The American Unexceptionalism Myth
Among Populists on both the Left and the Right. Many have lost hindsight of how wealthy and Exceptional America really is. Reading the Huffington Post and Zerohedge can give you the impression America is a third world nation. However that premise is faulty and ill explain that here today.
The US middle-class is among the most prosperous in the world, putting a majority of European countries (Sweden, UK, Germany, Denmark, etc etc) to shame. The only three European countries with higher median disposable income are Switzerland, Luxembourg, and Norway. Norway is oil-rich, Luxembourg has a population of 500k, and Switzerland has one of the most free and capitalistic systems in the world.
Middle-class Americans have it pretty damn good. Social mobility (the ability to move up the economic ladder) has been steady in America, and contrary to popular belief, it’s not harder to climb up the economic ranks than it was for your parents or grandparents. And also, contrary to popular belief, the average American’s disposable income has gone up significantly over the past 30 years. More than ever before, middle-class and [relatively] poor Americans an buy cheaper products that are of higher quality with greater ease in 2017 than any time in the past. Don’t buy the nostalgic “life was much easier from the 50–70s” narrative, the data simply don’t support that view.
What economic issues do Americans face? Well, the poor often don’t have access to healthcare which I agree should be on the table and addressed. Furthermore, the cost of education has gone up. Outside of these two issues healthcare and education Americans are rich, have ample opportunities, and anyone who denies this is in fact in denial of the evidence.
All-in-all, most average Americans have a lot of money, access to high-quality products at low prices, and unprecedented opportunity to excel (high social mobility). Many economists argue that inequality at the level we’re witnessing in the US is a natural and healthy outcome of a thriving economic system — the very system that has produced a thriving middle-class, the innovation that has improved our lives ten-fold, and coincidentally lifted billions of people out of abject poverty worldwide.
The Scandinavian countries are highly capitalistic welfare states. Much of GDP runs through government and is redistributed, but they are pro-trade, pro-investment, and rank similarly (and higher) in economic freedom to the US. Under a Sanders regime, he would introduce the high taxation and welfare schemes, but wouldn’t compensate with other pro-market policies (as the Scandinavians have).
Overall, Scandinavian markets don’t produce anywhere near the median disposable incomes we have in the US. Norway has high median household incomes, but it is oil-rich — take that out of the equation and it’d be similar to Denmark/Sweden. The middle class in the US is significantly more prosperous than those in Denmark, Sweden and Norway (minus oil wealth). Anyone who argues otherwise is ignorant of the data. The only aspect we fall short on is healthcare, which is a legitimate concern, but most Americans don’t struggle in this regard (again, those who do are legitimate cause for concern).
On the other hand, Switzerland is perhaps the most free-market country in the world (after Singapore and HK). It has similar demographics to the Scandinavian countries (in terms of homogeneity and <10 million population), and a highly decentralized system of governance. With a modest population of ~8 million, Switzerland is divided into 20+ cantons (equivalent to US states) which have significantly more power than states do in America. The top federal government tax rate is a meager 13%, and the cantons/states — which range in population from 15k to 1.5 million — take a majority of tax money and provide a majority of social services
Results? Switzerland boasts higher median incomes than pretty much every Western country (even the US), and has excellent income equality. They have >99% healthcare coverage through a voucher-system using private insurers, and it only costs the government $1,200 per head (US pays upwards of 6 grand a head, the UK 3 grand a head, all other European countries are somewhere between $2.5k and $5k per person). Switzerland loves free markets and local government, while we sit here in the US and hand the vast majority of our tax dollars to bureaucrats in DC — who apparently know what’s best for 330 million Americans
The US currently has the most progressive income tax system in the world, so they certainly pay a fair share in that regard:
If you’re concerned about capital gains, the top rate in America is fairly high when compared to those of its peers. Sanders wants to take the rate above and beyond what you’d find in other countries:
It’s not that only the rich pay less in taxes in the US than the rich do in Sweden (for example), every class in the US pays less in taxes than every class in Sweden. Yet the rich in the US pay more in taxes as a ratio to their share of national income than the rich in any other country do
The US has enough public money per capita (excluding military spending) to fund the staple European welfare programs which progressives so desperately seek. We don’t need to make US companies less competitive to fund social programs, and they definitely shouldn’t be nationalized (effective corporate tax rate is, at the very least, average for OECD countries, and our income tax systems is the most progressive in the developed world).
Whenever people are comparing the US to the rest of the West, I suggest that one does the following: reference Canada as a whole, the US as a whole, then go state by state. There’s a lot to be learned this way
At any rate, the internet is teeming with people who salivate at the opportunity to tear the US down. Contrary to popular sentiment, the US isn’t a third world country, and is in fact a world leader in terms of opportunity and quality of life (as reflected by our outstanding median incomes).
