Monday, September 07, 2009

MS Per Capita GDP (PPP) Higher Than EU, Japan

The chart above displays GDP at purchasing power parity (PPP) per capita in 2008 using data from the CIA World Factbook (data available here) for various European countries, the European Union as a group, Japan, and the U.S. The chart also shows an estimate of GDP per capita for America's poorest state of Mississippi ($34,968), adjusted for purchasing power by applying a factor of .7439 to U.S. per capita GDP adjusted for PPP of $47,000, based on Mississippi's unadjusted GDP per capita compared to the U.S. average (data here).

On a PPP basis, all European countries in the graph except the U.K. have per capita GDP below America's poorest state. In other words, if Italy, France, or Germany left the European Union and joined the U.S., they would be the poorest of the U.S. states, and the same would apply to the European Union as a group, and the same would apply to Japan.

38 Comments:

At 9/07/2009 1:32 PM, Anonymous Jack Rosten said...

This information never seems to get to the public at large. I believe most Americans don't realize that they're 20-25% richer than their Western European counter-parts.

Maybe as the GDP/person gaps between the nations grow as we get farther up the exponential growth curves, people will figure it out. Hopefully at that point citizens living in the slow-growth socialized economies will realize the amount of wealth they're giving up by having their governments control such large portions of their economies.

 
At 9/07/2009 1:54 PM, Anonymous Anonymous said...

Michael Moore blames the evil capitalist system for America's affluence. I'd have to agree.

Not to worry, the left is working tirelessly to close the gap between the U.S. and Europe.

Can they bring down the wealthiest and freest nation in the history of man? Yes they can!

 
At 9/07/2009 2:28 PM, Blogger spencer said...

The data for the US and Mississippi given at the source you linked to (wikipedia)is significantly different that the data in the chart.

The chart shows the US at about $45,000 and Mississippi at $35,000.

But the source you link to shows a US average of $39,751 and Mississippi at $29,569. Can you explain the difference.

At $29,569 Mississippi would be below all the European countries in the chart.

The CIA list the US at some $47,000, what you show in the chart.

But the CIA also has $36,000 for Italy and that is considerably higher than in the chart.

There seems to be significant problems with the data in the chart. Moreover, it does not incorporate the point that the CIA makes that the share of GDP going to the bottom quintile of the population is roughly double in most of Europe and Japan than in the US. So even if Mississippi and Italy, for example are about the same, the living standards of the bottom quintile in Italy will be much better than in Mississippi.

 
At 9/07/2009 2:28 PM, Blogger Andy said...

If you don't adjust for purchasing power, you get a whole different picture.

Which way makes sense? Well it depends on what you are trying to show with the GDP/capita calculation, I suppose.

 
At 9/07/2009 5:27 PM, Blogger Michael said...

Italy is $31,000. To get the number for Mississippi in the chart, MP is taking the $29,569 and $39,751 numbers from wiki to get .7439 GDP ratio and then using the CIA number of $47,000 to come up with Mississippi's number for the chart since the data in the chart comes from the CIA.

 
At 9/07/2009 5:28 PM, Blogger Mark J. Perry said...

spencer: Michael is correct. Sorry I had a bad link for the per capita PPP GDP data, it's fixed now.

 
At 9/07/2009 7:20 PM, Blogger 1 said...

"Michael Moore blames the evil capitalist system for America's affluence. I'd have to agree."...

Speaking of the delusional suet sack, he again has opened his mouth and spread pearls of idiocy: 'Americans now think more like me'

 
At 9/07/2009 7:34 PM, Blogger 1 said...

United States ranks number 2 behind the EuroUnion...

GDP (purchasing power parity)

 
At 9/07/2009 8:01 PM, Blogger Less Antman said...

@1

It is true that the European Union has a slightly higher total GDP (PPP) than the United States, but it also has 60% more capita (500 million vs 300 million people). So the US FAR outpaces the EU in per person GDP.

 
At 9/07/2009 8:17 PM, Blogger 1 said...

"So the US FAR outpaces the EU in per person GDP"...

No disagreement from me at all...

There's like what? Four countries in the EuroUnion that have a higher P3 than the US...

I've been to three of them and one can't even find a large jar of Peter Pan peanut butter on the shelves of their stores... So just how good can it be to live in one of those countries?...:-)

 
At 9/07/2009 8:28 PM, Anonymous Anonymous said...

To me, this looks like a great example of how much overvalued the dollar is even today (compare how people in western europe live to the folks in mississippi).

 
At 9/07/2009 9:01 PM, Blogger Less Antman said...

@1

Wait a minute: they have no Peter Pan in Luxembourg? Barbarians!

 
At 9/07/2009 9:34 PM, Blogger 1 said...

