brunei, the UAE and Kuwait are petro-states with likewise tiny populations enjoying tremendous resource wealth (none of these countries would actually function if not for the foreigners, who outnumber the native population several times, and do everything from advising governments to cleaning toilets). Be that all as it may, there are three European countries – Ireland, Norway and Switzerland – which have larger GDP per head of population that the United States (only Ireland is an EU member). None of these countries were included in the AEI table, probably because they would have spoiled the narrative, if only somewhat (“most European countries”).
Wikipedia (using Bureau of Economic Analysis data) provides this table of GDP per capita of all the United states:
If you merge the ranking above with the CIA figures (while noting that the CIA’s figures are in most cases from a year later, so more favourable to Europe), we will find out the following:
– It is shameful that GDP per capita in the District of Columbia is more than twice as high as that of the highest state, considering that the main industry in the DC is government, or sponging off taxpayers. This tells you all you need to know about governments in general and their priorities.
– Ireland is just ahead of New York, the wealthiest per capita state, Norway would be positioned between Connecticut and North Dakota, and Switzerland between Illinois and Minnesota.
– That said, all the other European countries would still be in the bottom half of US states; the United Kingdom below Kentucky and France below Montana, for example.
– Australia would be placed between Georgia and Louisiana, which is probably not where most Australians picture ourselves.
While PPP comparisons are the most accurate ones, since they are based on what money in each country can buy, as opposed to comparing rough numbers translated through exchange rates, clearly there is more to comparing good life than GDP per capita. As someone on the right, I’m not as obsessed about economic inequality as those on the left, but nevertheless it does make a difference whether GDP per head of $X is the result of a few people being astronomically rich and the great majority very poor, or whether most people cluster around that average of X – it certainly matters when you try to conceptualise the general standard of living.
It’s also true that different economic and political arrangements have their own trade-offs. For example, people in European countries might be poorer per hear than most Americans but they might respond that they enjoy a more generous safety net, better job security, and better life/work balance in the form or fewer working hours and significantly longer holidays. In the end, what you consider to be a good life largely depends on what you think is important to you.
Personally, I like competition, I like choices and I like freedom. For that reason I like federal structures of government, where different jurisdictions can offer different models to people (the US is a federal state, and the EU acts like a federation to a certain extent). As long as people are free to vote, and also ultimately free to move around to places that more closely reflect their values, I’m all for a wide variety of systems to suit all preferences. You like smaller state, less regulation and lower taxes? Move to the proverbial Texas. You prefer a welfare state and a far greater role for the government? Move to the proverbial Scandinavia.
Vive la diferrence, vive la liberte!