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GDP/PPP

A quick sloppy post because it's late. I've been involved in libertarian/liberal/soc dem debates again recently, which prompts the matter of comparative economics, and how well various countries do. If you look at the CIA World Factbook, there's a big gap in GDP/capita (Purchasing Power Parity adjusted): US at $44,000, Norway even higher, but almost everyone else I'd be comparing us to in the $30-35,000 range. Big gap! Why?

data links:
GDP/capita
PPP

Possibilities:
US workers are that much more productive as they work.
US workers work that many more hours.
American empire: corporate exploitation of other countries, and Hollywood's cultural imperialism, brings in a lot of extra GDP money, possibly manifesting as extra millionaires and billionaires.
Bias: PPP calculations heavily weight something the US is particularly good at, like cheap oil or real estate.
Egalitarian backlash: higher base wages in other countries means that anything labor dependent is more expensive there. The middle American has access to cheap Americans and immigrants that the middle Swede doesn't. Upside, no cheap Swedes, downside more expensive products. Upside for Americans: servants. Downside: someone has to be the servant.

There's probably data to be found on all of this, but it's late. I think that European vacation time isn't *that* much greater or hours worked that much less, but I could be wrong.

One thing I could test easily: CIA gives raw GDP numbers and population, though not raw GDP/capita, but I can divide. Result: Sweden and Denmark look a lot more comparable to the US, while Norway soars to $57,000. France doesn't change that much. Canada gets worse.

The point of that number is how much power the consumer has on the world market. Locally, Swedes are at a disadvantage, perhaps because other Swedes are more expensive, or because Sweden is so far north. When it comes to imports, they're a lot more equal to us -- which speaks to socdem's competitiveness vs. American capitalism.

Comments or data tips from other readers (james pompe dsgood) welcome!

Comments

( 10 comments — Leave a comment )
mazarinade
Jun. 24th, 2007 08:22 am (UTC)
Further point to ponder: denomination of much of the world's energy market in USD amounts to a giant interest-free loan to the US from the entire rest of the planet. If and when the world shifts to trading its oil and gas in some other currency, the US' performance figures will drop to something more realistic-looking.

By way of aside, the last nation to discuss redenominating its oil exports in Euros was Iraq, and look what happened to them. Iran's started talking about establishing a non-dollar Oil Bourse, and lo! the Neocons start publishing pieces with titles like 'The Case For Bombing Iran'.
mindstalk
Jun. 24th, 2007 04:22 pm (UTC)
I'd heard of the Iraq thing. But I don't see how the "giant interest free loan" works.
mazarinade
Jun. 24th, 2007 05:03 pm (UTC)
In order to buy oil, you have to have dollars, and the principal place to maintain dollar reserves is on US securities markets. Effectively, the US gets, for free, a small slice of the economy of every other country in the world added to its capital reserves.
pompe
Jun. 24th, 2007 11:19 am (UTC)
Norway's numbers are boosted heavily by oil money. That money is going into an oil fund (or is being used on frivolous regional subsidies), so it can be argued that in practice the average Norwegian is not quite as wealthy as it seems. Sweden, on the other hand, hit a severe recession in the early 90's. Presently GDP growth is faster than the US, but there was a lot of lost ground. Also, I don't know how propped up the US economy is by cash flow or how important natural resources are.

And it should be noted both Sweden and Denmark have very high taxes, which probably would affect the PPP-GDP/c (but not the plain GDP/c) and might explain why these nations _
- and Norway, another high-tax country - rise so much in plain GDP/c. Swedes get free university studies but pay 25% sales tax on anything you can't eat or read, as an example.

Work is expensive here. But that also means efficiency is prioritized. But yes, it means services of the servant kind are seldom worth utilizing. There's also a semi-historical psych issue there.

However, I'd like to throw in a wrench or two here. GDP/capita may or may not be interesting. First of all the values may be skewed heavily in favor of say, the very rich, and it is a possibility the Scando countries scare off the very rich so they live somewhere else. So it doesn't say that much about how the average citizen lives. A median value might be more interesting.

Second, we must ask what we get for the money. If US number are almost 33% higher than Sweden's or Denmark's, we presumably would see some other positive effect of that wealth. Longer life span, less crime, lower infant death rates, higher education. If we don't see any such benefits the conclusion could be that US capitalism might be good at generating wealth but compared to say, Swedish free-trade social democracy, inefficient at converting wealth into living standard.
pompe
Jun. 24th, 2007 11:30 am (UTC)
...indeed, googling a bit I see that there might be problems with PPP-GDP comparisons for welfare states. Basically the basket-of-goods do not reflect the more intangible things a welfare state might focus on.
mindstalk
Jun. 24th, 2007 05:02 pm (UTC)
Looking at Nationmaster PPP, it confirms my CIA impression -- a big bloc of non-US countries gets squished together. In fact they're even closer together than in raw GDP. Big drop from Norway to Switzerland but then a very flat plateau until maybe NZ.

OTOH, good -- First World countries are First World countries. But then why's the US ahead like that -- along with Ireland? Are the Irish 4/3 as wealthy as the British?
mindstalk
Jun. 24th, 2007 10:22 pm (UTC)
Going by Wikipedia, a lot of the income is multinational, and probably funneled out of the country. Ireland doesn't tax copyrighted stuff -- meant for artists, exploited by software.

Health care system seems semi-public in structure (though WHO says nearly 80% of funding is public.) I added data to my health page http://mindstalk.net/socialhealth/
suggesting Ireland isn't doing too well there -- it underperforms the UK, and even the US in healthy years from age 60.
mazarinade
Jun. 24th, 2007 05:06 pm (UTC)
There's something to what you say. Some years ago, when I was in the top bracket for income tax purposes in the UK, I did a comparison between my tax position here and my tax position in the US. I'd have been paying slightly less tax in the US, but on top of that I'd have been paying for healthcare. I got prices for NHS equivalent health insurance in the US, and found that I was effectively being paid several hundred pounds a year not to emigrate to the US.
mindstalk
Jun. 24th, 2007 04:33 pm (UTC)
GDP/capita is interesting at least in the sense of productivity on the global scale, how much the country as a whole can command. So rich people count for purposes of "does the economy 'work', as conservatives say it doesn't?"

Nationmaster has Sweden within $1000 of the US, even with greater vacation times, possibly higher unemployment, lack of Hollywood and empires -- suggesting the average Swede is even more productive per person.

I'm not sure if taxes would affect PPP, since the adjustment is looking at how far a dollar (or kronor?) goes, not how many dollars you have.

I'd love median income data by country. I haven't found it. Nationmaster has some inequality measures (Gini, Richest 10%/Poorest 10%) but I don't see median or anything like it.

But yeah, that Swedes live longer for less is something I've been pointing out a lot. I think what was left of my libertarianism has burned away in the face of The Data.

"inefficient at converting wealth into living standard" -- nice line, heh.

Glad you responded -- I banged this out last night largely so that you could wake up to it. :)
pompe
Jun. 24th, 2007 07:53 pm (UTC)
I'm no economist, but... High taxes means less disposable income, which would directly impact the purchasing power, I think.
( 10 comments — Leave a comment )

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