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Comparing Income across Countries in USD is Detached from Reality: 1

January 20, 2017 10 comments

One of the most popular talking points of “public intellectuals” who support the CONServative or neoliberal position goes some like this.. the average income of some of the poorest states in USA is often higher than the average income of wealthy west-european countries. They use this bullshit argument to convince people that the american socio-economic system, as it exists now, is the best possible way to run countries. They also use this scam to pretend that the quality of life for the average person in USA is much better than in other affluent countries- when the reverse is in fact true. The rest of this post will show how the relationship between income as measured in USD and quality of life has completely broken down all over the world in the last thirty years.

Now, there are a number of reasons why a significant percentage of people in USA might have believed such bullshit in the past. As many of you know, people in USA did not (and still do not) travel to other affluent countries at percentages that are even remotely comparable to their counterparts in other developed countries. Therefore, in the pre-internet era it was easy to believe propaganda which told them that the USA was the best place to live in the world. This was especially true in the era between 1945-1999 when the economy in USA, despite occasional downturns, seemed to work reasonably OK for a majority of its people. It is also worth nothing that much of the cultural memory of Americans about the quality of life in other European countries was formed in the first 10-15 years after the end of WW2.

The course of events in the world, however, does not stop if you cease to observe them. Nor does the nature and speed of change to accommodate the beliefs and delusions of any particular group of human beings. My point is that saying or believing something to be true does not make it so- regardless of how loudly and frequently you say it or how many “credentials” you possess. But what does the futility of believing in comforting bullshit have to do with the already massive disconnect between proxy measures for economic well-being of average person in various countries? And why is believing in such bullshit actually dangerous to those who choose to believe in it?

Let us start by looking at the correlation between average incomes (measured in USD) in various countries and their average life expectancy- which is one of the better indicators of general socio-economic well-being. While median life expectancy and remaining life expectancy after age 65 are somewhat better measures of socio-economic, the average numbers are good enough for most purposes. So how does USA compare in that respect to other developed countries? Well.. have a look.

lifeexp_vs_cost_oced_upto_2014_01

You will immediately notice that while the USA spends way more than similar west-european countries, it has by far the lowest average life-expectancy. The high per-capita expenditure on healthcare in USA, as compared to other developed countries, does not translate into better outcomes. Furthermore, bankruptcy and severe financial problems due to medical costs are basically unknown in the rest of the developed world. But it get’s worse.. much worse. A number of developed countries such as South Korea, Chile, Greece and Israel are able to achieve significantly higher life expectancy (than USA) for a fraction of the cost- as measured in USD. The life expectancy in Mexico is almost identical to USA though its per-capita spending on healthcare (as measured in USD) is about a tenth of that in USA.

Even countries as different from each other as China, Jamaica, Malaysia, Sri Lanka, Maldives and Tunisia whose per-capita spending on healthcare is 5% (or less) of USA have average life-expectancies similar to (or better than) early-1990 era USA. It is hard to escape the conclusion that the entire healthcare system in USA is more about rent extraction and job creation than providing.. healthcare. But that is best left for another series of posts- though I have made a brief version of that argument in a previous post. The point I am trying to make in this particular series of posts is that comparing income across countries in USD is delusional and potentially dangerous.

So let us now turn to the costs of housing in USA, especially as regards to what people get for a given amount of money (as measured in USD). While it is possible to make the case that houses in USA tend to be bigger than those in many other developed countries, that is only part of the story. Sure.. you can buy a large and relatively inexpensive house if you are willing to live 50-100 km outside the nearest city in pretty much any part of USA. But how many people want to willingly live in such places? Here is a hint, use google earth or maps to look at satellite pictures of distant suburbs and then compare them to locations near nearby cities. So let us be honest and compare the cost of housing (buy or rent) in desirable locales in USA to those in other developed countries. When you do that, it quickly becomes obvious that housing in many developed countries often costs a bit less and has significantly superior access to everything from shopping to entertainment.

And this brings to the issue of discretionary purchasing power. One might think that the average person in USA would have more discretionary spending power than his or her equivalent in other developed countries. But is that so? I mean, you are far more likely to see a tourist from a west- or east- European country in USA than the other way around. Not only that, people in European countries tend to dress better than their equivalents in USA. So how do those who defend the american system based on income as measured in USD explain all of this? Well.. they try to distract you by lots of hand-waving and sophistry.

Then there is the issue of education or more precisely the cost and quality. While the cost and quality of K-12 education in USA is somewhat close to its equivalents in other developed countries, it still leaves much to be desired. The situation of higher or post-secondary education in USA is however far worse. As many of you know, the cost of obtaining higher education in USA is far higher than in other developed countries. But is the quality any better? In other words, is an engineer from some large and well-known university in USA really better than his equivalent from some German or Japanese university? Or is a doctor from a large and well-known american university any better than his equivalent from some French or British university? What about other areas of higher education? My point, here, is that the american education system (especially its post secondary component) provides incredibly poor value for money and is far more about obtaining credentials from a shiny-looking university. That is why most international students in american universities are from developing countries, rather than other developed countries.

In the upcoming part of this series, I will show you how the average quality of life for ostensibly middle-class people in USA has more in common with their equivalents in other developing countries rather than developed ones.

What do you think? Comments?