Who’s number one? Not the U.S. apparently. David Francis writes in the Christian Science Monitor:
The United States is the world’s only military superpower and has the globe’s largest economy. Yet, by some measures, the US is a second-rate industrial nation – at best.
“Compared to other advanced economies, our market-driven model yields highly varied results regarding the living standards of our citizens,” notes a study by the Economic Policy Institute (EPI), a nonpartisan think tank in Washington.
It’s an open question as to whether most Americans are better off than most Western Europeans.
“We leave a lot of people behind,” says Sylvia Allegretto, an economist at EPI.
“We are a dynamic economy,” says Timothy Smeeding, an economist at Syracuse (N.Y.) University. “A lot of people are doing well,” he adds. But for those with median incomes ($40,000 a year) or less, it is a “second-rate” economy. They “are not getting much help.”
Conservatives like to brag about numbers — Gross Domestic Product (GDP) and Gross National Product (GNP) and Purchasing Power Parity (PPP) numbers, for example — and toss in some coefficients and price adjustments, and then they say, ah-HAH. The U.S. is the richest country in the world.
This guy is a prime example. After a dizzying display of numbers, he concludes:
If we accept (as I do) that we do, indeed, need to have a social safety net, and that we have a duty to provide for those incapable or unlucky enough to be unable to do so for themselves, we need to set some level at which such help is offered. The standard of living of the poor in a redistributionist paradise like Finland (or Sweden) seems a fair enough number to use and the USA provides exactly that. Good, the problem’s solved. We’ve provided — both through the structure of the economy and the various forms of taxation and benefits precisely what we should be — an acceptable baseline income for the poor. No further redistribution is necessary and we can carry on with the current tax rates and policies which seem, as this report shows, to be increasing US incomes faster than those in other countries and boosting productivity faster as well.
At the bottom of the article, the author’s blurb: Tim Worstall is a TCS Daily contributor living in Europe. (chuckle)
Compare/contrast with Robert Kuttner, who wrote in April 2006:
Census data show median household income fell 3.8 percent or $1,700, from 1999 to 2004, according to economist Jared Bernstein of the Economic Policy Institute (on whose board I serve.) And this drop occurred during a period when average productivity rose three percent per year.
Moreover, as economist Jeff Madrick has observed in his book ”Why Economies Grow,” , the reality is worse because prices of commodities that make us middle class are rising much faster than inflation generally: housing, college education, health care, and also child care. These very rapid price increases are offset by falling costs of consumer electronics, basic food, and clothing, creating misleadingly low inflation measures.
It’s great that shirts are cheaper than a decade ago, and that we all have cell phones. But that doesn’t exactly substitute for a house, an affordable college education, or health care.
According to economist Bernstein, whose study covers the years 1991-2002, households in the middle fifth of the economy increased their incomes (not adjusted for inflation) by 41 percent. Inflation during that period, as measured by the government’s Consumer Price Index, went up 33 percent. That implies real living standards rose by a not very impressive 8 percent during more than a decade.
But hold on. During the same period, housing, healthcare, education, and child care went up 46 percent, or more than incomes. We cannot afford the big things we need and comfort ourselves with gadgets. The cheaper laptop, plasma TV, and GPS screen in your car make it appear statistically that living standards are not falling as much as they are.
The emblem of the new economy might be a 35-year-old, listening to an iPod, living in a house much smaller than the one he grew up in.
To use a favorite word of my grandmother’s, call it the Tchotchke Economy (a Tchotchke is a small trinket): Plenty of nifty, ever cheaper electronic stuff — and ever more costly housing, education, healthcare. An iPod is swell, but it doesn’t exactly make you middle class.
Why does this describe America in 2006? Don’t blame it on immigrants. Blame it on the people running the government, who have made sure that the lion’s share of the productivity gains go to the richest 1 percent of Americans. With different tax, labor, health, and housing policies, native-born workers and immigrants alike could get a fairer share of our productive economy — and still have the nifty iPods.
Righties pooh-pooh standard of living comparisons as so much socialist hocus-pocus; they prefer numbers. But I would really love to see a side-by-side comparison of how average working people live in several industrialized nations. Take some common occupations, both white and blue collar — e.g., truck driver, cashier, teacher, office administrator — and compare how people in those occupations manage in various countries. Take into account what kind of house they live in; how much of their income goes to pay for housing (mortgage, rent, property taxes); what major appliances they own; how they get around on an ordinary day (car, bus, bicycle) and how much time they spend commuting; how many hours a week they spend on the job; vacation and leisure (how much paid vacation they get, and what they do for fun); the quality of health care they receive and how it’s paid for; how much they spend on child care and education; etc.
Take your numbers and shove ’em, in other words. Show me how ordinary working folks live. I suspect the U.S. would look pretty average in such a comparison — better in some ways, worse in others.
Of course, in the United States there are huge disparities from region to region. Housing is a lot more affordable in most of the South and Midwest than it is in the megalopolis northeast, for example. It might take some doing to figure out what the real “average” is in the U.S.
See also this article from the August 19 Guardian: “Balance of power ebbs away from the US.”
… the US economy has already slowed, expanding at an annual pace of only 2.5% in the second quarter. With news this week that the 12-member eurozone expanded at an annualised rate of 3.6% in the April to June period, Europe is suddenly growing faster than the US. Britain, too, has recovered from last year’s slowdown and expanded at an annualised 3.2% in the second quarter.
In the last post I wrote about how the nation’s infrastructure is rotting away. This is not from a lack of wealth; certainly we got wealth up the wazoo in America. No, our infrastructure is rotting away because of a lack of will, as well as greed. A small portion of our citizens are sitting on most of the wealth and don’t want to share it. And the politicians are too corrupt or clueless to insist that infrastructure be maintained. Eventually we’ll have more and more power failures and maybe some spectacular and deadly bridge collapses, and then citizens will want to know why.
Face it; the whole nation is being Katrina’ed. The only difference between the Gulf Coast and the rest of us is time. Hurricanes work fast; rot and rust take longer. But they get the job done eventually.
Update: Via DemFromCT at The Next Hurrah, Steven Greenhouse and David Leonhardt write in today’s New York Times, “Real Wages Fail to Match a Rise in Productivity“:
With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.
That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this yearâ€™s midterm elections even though overall growth has been healthy for much of the last five years.
The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity â€” the amount that an average worker produces in an hour and the basic wellspring of a nationâ€™s living standards â€” has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nationâ€™s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960â€™s. UBS, the investment bank, recently described the current period as â€œthe golden era of profitability.â€
Here’s an eye opener:
In another recent report on the boom in profits, economists at Goldman Sachs wrote, â€œThe most important contributor to higher profit margins over the past five years has been a decline in laborâ€™s share of national income.â€ Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months.
Is that saying that corporations are making profits by squeezing workers? I do believe that’s what it says.
The most recent recession ended in late 2001. Hourly wages continued to rise in 2002 and peaked in early 2003, largely on the lingering strength of the 1990â€™s boom.
Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy. But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners â€” making about $80,000 a year â€” inflation has outpaced their pay increases over the last three years, according to the Labor Department.
I’d like to know what Tim Worstall, TCS Daily contributor living in Europe, has to say about that.
Update: Maxspeak, who understands numbers better than I do, explains why Tim Worstall (TCS Daily contributor living in Europe) is wrong.