The median disposable income adjusted for PPP (which is what I’m referring to) is the most accurate representation of how much spending power the average person has in a country. The distribution of incomes around that median point follow a similar curve in all developed countries. Our median is significantly higher than that in every developed European country except oil-rich Norway, market-oriented Switzerland, and Luxembourg. The average American has significantly more spending power and opportunity than the average Englishman, or Swede, and most certainly Frenchman. In fact, given our relative poverty line and its definition, the average poor American is richer than his or her counterpart in many Southern European welfare states.
The US is the world leader in R&D as well as rate of success in treating disease. Healthcare is a problem, but reproducing VA care for all Americans isn’t a sound idea. Cost of living is irrelevant, since median disposable income adjusted for PPP already factors it in (and we’re on the top of the stack in that regard).
The political situation is indeed shit, but nationwide elections aren’t meant to be as consequential as they’ve become. Regardless, our constitution is an incredible document which has given way to the prosperity you enjoy today. American-style liberalism and the market activity it’s generated around the world has lifted billions out of poverty and improved the standard of living in incomprehensible ways. Everyone, everywhere from the US constitution. People revere it because it is a document worth revering.
People don’t understand how successful the US economy has been and is in creating propsperity for average Americans. The middle class in this country enjoys median disposable incomes (adjusted for PPP) which far exceed those in comparable countries.
Notice how the top three countries are Luxembourg, oil-rich Norway, and ultra-capitalist Switzerland. However you measure it, middle-class Americans have access to more capital and opportunities than most of their contemporaries in the socially democratic nations Bernie Sanders wishes to emulate. Mind you, we face demographic challenges which escape most Europeans. The average American is significantly richer than the average Swede, but furthermore the average American of Swedish descent is significantly richer than the average American. Culture is a very important economic factor, as evidenced by accounting balances in the Eurozone, and folks from cultures the world round seem to do much much better in the US (you know, those knuckle-dragging, irrationally gun-loving, everyone-believes-the-world-is-5000-years-old United States which you’d think is a third-world country from reading the Huffington Post).
Note: the minimum cutoff for different economic brackets always goes up, so being in the middle class today is better than it was in the 80s. An encouraging progression, considering that all middle l-class contraction over the past few decades has been upward
Once we’be established that, contrary to populist belief, there is no crisis of the middle class, we’ve then eliminated a lot of the purported reasons for needing redistribution. Attending to the needs of the poor is a different aspect of social service, but you’ll find that a lot of those numbers and their implications are similarly exaggerated. For example, childhood poverty measures neediness in relative terms — meaning that if everyone in this country magically became 100x richer in terms of income and wealth, we’d still have the same childhood poverty rate.
The other side to consider is what i’d call the “not-immediately-obvious” benefits of capitalistism. The advancement of technology across the board is enjoyed by everyone. Every medial breakthrough in the states is enjoyed by someone in Denmark, and vice-versa. It just so happens that we’re responsible for the bulk of medical R&D (in spite of a stifling FDA), and hence other countries piggyback off of that progress (and vice-versa). If a tiny welfare state eliminates profit motivations tomorrow, the rest of the world won’t feel much in way of stifled technological progress the same can’t be said about the US.
So what I’ve attempted to convey thus far is that the US has been and still is a smashing success in many meaningful ways, and that the popular narrative of a struggling labor class is based on a lot of misinformation. There’s an endless list of things that we do far worse than other countries, but probably not what the average information-consumer has been led to believe
I’d consider the most comparable countries (in size and diversity) to be the UK and Germany. The disparity between US medians and those in UK/Germany is vast
Nonetheless, and more pertinently, the US has greater median disposable incomes than the Scandinavian model-countries which Sanders so enthusiastically touts, on the order of 10% or more (which is significant)
Plus or minus a year is negligible, especially considering that these years don’t immediately surround major economic events (like the Great Recession). All of the OECD median income data seems to be from 2013/2014, if I’m not mistaken. Interested to see why you’d think the US’ standing on the list would move down 2 ranks if we compared across countries during a single year, like 2013, or even today. What gives you the impressi
Also, most Americans have employer-sponsored health insurance, with 15% having Medicare and another 15% with Medicaid (obvious overlap between these groups). Middle-class Americans whose incomes are reflected by the provided figures most likely enjoy a disposable income after paying for health benefits. Furthermore, in-state higher education in the US isn’t significantly more expensive than that in Canada or South Korea (highest tertiary educational attainment rate), and is less expensive than university in the UK (and Australia too if I’m not mistaken).
98% of folks who graduate high school, work full-time, and don’t have kids before 21 surmount poverty. Point being, the economy isn’t necessarily hard on low-skilled workers But yes, the past 9 years have been a major drag, and I just wanted to clear out the common “income stagnation since 1979” myth.
If you’re above the 30th percentile then most likely the US. The median American commands significantly more disposable income than his or her average European counterpart. Compare a place like Spain and the US and I’d say even a 10th percentile American is better off.
America arguably has the highest standard of living if you’re at the median or above. The better-off Americans enjoy the best lives, but the country has the widest inequality.
