America, in Relation to Peers

Do you feel that America is having a bad time?  That economically, politically, and culturally, we are in a rut?  Do you even wish that America had something that some other nation or region currently has?

Be careful what you wish for.

A European study has estimated that the EU economy is only as developed as the US was 22 years ago.  This does not even include the newest, poorer members of the EU like Romania and Bulgaria, which would drag down the EU stats even further.  Furthermore, the EU has a growth rate slower than that of the US, guaranteeing that the gap will continue to widen. 

Related : More on the Decline of Europe.

But China has a rapid economic growth rate, that enables it to catch up with the US, does it not?  With China's huge population, it needs to merely achieve a per-capita GDP that is one fourth that of the US in order to surpass the total size of the US economy.  That should be relatively easy, no?

China is not permitting new Internet cafes to open in 2007.  So much for free-market supply/demand, or supercharging economic growth through participation in the information age.  It appears that the question of how high prosperity can rise before the demand for personal freedoms directly forces the PRC to curb progress has been answered.  The PRC will continue to face more direct tradeoffs between economic growth and the restriction of personal freedoms.  It will be interesting to see which area they choose to make concessions in over the coming years.

How about India, then?  India will never restrict Internet access for the public, and has a young, growing population that Europe lacks.  GDP growth topping 8% certainly qualifies as enviable.  Surely, India has potential.

And it will always have potential.  If Europe is 22 years behind the US in economic growth, it would be impossible to calculate how far behind India is by that metric, as the US is only 231 years old (and has never been as poor as India is today).  India's infrastructure is so shabby that highways have an average speed of 20 mph, and large cities have to resort to restricting electricity availability to six days a week in order to ease grid overloads.  On the UN Human Development Index, India ranks a miserable 127th, even lower than many dictatorships and communist states.  India's per capita GDP is just $700 a year, a number which, by American standards, seems scarcely higher than zero.  8% annual GDP growth for the next 30 years will still only bring prosperity in India to where Mexico is today.

But, despite India being the poorest entity in this article, all Americans should note that India is the only entity here that is pro-US, and actually wants to emulate the US, rather than create an alternative model like the EU and China have attempted.  India deserves pity, but also encouragement from America. 

So there we have the state of three other regions that America is often compared to.  I will also throw in this chart of per capita GDP on a PPP basis, over the last 60 years.  The biggest takeaway from here is that basic growth appears easy, as a developing nation merely has to copy what was done by advanced nations before, but once a certain ceiling is reached, incremental growth becomes harder.  No large country of over 50 Million people and a per capita GDP greater than $20,000 a year has managed to sustain a growth rate higher than the world average (currently 4.5%) for an extended period.  Thus, China's rapid growth will moderate long before high per-capita GDP is reached, just as Japan's and South Korea's has.  Also note that India was richer than China all the way until 1991, and was probably at parity with South Korea and even near Japan in 1950, until India foolishly allowed itself to fall behind. 

Remember, the true measure of a country is the net of how many people want to get in, and how many want to get out.  This metric appears to rank America right on top. 

Related : Why the US Will Still be the Only Superpower in 2030. 

Comments

[China Law Blog]

Great post!

[Sam]

Thanks - I enjoy your graphs and analysis to help put things into perspective.

[jeffolie]

The cost of living is not take into account. Moving from a high cost area to a low cost area make a termenous difference.

[GK]

jeffolie,

Cost of living is taken into account in both the UN Human Development Index and the PPP per capita GDP (hence the PPP).

Do you think America is poorer than Japan?

[Manco_Dollars]

Great post! I think Japan is on par properity-wise with America at the moment. That's not a bad thing since Japan really embraces capitalism. The best run companies in the world are Toyota, Honda, etc... Heck, I've owned Toyota and Honda vehicles.

[Saul]

Interesting. While I would rather see America as the world's superpower (even though I am not an American) I would also like to see faster development in other nations. Both for the reason of spreading liberty and prosperity but also to further accelerate the rate of scientific and technological advancement of the planet.

[GK]

Saul,

Prosperity also corelates with a reduction in warfare (most of the time).

[Kosha]

Great post. Specially the China bit as that really is the dinner topic du jour these days.

As a related side-note, many expats I hang out with here in China talks about how blind the West is to the "power of China" and how it will soon be the only super-power as America is "self-destructing."

[GK]

Kosha,

As long as US-protected Taiwan and South Korea exist in China's back yard, the "power of China" is not all that. When China has a puppet state near the US mainland, then only will the tide have shifted. Cuba merely 'trading' with China does not count.

How is the US 'blind' to China when every US company does business there, but Chinese people themselves don't know about their own history of the last 50 years (Tianenmen Square, Great Leap Forward, Cultural Revolution). Not that you should bring these up when you are located there, though. You might get in trouble with the government.

