I’ve known about the relative poverty of Western Europe compared to the United States for quite some time now, but it’s always nice to see this little tidbit get some love in the national and international press. Fraser Nelson, a journalist at the Spectator (in the UK) gives us the run-down on the numbers. According to Nelson, the UK is poorer than any US state save for Mississippi. Over at Forbes, Tim Worstall points out that the UK is actually poorer than Mississippi, too. Poor Mississippi!
Both men are calculating wealth with GDP (PPP) per capita, which is what I use as well. GDP (PPP) per capita means Gross Domestic Product (Purchasing Power Parity) per capita. Worstall explains how and why social scientists like using GDP (PPP) per capita to gauge a society’s standard of living:
Just to explain PPP for you. Prices vary across places. In the US food is generally cheaper than it is in Europe, medical care generally more expensive. So what we try to do with PPP is work out what exchange rates would need to be in order to make prices of all of these different things the same in the different places. It’s not an exact science, more of an art. But if what you’re trying to measure is living standards then it’s somewhere between useful and essential as a part of your workings.
It isn’t just the UK that is poorer than the poorest US state, either. Economist Mark Perry did these same calculations using 2010 data back in 2011 and pointed out that only Luxembourg and Norway would be in the Top 30 states were Western Europe and the United States to meld into one federal republic. The rest of Western Europe is on par with the living standards of the American South (which is considered to be the poor, culturally backwards region of the US). Be sure to check out Perry’s 2010 data and compare it to Worstall’s and Nelson’s 2013 data, too.
Careful readers will notice extremely small differences in the calculated purchasing power parity of all three authors (the IMF’s is also a little different), but each data gives us a similar approximation for standards of living in each country and each US state. Suffice it to say here a political union between the United States and the wealthy countries of Western Europe would significantly diminish the GDP (PPP) per capita of the US overall. A political merger with Japan, South Korea, and Mexico would also diminish the overall purchasing power parity of the average US citizen. Canada might (might) make the Top 40 for US states (somewhere between Michigan and Ohio – states of the Rust Belt).
Now, if I had my way, the calculation standards for non-US countries would be the same as they are for US states. That is to say, I think a better way of measuring standards of living would be to break up the countries I’ve mentioned and measure the GDP (PPP) per capita of the administrative units that operate just below the national governments of these states. So, for example, instead of measuring the GDP (PPP) per capita of the Netherlands, I’d measure the GDP (PPP) per capita of the 12 provinces that make up the Netherlands.
Then, in my libertarian utopia, the 50 US states would join together politically with the various administrative units of Western Europe, Canada, Mexico, Japan, and South Korea. Instead of 50 administrative units (the US states) there would be hundreds, maybe even thousands, of them. Talk about decentralization!
Given that a political (and therefore economic and social) merger between Western Europe, the NAFTA states, and Japan-South Korea would diminish my PPP, why should I support such a proposal?
Update 8/30: Some commentators on Facebook have been clamoring for a map, and I found a great website that has devoted lots of time to creating maps based solely on administrative units. The name of the site is Kelso’s Corner and they have a great blog post on the “Natural Earth Vector,” which is the project that maps out administrative units.
It doesn’t have detailed maps of the Anglo-Saxon world or Mexico (presumably because these are so well known), but I found a couple of great maps of Western Europe and Southeast Asia.
Imagine if all of these units were to send representatives and senators to Washington (or a new geographic equivalent): Decentralized political power and integrated markets and cultures would be the new norm for much of the world in a political system based on Madison’s federal republic. I reckon that, in a libertarian utopia, the world would look like this map and be united under Madison’s minarchist federal government:
I understand that my utopia is not much of a utopia (people will still die and there will be plenty of conflict), but I think this is actually a strength rather than a weakness.