This chart is from the OECD’s “Better-Life” index, which goes beyond the traditional (and often limited) variable of GDP and instead factors in 24 other metrics, such as life satisfaction (as measured by surveys), availability of housing, quality of education and infrastructure, etc.
Notice the gap between the richest and poorest within each country as well (especially in the US). Needless to say, some of these findings may be disputed or controversial. Click the hyperlink to see a more detailed report for each country, as well as those nations left out in the chart.
These charts pretty much looks at standard of living for middle class, top, bottom 10% Americans. Check out the OECDs better living index for detailed explanation.
The living standard for the average Swede is lower because middle class Americans command huge incomes. It’s probably better to be in the socio-economic bottom 10–20% in Sweden than in the bottom wrung of US society. But the answer is income (as far as the middle class and above goes).
Another Example is the myth we have “fallen behind in education”. This is regurgitated by the Populist right and left.
I’m willing to bet that the scores of Japanese-Americans are higher than the Japanese scores. Just like the Japanese-American crime rate is lower than the crime rate in Japan, and the Swedish-American poverty rate is lower than the poverty rate in Sweden. Culture matters, and our diverse nation has cultural challenges which are unique to different groups which makes these cross-nation comparisons insufficient in painting a real picture.
Oops, no need to bet:
“The schools are failing” is a political talking point, a scare tactic designed to drum up votes. It bears little relation to reality.
If you are reading this, then chances are someone taught you to read, and that person was probably a public school teacher.
People come from all over the world to study at American universities; few Americans scatter abroad to study at other countries’ universities.
Our economy has, for the past century or so, been among the most advanced in the world. We’ve created or contributed significantly to the development of cars, airplanes, atomic bombs, computers, vaccines, etc. Oh, and we PUT A MAN ON THE MOON.
And everyone who worked on space program (immigrants excluded) started attending US schools back around 1910–1940. (I suspect our schools have gotten better since then.)
People make a big deal out of US students not scoring #1 in the world in international-comparison tests. What of it? There are lots of countries with smart people in them, and we can’t all be first.
But even granting this, the reports of American under-performance are massively overstated. Let’s compare the 2009 Programme for International Student Assessment (PISA) reading scores for the US and 64 other countries (graph thanks to Steve Sailer, who spent two days combing through PISA data to make it):
Counting only countries that are actually countries (ie not Shanghai,) the US comes in #14. We scored better than 24 European countries, and significantly better than all of the Muslim, Latin American, and “other” countries in the data set.
“Above average among first world countries,” is a perfectly respectable place for a first world school system.
But you may have noticed the red bars in our graph. Yes, the US data is broken down by race, because the US is a significantly more diverse country than, say, Finland. Or Japan.
Asian Americans outscore Asians in Korea, Japan, Singapore, and Hong Kong. (and Taipei and Macao.) The only people on earth who are scoring better than our Asians are Shanghai’s Asians.
European Americans outscore Japan and every European country but Finland.
Latino Americans outscore every single Latino country in the dataset.
No African countries are represented in the dataset (though I hear Trinidad is half black,) probably due to the severe poverty of African countries. Nevertheless, just as African Americans outscore Trinidadians, I am confident that they would also outscore continental Africans were they concluded–there’s a pretty clear correlation here between development level and PISA scores.
In other words, whenever someone says, “American schools are failing,” what they really mean is “American blacks and Hispanics score worse than Europeans.”
Can we do better for our blacks and Hispanics? Perhaps, but any set of reforms that start out based on the notion that “the schools are failing” is highly unlikely to solve the problem of “blacks score worse than whites.”
Welfare is certainly a factor in entrenching the cycle of poverty for many, but there are much more significant factors at play. According to the Brookings Institution, 98% of Americans who follow these three rules escape poverty:
“at least finish high school, get a full-time job and wait until age 21 to get married and have children”
There is no doubt that culture is a significant factor in the matter. There’s a famous story about Milton Friedman:
A Scandinavian economist once stated to Milton Friedman: “In Scandinavia we have no poverty.” Milton Friedman replied, “That’s interesting, because in America among Scandinavians, we have no poverty either”
This reflects the fact that, even though the average American is considerably richer than the average Swede, the average American of Swedish descent is considerably richer than the average American , and thus significantly richer than the average Swede
Similarly, Japan is known for its rock-bottom homicide rate, and America for its sky-high homicide rate, yet Japanese-Americans commit crimes at a rate similar to that of people in Japan
“Poverty culture” is not unique to a particular nationality or race, as you see it across the board, but the associated circumstances/behaviors are almost always the same e.g. higher frequency of single-parent households, little to no emphasis on education.