"Wait a minute: they have no Peter Pan in Luxembourg? Barbarians!"...

Well about 10 years ago or so I finally started seeing Peter Pan peanut butter show up on the shelves in Germany in places other than Rhine Mainz...

In Norway its still more expensive than Russian caviar (which is still merely bait as far as I can tell) and I've only seen it in a few places in some London supergrocers...

"compare how people in western europe live to the folks in mississippi"...

Yeah anon do take a good look at the socialist paradise of western Europe...

 
At 9/07/2009 9:38 PM, Blogger Less Antman said...

Somebody once suggested that the perfect present to bring friends when visiting the UK was Ziplock storage bags.

 
At 9/07/2009 10:19 PM, Blogger PeakTrader said...

Jack Rosten beat me to the exponential growth concept.

A 1% per year difference in real GDP growth makes a big difference after (and over) 10 or 20 years. Using a scientific calculator, a 2% real GDP growth rate will increase real GDP from $14 trillion to $17.1 trillion in 10 years (type 1.02, then hit the y^x key, then type 10, then hit = then hit X or the times key, and type $14 trillion or 14,000 for a smaller number). However, a 3% real growth rate will be $18.8 trillion after 10 years or a difference of $1.7 trillion after 10 years. The difference is about $4 1/2 trillion after 20 years. Also, government spending has been growing much faster than nominal GDP over the past few decades.

 
At 9/07/2009 10:34 PM, Blogger PeakTrader said...

Also, I may add, PPP reflects only tradable items (for example, houses cannot be traded between countries). Also, quality differences are ignored (e.g. between items sold at America's Walmart and China's Wu-mart).

 
At 9/08/2009 12:09 AM, Anonymous Anonymous said...

@1 (from: anon @9/07/2009 8:28 PM)

Dear 1, I know how terrible those slums must look to your American eyes. Of course nothing like this exists here. Of course, Europe being socialist and all, everyone lives like that...

I am only happy I no longer live in the 4 bedroom house with the large modern kitchen and 2 tiled bathrooms and garden we had to pay the insane sum of $700 monthly in the middle of Berlin. I am glad and feel so much richer, now that I can pay $2k for a smaller apartment in Washington with less comfort.

 
At 9/08/2009 2:21 AM, Anonymous richard said...

Mark,

Is this true?

If Germany would join the US (hypothetically), it would also have the $US as its currency.

That would change the ppp calculations.

 
At 9/08/2009 7:10 AM, Blogger 1 said...

I love it when a liberal has to lie to support his/her point: "I know how terrible those slums must look to your American eyes. Of course nothing like this exists here. Of course, Europe being socialist and all, everyone lives like that..."...

Good one anon @ 9/08/2009 12:09 AM...

I know exactly what to $2K worth of monthly rental will get you in Berlin, Bonn, or Cologne...

Funny but just like the US pricing depends on where one wants or needs to live...

BTW how did you like having Turkish neighbors?

 
At 9/08/2009 11:32 AM, Anonymous Anonymous said...

@1 - anon @ 9/08/2009 12:09 AM is back

My, yes. I loved heading out for a quick Doener, and I am all for a Becks with Apple Juice after Sports.

Also, I love it when a representative of a category needs to resort to stereotyping and ad hominem attacks instead of responding to the argument.

Lest it be lost: My point was that I suspect that the GDP/person gap might be due more to an overvalued dollar than to true productivity difference. I have lived in multiple places in Germany, too, and in my personal experience the average standard of living these is higher than in the US. Specifically, the idea that the state of Mississippi has a higher per-capita-GDP than all of Germany has me highly suspicious. Then again, I haven't visited that state yet. Maybe I should.

 
At 9/08/2009 12:16 PM, Anonymous Anonymous said...

And your point is ?

If MS per Capita GDP is higher than France, it only shows that Per Capita GDP is irrelevant or a poor correlation factor to quality of life, life expectancy and good quality schooling.

 
At 9/08/2009 12:30 PM, Anonymous Benny The True Man said...

Hmm. So, $47k per capita.
The average family of four has nearly $200k in purchasing power?
But median family income in US is under $50k.
These figures make my head spin.
If tere is $47k percapita spending power in the USA, then we must have incredible concentrations of spending power. I know only a few families with $200k in spending power.

 
At 9/08/2009 12:42 PM, Blogger Mark J. Perry said...

Benny: The measure is GDP (total production of goods and services) divided by the population, which is different from per capita income. We take appox. $14 trillion in nominal GDP divided by about 305 million people to get about $46k per person. Disposable income per capita is closer to $35k per person.

Either of those may seem high, but it's a consistent measure that allows valid international comparisons of per capita GDP on a PPP basis.

