March 20, 2007
The Richest and Most Powerful Country of the Time II Posted by Joshua Zeitz at 12:20 PM EST In response to my suggestion that the United States is not categorically the richest country in the world, John Steele Gordon writes: “Per capita GDP is utterly irrelevant here. If I own a single Rembrandt worth $50 million, do I have a richer and more powerful art collection than the Metropolitan Museum of Art, whose 100,000 pieces of art are worth only an average of $1 million each? A more relevant chart is . . . GDP per country, not per capita. The United States had a GDP in 2005 of $12.5 trillion. . . . With 28.15 percent of world GDP, the United States is by far the richest and most powerful country of our time, perhaps any time.” I still maintain that GDP per capita is both relevant to Mr. Gordon’s original argument and the right indicator to examine. In his post yesterday, Mr. Gordon proffered that “the richer and more powerful the parent, the less excuse there is for things not being perfect. It would be an interesting exercise in historical psychology to see if the tendency to blame one’s own country for all the world’s troubles is most strongly found in the richest and most powerful country of the time.” Mr. Gordon was suggesting an alternative explanation of homegrown criticism of American institutions. Agreeing only in part with Michael Barone, who attributed the blame-America-first instinct to liberal professors, Mr. Gordon wondered whether such self-directed criticism was not the usual byproduct of an affluent society. Seems to me he may be onto something, though I still take issue with his characterization of America as the “richest” country of its time. I hope we can agree that there are different ways to determine wealth. Total GDP is one measure; GDP per capita is another. Mr. Gordon used the art collector’s analogy. Let me suggest another. Family A has an annual household income of $100,000 and net assets of $250,000. Family B has an annual household income of $150,000 and net assets of $400,000. Family A consists of two working parents and two children. Family B consists of two working parents and eight children. Which family is richer? By Mr. Gordon’s standard, family B is richer, because it has more total assets and income. By my standard, family A is richer, because the cost of feeding, clothing, educating, and providing health care for 10 people is a lot more than the total cost of providing for the same basic needs in a family of four. Family A has more income and more assets per capita than Family B. It stands a better chance of eating out and vacationing more, sending its kids to private colleges, and stashing away more money, long-term, in retirement investments. Which family is “richer?” There are other ways to measure wealth, as well. I imagine that Mr. Gordon would agree that corporate perquisites like housing and travel allowances, stock options, and company cars should in some way be considered when measuring an executive’s personal riches. The same is surely true of states and citizens. Ireland and Norway, which have greater GDP per capita than the United States, and Canada, which ranks below the U.S., provide their citizens with valuable social provisions like health care. Surely this contributes to the wealth of individuals in ways that elude simple indices like total GDP or GDP per capita. Standard of living is also a good measure of wealth. Scandinavian countries are renowned for their superb public infrastructure, their health care systems, their schools and their childcare arrangements. Their citizens work less, live longer, eat better, and have more relative purchasing power than citizens of other countries, including the United States. That is why Norway, Iceland, and Sweden ranked first, second, and fifth in the 2006 Human Development Index, while the U.S. ranked eighth (behind Ireland, Canada and Japan). The HDI is an interesting measure of how much wealth countries possess and how universally felt that wealth is. Mr. Gordon’s original point was that citizens of affluent countries may be especially prone to criticize their domestic institutions and traditions, and that this may be especially true in the United States, which he called the “richest” country of its time. In order for his idea to bear out, aggregate wealth would have to be widely distributed and widely felt. It wouldn’t matter if the U.S. had 80 percent of the world’s wealth sitting in a bank vault in Kansas. If citizens could not enjoy the benefits of that wealth, they would not be living in an affluent society, and they would not feel affluent. My point is that on a per-capita basis, the U.S. is not richest, and in terms of its quality of life or standard of living, it lags behind several other developed countries. Mr. Gordon enjoys the quick quip, and indeed, in his recent post he mocked Canada for not matching the United States in military might and wrote off Ireland as a tax haven. Lest we confuse wit for wisdom, it might be helpful to remember that Ireland now has one of the most robust economies in the developed world and is, for the first time since the nineteenth-century famine, attracting immigrants rather than exporting migrants. That loophole by which Americans can claim Irish citizenship if they had one Irish-born grandparent? Expect to see the Irish government close that soon. As for Canada, it may not be able to pacify New York, but then, the U.S. can’t seem to pacify Baghdad either. Also, Canada still licks the U.S. on the HDI, and they still play better hockey.
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