I don’t say bad things about these countries. They offer a tip-top standard of living for most of their citizens. However, I am the first to point out that their models are not wholly suitable for America, and that there are a lot of misconceptions about Nordic nations. My issue is that people worship these countries based on these misconceptions — so I’m emphatic on tearing into them for the sake of setting the record straight. For example:
Cliffs:
1. Middle-class Americans have considerably more economic opportunity than their Scandinavian counterparts, as reflected by cross-country comparisons of median disposable incomes
2. Americans of Scandinavian descent are, on average, considerably more prosperous than the average American and, by extension of point #1, are significantly better off than the descendants of the Scandinavians who chose to stay in their home countries (i.e. the people living in Scandinavia today.) Much of the Scandinavians’ success can be attributed to the culture of the natives and demographic homogeneity, rather than the efficacy of their systems
3. As intuition suggests, welfare does appear to lower the incentive to work. Nearly every other Somali immigrant in America is employed, whereas only about 20% of Somali immigrants in Sweden have jobs
4. One can ignore all of the above and invoke Switzerland as an even better story of European success. Switzerland is a low-tax, small-government country of approx. 8 million people (every Nordic country consists of 4–10 million people), with low income inequality, and a significantly richer middle-class than those in Scandinavian countries
5. When someone touts countries with populations of 4–10 million as models, they’re inadvertently bolstering the case for states’ rights — i.e. local government is more efficient. When comparing the US to large European nations with populations above 50 million, e.g. Germany, Britain, and France, we find that median incomes are significantly lower than those in the US and even lower than those in Scandinavia
6. People like Bernie Sanders are only interested in poaching Scandinavian welfare systems, whilst paying little attention to the pro-market policies of Scandinavia which sustain those schemes
When discussing average incomes, it’s worth noting that Norway is an outlier and that their higher medians are completely attributable to their oil-wealth. To put this in perspective, Norway’s GDP/capita was considerably lower than that in Denmark and Sweden before major petroleum extraction began in the 70s. So, in part, what makes Norway richer than other Scandinavian countries is what makes the United Arab Emirates rich. Hence, you’ll see the phrase “except oil-rich Norway” used throughout the elaborations below. Also, Scandinavian and Nordic are used interchangeably, although Nordic includes Iceland and Finland in addition to Sweden, Denmark, and Norway. All significant observations hold true for both groups of countries.
1. The US clearly has higher GDP per capita than all of the Scandinavian countries, but people tend to reject this statistic as a measure of well-being since averages don’t account for skewed distributions. However, data on median disposable income tells us the same story — primarily that the average American commands a greater income than his or her Scandinavian counterpart. The table below shows PPP-adjusted median disposable income — which accounts for taxes and government cash-transfers — for an equivalent adult across OECD countries. The data show that the median income in America is considerably greater than that in every European country except Switzerland, Luxemburg, and oil-rich Norway.
Table from Wikipedia, data sourced from OECD
In short, the median American has more economic opportunity than his or her Swedish, Danish, and Finnish counterpart. It is often refuted that cash-income data is misleading since Scandinavians and Europeans in general receive non-cash benefits from the government (not captured by disposable income) such as healthcare coverage. However, the same would hold true for Americans who receive immense non-cash benefits from their employers, or the elderly who receive comprehensive coverage through Medicare. Considering that the vast majority of Americans are covered through their employer’s healthcare-package or Medicare, the median-income data do give us a pretty accurate picture of the advantage the average American holds over his or her Scandinavian counterpart in terms of economic opportunity. Given the current inflationary trajectory of US healthcare and university costs, US disposable cash-incomes could conceivably dip and converge with those in the Scandinavian countries over the coming years. Hence, the conversation should really be about increasing efficiency in medical and higher-education markets — which would create an even wider gap between European and US median incomes. Folks of our persuasion believe that the latter can be achieved through deregulation and less government involvement in education and healthcare, but that’s a different topic.
2. Comparing the descendants of Scandinavians who chose to immigrate to the US against the descendants of Scandinavians who stayed home many generations ago is a good way to control for cultural factors when contrasting the “boot-strapping” US approach and the “cradle-to-grave” Scandinavian paradigm. To this end, the Institute of Economic Affairs studied the socio-economic standing of Americans of Scandinavian descent and produced several insightful numbers on the group. Americans of Scandinavian descent are, on average, considerably wealthier than the average American. Since the average American is considerably wealthier than the average Swede, for example, it then follows that the median-earning American of Swedish descent is significantly wealthier than his or her counterpart in Sweden. A quote from The Economist reporting on the IEA study:
“According to a study from the Institute of Economic Affairs, Swedish-Americans are considerably richer than the average American — as are other Scandinavian-Americans. The poverty rate of Americans with Swedish ancestry is only 6.7%, half the national average. Swedish-Americans are better off even than their cousins at home: their average income is 50% higher than theirs, a number used by opponents of the Swedish model as an argument against the shackles of big government.”
Links to The Economist article as well as the original study cited:
http://www.economist.com/news/un...
https://iea.org.uk/publications/...