 
At 9/08/2009 1:13 PM, Anonymous Benny The Average Man said...

Dr. Perry-
Thanks for your comment...although I am beginning to feel like something of a loser.
These figures would indicate huge spending power for the "average" family of four...
Disposable per capital income of $35k per person? An average family should have $140k in annual disposable income?
I just want to be average. I was average in school, why not in life?

 
At 9/08/2009 2:17 PM, Anonymous Anonymous said...

ctaReich-wingers blame liberals for their evil socialist ways. Yet Washington DC has the highest GDP per capital at $64k to top everybody on the list!! It pays to be double liberal or you can be twice as poor in red-state, redneck Mississippi!! Blue states own most of the 20 states too.

 
At 9/08/2009 2:37 PM, Blogger KissTheGoat said...

And yet, I'd rather live there than here. Healthcare and schooling, the really important things in life, are done much more sensibly.

 
At 9/08/2009 2:37 PM, Anonymous Anonymous said...

The prime example of PPP is the Big Mac Index, right? If so, how is PPP a good way of measuring wealth? How much is a big mac worth to a European or to a Japanese.

You can argue that the price determines how much is worth, and you might be right, but since in reality it all comes down to your willingness to pay (how much is a big mac really worth to you?) ultimately I rather look at indexes that look at this in terms of human development, happiness or quality of life: http://en.wikipedia.org/wiki/Human_development_index

In virtually all of those the US ranks much lower than most EU countries.

 
At 9/08/2009 2:45 PM, Anonymous Anonymous said...

You're too focused on GDP numbers, in my opinion. Several american economists (nobel prize winners, by the way) tend to think that GDP does not show the whole picture:
Joseph Stiglitz - Problems with GDP as an Economic Barometer (http://www.youtube.com/watch?v=QUaJMNtW6GA), Paul Krugman - The Global Econy (see chapter
15. Q1: Measurements Other than GDP Growth at http://fora.tv/2009/01/29/Paul_Krugman_The_Global_Economy#fullprogram)

 
At 9/08/2009 3:30 PM, Anonymous Peter said...

Stay tuned for next week when the data shows that the Black Hole of Calcutta is a better place to live than Manhattan.

 
At 9/08/2009 4:19 PM, Blogger orthodoc said...

From anonymous:
"ctaReich-wingers blame liberals for their evil socialist ways. Yet Washington DC has the highest GDP per capital at $64k to top everybody on the list!! "

Not surprising.

“If projections bear out that the federal government will hire up to 120,000 people for jobs in the region over the next few years, the Washington area economy could be on its way to a rebound faster than most of the nation,” the Washington Post reported.

Not only is the pay 60% higher — and the job security almost a lifetime guaranteed job — but the fringe benefits are out of this world. Extra holidays. Lenient sick leave. Early pensions that are defined benefits — and lush.

There are two Americas: Those who work for the government and those who pay for it.

 
At 9/08/2009 4:21 PM, Anonymous Peter said...

http://www.newmogul.com/item?id=18811

A response worth reading.

 
At 9/08/2009 4:26 PM, Blogger Michael said...

Is income disparity part of the difference? How would the various countries and states rank in MEDIAN income? (Or for extra credit, in 95%ile and 5%ile incomes)?

 
At 9/08/2009 7:32 PM, Anonymous Peter said...

What's that old college classic? "How to Lie With Statistics"? It was a required text for a philosophy course I took.

 
At 9/09/2009 11:42 AM, Anonymous Benny The Truth Man said...

It occurs to me that vacation time may not be counted. In other words, Europeans generally get 6 weeks off a year. No doubt, they have lower GDP, due to this. But the value of time off is not countable, in GDP.
Also, per capital PPP could be high in a country with a small set of extremely rich people, while most people are not so well off.
In such a case, the "average" family could be better off in Europe, where income distribution is more equal, than in the average family in America, where the top 5 percent absorbs a large fraction of the income.
I have to say, I think most Western Europeans live better than most Americans.

 
At 9/09/2009 12:42 PM, Blogger fboness said...

I've spent some time over the years in Manchester. A Manchester = Mississippi comparison is spot on.

 
At 9/10/2009 10:36 PM, Anonymous Anonymous said...

University of Mississippi versus Manchester United? You are on drugs.

 
At 9/25/2009 7:32 AM, Blogger nicolas.boullosa@faircompanies.com said...

GDP calculations are dumb: take the whole income in one area and divided by population. No real wealth. Go to MS and then to Germany, France and Northern Italy. Just focus on the people you see. Yes: they thinner, better dressed, more educated, healthier, live longer and enjoy loooots of free time.

 
At 10/16/2009 5:10 PM, Blogger Carl said...

Good chart. Btw, a January 2007 piece with other relevant comparisons.

 

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