By the 'West', Europe is to some extent self-destructing, and China will surpass Europe.

But how is America self-destructing when US GDP is still growing at a rate similar to the world average? The US share of the world economy is not shrinking.

Plus, always use this sentence : The true measure of a country is the net difference between how many want to get in vs. how many want to (permanently) get out. By this measure, the US is very far ahead of China or any other country. Anti-Americanism is nothing more than fashion until these people's actions speak louder than their words.

Please forward your opponents this article, as well as my "US will be the only Superpower in 2030 article". Unless they refute individual points, they have nothing.

[Assistant Village Idiot]

Excellent analysis of the main points, but I have a few quibbles. As your "Who Hates America?" link shows, Poland is US-positive and trying to emulate it. One could use this for a proxy of all Eastern Europe, which is more capitalism-hopeful than Western Europe. How this will play out as these poorer countries join the EU and adopt more of the Western European model remains to be seen. They may influence the west as well, certainly. European demography looms large in all this.

Those European countries which are non-EU may excape the day of destruction as well: Switzerland, Iceland, Norway. Though less capitalist than the US (more like Canada), they have avoided some of the Eurosoc problems.

As for China, there is enormous difference between the coastal and inland areas in income, creating an imbalance that threatens stability there. The PRC's hope to get all the benefits of open markets without actually having an open society is another enormous tension, as you note.

[GK]

AVI,

How this will play out as these poorer countries join the EU and adopt more of the Western European model remains to be seen.

If Eastern Europeans are more capitalist and less interested in social models that are seen in Germany and France, they just might cause high-tax socialist systems to change, rather than be forced into them unwillingly.

Take Ireland. It is in Western Europe, but has a lower tax rate than even America (let alone Britain or France), and has a higher GDP growth rate than the US. 20 years ago, Ireland was poorer, but now is richer than Britain or France. Many Poles go straight to Ireland for employment, rather than to the bigger, higher tax countries.

Ireland's success could very well pressure other countries to adopt that low-tax approach.

China : I do contend that between now and 2015, China will have to choose between a big expansion of freedoms, or much slower economic growth. They won't be able to sustain it both ways forever.

[Nitin]

Hi

Just chanced upon your post:

I agree with your general thesis that a growing number of Indians admire America and identify with many of its values.

But as I've pointed out a few times on my blog, the relationship between the Indian and the American governments is driven by a convergence of (perceptions) of national interest. China being one of them.

India deserves pity, but also encouragement from America.

Hmm...neither actually. It needs America to understand India. And invest in India :-)

[AndyJ]

I have just tripped over your blog. I am now a fan. I enjoy well written concise discussions. You hit all three of those buttons with every post-! Thanks.

[GK]

Thanks, AndyJ

[Prince of Darkness]

Actually the US was once as poor as India is today. If I remember correctly from when I last checked, US had the same GDP per capita as India (PPP) in around 1880. So, India is around 125 years behind the US today.

India in 1970s was around where US was in 1776. So it was around 200 years behind then. So India is catching up at around 3x the speed with the rate going up in recent years.

[GK]

PoD,

Do you have a reliable source to back that up? I don't think the US ever had composite human indicators as low as India has today.

Plus, don't assume that India's (or China's) current rate of growth can persist when a high per-capita GDP is achieved. From the graph itself, note how Japan rose rapidly, but then tapered off as all the 'easy' growth was completed. South Korea is showing the same trend. China and India, too, will find it much harder to grow at 8% or 10% when, eventually, GDP per capita crosses $20,000. Thus, catching up to the US in per capita terms, is unlikely in the next 30+ years.

Why do you think the US (Japan, Britain, Australia, etc. are even lower) only grows at 3% a year despite having far superior economic policies, infrastructure, education, and technology diffusion mechanisms than developing regions? Because all the low and medium-hanging fruits are already consumed. After a certain point, growth only comes through technological breakthroughs..

[Sridhar]

Hmmm....a post filled with stupid self-loathing that doesn't even care to ponder over facts... US is in a deep economic dung-hole and will remain so for the foreseeable future, you yourself have predicted this downward trend and then, you are back with stupid rhetoric.

"India deserves pity, but also encouragement from America."

Ummm, yeah...no thanks, US needs India and China for it's own industries to grow, and also their consumers need Chinese and Indian help. toning down this stupid and classic anglo-saxxon arrogance might help in forming better relations with both India and China in the long-term future. Nobody needs your "pity", but we may have a talk if you are with us to do business. You see, your stupid jingoism sounds hollow when you are shown the facts, when are you are living in a bankrupt country that has no "clothes" to show of!!

So, Mr. The Futurist, instead of this stupid hooliganism and over-optimism, maybe you should write why your great Amreeka is failing at almost every parameter in an economic system created by America and americans themselves.