3. This is brief but builds on the broader argument you were making about the advantages Scandinavians enjoy by virtue of their small, hardworking, and homogeneous populations. Whereas point #2 tells us that Scandinavians are successful both in the US and in their home countries, comparing the experience of Somali immigrants in both Sweden and the US provides another semi-controlled comparison of the two systems. A report produced by the Swedish government entitled “Somalis in the labour market — does Sweden have something to learn?” shows that a Somali immigrant in the US is more than twice as likely to hold a job than a Somali immigrant in Sweden. I couldn’t dig into the report since the study is in Swedish, but it’s a quick and compelling observation of outcomes which can be used to elucidate a broader principle.
4. When Bernie Sanders tells us to look to Scandinavia, the easiest response is “Why not Switzerland,” which is the most successful country in Europe by just about every metric. Switzerland is a country of 8 million people (comparable to Scandinavian countries) which is further divided into 27 cantons (equivalent to US states or Canadian provinces), each of which has significant autonomy over its own affairs. The federal tax rate a tops out at ~13.2 percent, and the cantons gather and spend most of the country’s tax revenues and direct most public programs. Switzerland has low economic inequality and the highest disposable median income in the world after Luxembourg and Singapore, which is significantly higher than those in Sweden/Denmark/Finland and Norway (minus the oil-money). Switzerland is also the most economically free country in the world after Singapore, Hong Kong, and New Zealand. The latter is based on rankings produced by the Heritage Foundation.
http://www.heritage.org/index/ex...
5. The Scandinavian countries have populations ranging from 4–10 million — dwarfed by plenty of US states. A public scheme which works for 5 million people doesn’t tell us much about how it will work for 330 million Americans, especially when one considers the historic inefficiency of federal programs in the US. The fact that these countries have efficient public systems essentially bolsters the case for more local and state-level control in the US. When we turn our gaze to larger countries within Europe, we find that the US median income is substantially greater than that in France, the UK, and Germany. If Americans want Scandinavian systems, they should try to implement them on the state-level before imposing potentially fiscally catastrophic programs on the whole country. European entitlement programs are drastically different from country to country, and I don’t think Norwegians (Utahns) would be too happy if the Germans (New Yorkers) or French (Texans) got to vote on the specifics of their welfare schemes.
6. Progressives are selectively fond of the Scandinavian model. The revenues necessary for their generous entitlement programs wouldn’t be possible without the Scandinavian penchant for business and trade. What’s interesting is that the US is already ranked pitifully low in terms of trade freedom, after just about every other country in the Western world. We’re also ranked below all of the Nordic countries in business freedom, and below various Nordic countries (Iceland, Norway, Finland, Denmark, Sweden) in other economic freedoms — which is why we’re neck-and-neck in terms of overall economic freedom with the hyper-taxing Danes. All of the above draws from the Heritage Foundation Index of Economic Freedom.
Hundreds of millions of Americans haven’t been forced to hand over half of their incomes against their will to subsidize life for the 80% of the country that can easily afford it (though we do steal plenty of money for corporate welfare and other useless subsidides). Mass wealth-extraction doesn’t make for good tear-jerking cinema, but it’s wrong unless you can prove to me that stealing the loaf of bread will indeed feed a hungry child (in a proverbial sense)
As it stands, the US model works quite well for the vast majority of Americans. Left Wing Populists need to prove that instituting a Nordic-style system on a national scale would make everyone tall, blonde, and happy (I’m being figurative of course). It seems as if Scandinavians in the US are already tall, blonde, happy, and by-and-large significantly better off than their counterparts in the old country. It seems as if, controlling for other variables, Scandinavian culture + the small government produces more prosperity than Scandinavian culture + the welfare state.
All things aside, I’m happy to go full Sweden-mode on a state-by-state level, but NOT on a national level. As long as we experiment with it locally and verify results in an insulated fashion, I’d be happy to play along. But the suggestion that our vast and diverse country will replicate Nordic success on a federal level, and that we should just plunge into this headfirst to the protest of half of the country doesn’t sit well with me. As it stands, the US spends as much (or more) public money per capita as the UK, Australia, and Canada — yet we get very little in return (this holds true after factoring out military spending as well). We have the cash in the public coffers, it’s just that our federal government has been historically inept and unaccountable I’m weary of gigantic, potentially wasteful programs on a federal level. No thanks bro
- Americans of Scandinavian descent are, on average, considerably more prosperous than the average American and are significantly better off than the descendants of the Scandinavians who chose to stay in their home countries (i.e. the people living in Scandinavia today.)
- “According to a study from the Institute of Economic Affairs, Swedish-Americans are considerably richer than the average American — as are other Scandinavian-Americans. The poverty rate of Americans with Swedish ancestry is only 6.7%, half the national average. Swedish-Americans are better off even than their cousins at home: their average income is 50% higher than theirs, a number used by opponents of the Swedish model as an argument against the shackles of big government.”
