America is Rich

Correcting the record

Photo by John Warg on Unsplash

America is rich. Period. By any metric, one of the wealthiest countries in the world. A recent Economist article laid it out - first by calculating GDP per capita:

Yep - there’s the United States, at the far right side of the distribution. “But wait,” you say, “is it really fair to look at GDP per person at market exchange rates? Because the United States is an expensive country. GDP per person may be far higher in the US than in China, but prices are much higher in the US. A Chinese worker who makes the equivalent of $80,000 is doing far better than an American who makes $90,000 a year, because in China you can grab a decent lunch for $5.” Fine, let’s account for those price differences and see what happens:

And the United States is still one of the wealthiest countries in the world. The gap narrows once accounting for price differences, but nations like China and Russia remain significantly behind the United States. Even nations like France, the United Kingdom, and Japan are at least 10% below America. “But wait,” you say once again, “people in Europe only work 30 hours a week and all get 20 weeks a year of vacation.” First, this isn’t true. Western Europeans generally work fewer hours and have more vacation time than their American counterparts, but the differences aren’t as large as often made out to be. When considering average hours worked, the US is barely above the OECD average. Talking with successful Europeans, they all laugh at the idea that everyone is working banker’s hours. Still, the difference is there. So let’s account for hours worked as well as prices:

Lo and behold, the United States is still at the top. Only Belgium, Switzerland, Denmark, Qatar, and Norway are higher. Those countries, of course, being much smaller, and with the notable exception of Belgium, much more culturally homogenous, have limited lessons for Americans to learn.

“But wait”, you say yet again, “GDP per person isn’t necessarily wealth. It’s the total value of all goods and services produced. Sure the US is a wealthy economy, but it’s also a highly unequal place. The gains are only accruing to the super wealthy, while the rest of us fight for scraps. If you were to look at incomes, it would show that many nations in Europe are wealthier. And this needs to be median incomes, not average incomes, because the top 1% of Americans pull that average up and distort the statistics.” Ok, fine:

Again, the United States is at the top. Only little Luxembourg is higher. Also, note how fast median disposable income, that is, income after taxes and transfers, declines. The median household in the United States has just under $47,000 in disposable income. Coming in at number 10 on the list, the Netherlands is already down to $36,000. That means that even if the median income in the Netherlands grew by a substantial 25%, it would still be below the United States.

The United States is not only rich, it is fantastically rich. There are only a few countries within 10 percent. That might not sound like a lot, but think about what you could do with 10 percent more money. Think what sacrifices you would have to make if your income decreased by 10 percent. It would be a big change. Germany, a relatively wealthy country, would have to increase median household disposable income by nearly a third to reach the United States. That is a yawning gulf of separation. By the time you’re considering Eastern European nations like Poland or Greece, median disposable income has halved. A totally different world.

I used to buy into the notion that life was better for Americans for the top 90 percent of the population than anywhere else, but the bottom 10 percent of Americans would be better off if they were in Western Europe. As the American social safety net has continually improved, however, I now doubt that is the case. Even the poor in America are doing better than in other wealthy countries. Consider the rates of severe food insecurity by country:

With the notable exception of Italy, America is doing wonderfully. In fact, the US is doing far better than many countries that supposedly have superior welfare states. France, a country that is often held up as the pinnacle of welfare by liberals, has a severe food insecurity rate that is almost triple that of America. To put it in human numbers, about one in every 125 people in America does not have enough food to lead an active and healthy life. In France, it’s one in every 44. Australia is even worse, with one in every 24 people without enough food.

Now, this isn’t to say life is hunky dory for everyone in America. It isn’t. We still have poverty. The homicide rate is disturbingly high. Segments of American culture feel left behind. Then there’s the European welfare state. Americans have more money after taxes, but they have to spend thousands on healthcare every year that Europeans don’t.

The fact remains, however, that the typical American is wealthier than just about anywhere else, and the gap is significant. Any way to slice and dice the data, the United States comes out near the top of the list, usually only exceeded by small countries that have fewer than 10 million citizens. Take a moment to enjoy the bounty we have.