Links to The Economist article as well as the original study cited:
http://www.economist.com/news/un...
https://iea.org.uk/publications/...
- Nearly every other Somali immigrant in America is employed, whereas only about 20% of Somali immigrants in Sweden have jobs. We know that welfare benefits are quite generous in places like Norway and Sweden, and the experiences of Somali migrants in Sweden and the US suggests that one has less incentive to work in a Nordic country
- A report produced by the Swedish government entitled “Somalis in the labour market — does Sweden have something to learn?” shows that a Somali immigrant in the US is more than twice as likely to hold a job than a Somali immigrant in Sweden. I couldn’t dig into the report since the study is in Swedish, but it’s a quick and compelling observation of outcomes which can be used to elucidate a broader principle
For Example. Here is living Standards in 2010 when the US was still in a recession and we STILL ranked much higher then the rest of the developed world.
As you can see from this chart, the United States ranks far ahead of other nations. The only countries that are even close are Luxembourg, which is a tiny nation that also serves as a tax haven (a very admirable policy, to be sure), and Norway, which is a special case because of oil wealth.
And don’t forget European living standards will presumably fall even further — relative to the U.S. — as the fiscal crisis in nations such as Greece, Spain, and Italy spreads to other welfare states such as France and Belgium
Here’s another chart that looks at the G-7 nations. Once again, the gap between the U.S. and the rest of the world is remarkable.
Maybe, just maybe, the United States should try to copy nations that are doing better, not ones that are doing worse. Hong Kong and Singapore come to mind.
A study from the London-based Institute for Economic Affairs has found that Swedes in America earn significantly more money than Swedes in Sweden.
Here are a couple of excerpts from the IEA study.
The 4.4 million or so Americans with Swedish origins are considerably richer than average Americans, as are other immigrant groups from Scandinavia. If Americans with Swedish ancestry were to form their own country, their per capita GDP would be $56,900, more than $10,000 above the income of the average American. This is also far above Swedish GDP per capita, at $36,600. Swedes living in the USA are thus approximately 53 per cent more wealthy than Swedes (excluding immigrants) in their native country (OECD, 2009; US Census database). It should be noted that those Swedes who migrated to the USA, predominately in the nineteenth century, were anything but the elite. Rather, it was often those escaping poverty and famine. …A Scandinavian economist once said to Milton Friedman, ‘In Scandinavia, we have no poverty’. Milton Friedman replied, ‘That’s interesting, because in America, among Scandinavians, we have no poverty, either’. Indeed, the poverty rate for Americans with Swedish ancestry is only 6.7 per cent: half the US average (US Census).
This is remarkable information, and it reminds me that Thomas Sowell had similar stats for other groups in his great book, Ethnic America.
I’m not familiar with the methodological issues involved in this type of research, but is certainly seems like this is a good way of getting apples-to-apples comparisons of different economic systems.
Like many other people, I’ve argued that the success of the overseas Chinese community (compared to their counterparts stuck in Communist China) is a damning indictment of statism.
Now we see that Swedes do reasonably well when living in a country with a big welfare state, but they do even better when living in a nation with a medium-sized welfare state.
The median household income in the United States is $51,914 — for Scandinavian Americans it is $66,219. Scandinavian culture coupled with US-style policy translates to low levels of poverty
Close to 12 million Americans have Scandinavian origins, that is to say are individuals whose ancestors largely or in some cases entirely migrated from Scandinavia and who today identify as having Scandinavian origins. This group is characterised by favourable social and economic outcomes. According to the 2010 US Census, the median household income in the United States is $51,914. This can be compared with a median household income of $61,920 for Danish Americans, $59,379 for Finish-Americans, $60,935 for Norwegian Americans and $61,549 for Swedish Americans. There is also a group identifying themselves simply as “Scandinavian Americans” in the US Census. The median household income for this group is even higher at $66,219.
As shown in the picture below, the living standard of the descendants of Scandinavians living in America is considerably higher than their cousins in Scandinavia. We cannot draw definitive conclusions from these figures, since household composition may differ, but there is prima facie evidence that Scandinavians who move to the US are significantly better off than those who stay at home.
The success of Nordic immigrants in the US shows the pervasiveness of norms and low level social institutions. The comparison with Scandinavian Americans illustrates that the pursuit to create “social good” through welfare state policies has hindered economic prosperity. More surprisingly, the US-system hasn’t only allowed for higher living standard, but also lower poverty.
Economists Notten and Neubourg have calculated the poverty rates in European countries and the US using equivalent measures. They have shown that the absolute poverty rates in Denmark (6.7 per cent) and Sweden (9.3 per cent) are indeed lower than the US level (11 per cent). For Finland however, the rate (15 per cent) is somewhat higher than in the US. At the same time, Nordic nations have for long, even before the rise of large welfare states, been characterized by low levels of poverty. Nordic descendants in the US today have half the poverty rate of the average of Americans — a consistent finding for decades. In other words, Nordic Americans have lower poverty rates than Nordic citizens.
Milton Friedman was right. Scandinavian culture coupled with US-style policy translates to low levels of poverty, in the same way that Scandinavian culture coupled with large welfare states translates to low levels of poverty. This does not disprove that welfare policy can create social good, but does point to the limits of policy. The big question is thus not how to copy Social Democracy, but rather how to strengthen the Individual responsibility, social cohesion and working ethics that creates social success for Nordic citizens — not least in the capitalist US-system.
The table above compares the GDP per capita of America’s 50 states in 2014 (BEA data here) to the GDP per capita of selected countries in Europe and Asia on a Purchasing Power Parity (PPP) basis, based on data from the World Bank. As explained by the World Bank.
As the chart demonstrates, 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 West Virginia, and not too far above Mississippi. Countries like Italy, S. Korea, Spain, Portugal and Greece would each rank below Mississippi as the poorest states in the country.
Using GDP per capita as a measure of both economic output per person and of a country’s standard of living, America is winning quite handsomely. And one of the factors that contributes significantly to our standard of living, which is among the highest in the world and the highest in history, is the availability of cheap imported goods from countries like Mexico, Japan and China.
Here’s some additional analysis based on his number-crunching.
With the exception of Luxembourg ($38,502), Norway ($35,528), and Switzerland ($35,083), all countries shown would fail to rank as high-income states were they to become part of the United States. In fact, most would fare worse than Mississippi, the poorest state. For example, Mississippi has a higher median income ($23,017) than 18 countries measured here. The Czech Republic, Estonia, Greece, Hungary, Ireland, Italy, Japan, Korea, Poland, Portugal, Slovenia, Spain, and the United Kingdom all have median income levels below $23,000 and are thus below every single US state. …Germany, Europe’s economic powerhouse, has a median income ($25,528) level below all but 9 US states.
We could stop at this point and declare that the United States was more economically prosperous than all European nations other that oil-rich Norway and the twin financial centers of Switzerland and Luxembourg.
This doesn’t bode well for Bernie Sanders’ claim that America should be more like Sweden and Denmark.
But McMaken expands upon his analysis and explains that the above numbers actually are too generous to Europeans.
We’ve already accounted for cost of living at the national level (using PPP data), but the US is so much larger than all other countries compared here, we really need to consider the regional cost of living in the United States. Were we to calculate real incomes based on the cost of living in each state, we’d find that real purchasing power is even higher in many of the lower-income states than we see above. Using the BEA’s regional price parity index, we can take now account for the different cost of living in different states.
And he produces a new graph, once again featuring the United States average in red, with other developed nations to the left and numbers for various states to the right.
McMaken gives some added context to these new adjusted-for-cost-of-living numbers.
…there’s less variation in the median income levels among the US states. That makes sense because many states with low median incomes also have a very low cost of living. …This has had the effect of giving us a more realistic view of the purchasing power of the median household in US states. It is also more helpful in comparing individual states to OECD members, many of which have much higher costs of living than places like the American south and midwest. Now that we recognize how inexpensive it is to live in places like Tennessee, Florida, and Kentucky, we find that residents in those states now have higher median incomes than Sweden (a place that’s 30% more expensive than the US) and most other OECD countries measured.
And here’s the most powerful data from his article.
Once purchasing power among the US states is taken into account, we find that Sweden’s median income ($27,167) is higher than only six states… We find something similar when we look at Germany, but in Germany’s case, every single US state shows a higher median income than Germany. …None of this analysis should really surprise us.
In other words, even when we limit the comparison to Europe’s more successful welfare states, the United States does better.
Not because America is a hyper-free market jurisdiction like Hong Kong or Singapore. Instead, the U.S. does better simply because European nations deviate even further from the right recipe for prosperity.
And if you prefer direct measures of living standards, then data on consumption from the OECD also shows that America is considerably more prosperous.
It’s a sign of American prosperity that we can afford to buy more from other nations than they can afford to buy from us.
It’s also a sign of prosperity that, when they do earn American dollars, foreigners often choose to invest those funds in the American economy (remember, the necessary flip side of a “trade deficit” is a “capital surplus”).
P.S. Speaking of European prosperity, here’s a fascinating map I saw on Twitter. The reporter from the Wall Street Journal who shared it remarked that “Purple areas are rich as US states. Yellow areas poorer than Mexico.” In other words, The few dark areas (a handful in Germany and one each in a few other nations) are the only parts of Europe that are economically equal to the U.S.
Like the Chart I linked above.
We know very well that the US has both the highest living standards for the rich and also the largest inequality among the large, advanced, nations. However, look at it a little more closely in relation to other countries. We’re often told that to be poor in the US is much worse than being poor in the social democracies of Europe. And the bottom 10% in the US are indeed worse off than the bottom 10% in Sweden. But they’re better off than the bottom 10% in Germany or France: places where we are told that there is indeed that social democracy. Maybe there’s something for this capitalism red in tooth and claw then: given that it does seem to improve the lives of the poor.
The US is a much more unequal place than other countries. But notice also that we’re told that the US bottom 10% have a living standard very similar to those of Finland and Denmark: you know, those icy social democracies where they care more about the poor.
They might indeed care but caring doesn’t seem to do all that much to improve their living standards.
We might even say that higher economic growth and also higher economic inequality (or, alternatively, limiting economic growth through redistribution as the opposite) leaves the poor just as well off.
And the third comes from Branco Milanovic, the World Bank’s main man on global inequality:
Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.
Maybe it’s true that the US doesn’t do enough for the poor in the US. That’s rather a judgement call based upon your own morals. But it’s very difficult to see in the actual figures that the US doesn’t do enough. The poor in the US are richer than around 70% of all the people extant. The poor in the US are about as poor, perhaps a bit richer, than the poor in other rich countries. It is true that there is more inequality in the US: but this isn’t because the poor are poorer. It’s because the rich are richer.
If we use Purchasing Power Parity (PPP, adjusting for the way in which things differ in price in different places, so we can look at the real value of incomes) and then look at the after-tax and benefit incomes of the poor, we can see this.
One such study, conducted a decade ago, for EPI’s State of Working America Report, measured the incomes of the poorest 10 per cent of the US using such methods, and compared them to US median incomes. The researchers also looked at the bottom 10 per cent incomes in places like Sweden and Denmark, the UK, and then, using the same adjustments, compared them again to US median income.
So as far as possible, this is a measure of what those poor can buy, after all the help they get in benefits and so on. Those 10 per cent poorest all had incomes around the 35 per cent to 38 per cent of US median income. So, while the US is more unequal (the same study showed that the richest 10 per cent in the US had 220 per cent of median US income to play with, top 10 per cent of Swedes 110 per cent for example), it isn’t that the actual standard of living in the US is worse for the poor.
We’ve all also heard that poverty levels in the US are quite horrendous by European standards. There’s the chilling stat that near 20 per cent of American children live in poverty, an appalling rate for a modern nation (after all, it’s hardly the fault of the kiddies, is it?).
But this isn’t quite so as the US measures poverty differently to everyone else. We all say that if, after benefits, you’ve got less than 60 per cent of median income, then you’re poor. We get a bit fancier with adjusting for household size — after housing costs and so on — but that is the general system. The US, instead, has a so-called “absolute” poverty standard. Weirdly, this amounts to three times the basic food budget for a family in the early 1960s upgraded for inflation since then.
The major difference between the two ideas is that wages — generally at least if not in the past few years — rise faster than inflation. So the American measurement should gradually see poverty disappear; relating it to median wages means that we’re really measuring inequality.
However, that’s not really the problem with the US measurement. The main issue is that the US doesn’t include most of the things it does to alleviate poverty in its measurement of poverty: and we do. So, the EITC (our working tax credits), Section 8 vouchers (housing benefit), Medicaid and SNAP (food stamps, which in reality work very like child benefit, they’re very much more generous to those with children) don’t get counted in measurements of US poverty.
Also to also further elaborate my points. The Indexes I use above go off of these standards.
This was in 2011 when our top 10% didn’t own nearly as much and the country was in a Recession. The Economist has grouped these 11 sectors into four broader categories. America excels most in money and jobs, Switzerland in health and education. This year the OECD has adjusted the index for equality to give an estimate for the top and bottom 10% of each country’s population. America scores particularly poorly on this account, with the bottom 10% having an index score some 25% below that of the top 10%.
We also hear we have a terrible infrastructure crisis. This is mostly blown way out of proportion. We have better Infrastructure in general than Canada and GBR.
Progressives think the US suffers from a massive “public investment” deficit. They point to a much-hyped “report card” from the American Society of Civil Engineers folks who like infrastructure spending, mind you that calls for an additional $2 trillion in spending to get US road, bridges, and water works up to a solid “B” grade from the current “D+” by 2020.
But dig a little deeper and you find claims of a supposed infrastructure crisis are wildly overstated. US public construction spending has averaged 1.8% of GDP since 1993, with a low of 1.6% in the first quarter of this year and a high of 2.2% in the second quarter of 2009. Over the past two years, it’s averaged about 1.7%.
But is that a lot or a little compared to what our needs are? A Bloomberg piece last August highlights research that finds US public investment has tracked the OECD average since at least 1970. “The US. is about where it should be — close to peer nations such as Canada, Germany and Australia,” concludes reporter Evan Soltas. “Nations that spend substantially more tend to be in a phase of catch-up growth, such as South Korea and Poland.”
The truth is that, while some of our infrastructure is in poor condition, other infrastructure is in pretty good shape.
This is not to claim America is a Utopia. Nor is it to claim its perfect “Were far from it”. However this is to claim the domestic situation in the United States is nowhere near as bad as its made out to be by Populists on both the Left and Right.
