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

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?

  1. chaoserrant
    January 21, 2017 at 8:31 am

    I completely agree that comparing incomes is meaningless. Take for example two basic needs: shelter and food. Let’s say one in USA earns 10K a year but ALL is spent on shelter and food but someone else in a different country earns nothing but the same type of shelter and food is provided via well fare. Then the two individuals are pretty much equivalent in terms of poverty level though one earns 10K and the other nothing.
    However, some who defend the US system claim that in many other countries their system us doomed to fail. Some say, sure in France the health care is better but is not sustainable and slowly and steadily will be worse. Now if you ask me, at my age of 42, I would take my chances with France since it will likely still have better healthcare than USA 50 years from now. But, in the end, to predict which system ends being better in the long run is as foolish as predicting the stock market.

    Going back to the comparison between countries, the only benchmark that I can see is related to very basic needs such as shelter. And then you can ask how many have it. Beyond that even this approach is difficult. For example “how many have cars” tells you nothing as not having a car in rural USA means a significant drop in quality of life (since everything is far away) while in some parts of Europe a car is just a matter of preference.

    The way things are going, the american system is unlikely to last even a full decade.

  2. webej
    January 22, 2017 at 8:31 am

    The data in the graph is ppp adjusted: Otherwise it would be even more skewed.
    Although it is seems easy to understand that comparing things in dollar terms is bad method, the practice abounds. It is not just dishonest politicians who say: Nobody is poor here, because there is nobody living below $2/day (which is the WHO definition) — of course not, you’d be dead. But a lot of the migrants to Western Europe are also comparing how much even a janitor job earns there when converted to Nigerian or Ghanese money. Little do they understand how taxes, permits, cold weather, and prices mean there will not be anything left to send back to Nigeria.
    Not long ago I saw an (economist) article going on about how much GDP had fallen in various European countries since 2008. But the amounts were in dollars, and our “economist” had forgotten that the Euro has moved from $1.60 to $1.04. Any comparison that is not in Euro’s means nothing since currencies have fluctuated far more than GDP figures.
    The practice will not die, and people still land up comparing “costs” for labor or manufacturing in dollars, even if you are comparing to a country where you can get a lettuce for 2¢ instead of $2.
    Even aside from this, the idea that you should ever be comparing simple “averages” itself is a generally misleading default method. For per capita income, the simple mean tells you very little about “average” people. It should be standard to quote the trimmed median or the harmonic mean. The same applies (but to a lesser extent) to things like grocery or medical costs. The idea that the income of rich people in the US which is bloated by the considerable profits made by multinationals says more about how the world economy is organized by its principle hegemon than it says about Americans or about the merits of the local economy. The problem is that statistics are seldom quoted to arrive at meaningful comparisons and all the more to score points.

  3. webej
    January 22, 2017 at 8:46 am

    The correlation between life expectancy and the quality/cost of medical care is actually not the most important factor. US statistics are slanted by gun violence and incarceration rates. Rates are influenced by environmental regulation and stresses. Cultural factors (wholesome living — 7th day adventists get lower rates; sedentary habits; nutrition; alcohol and smoking; stress) also play a role.
    The most important correlation however is with the general level of prosperity, followed by preventive medicine (innoculation, stopping infectious diseases, early childhood care, hygiene, education). The costs for both of these is very low. Access to medical care in the case of disease and accidents helps, but its weight in promoting life expectancy is much lower.
    In general, prosperous countries have better medical care and vice versa, but there are important exceptions that illustrate the point (prosperity, not medical care, is the best proxy for life expectancy). Also illustrative is life expectancy in a country like Cuba (low prosperity, highly egalitarian, nevertheless good medical care at very low costs) which is the same as the USA.

  4. January 22, 2017 at 11:12 am

    The elephant in the room that we will never be able to discuss with the M(h)RA’s from AVfM while their “femRA” pitbull Judgy Bitch shouts veiled white power memes. Womyn live longer than men. We get told repeatedly that men are the privileged class. Why is this? Are womyn biologically wired to live longer? Or are there cultural conditions such as if a womyn is not successful in a career or romance she still has family, friends and society telling her she has value…

    Taken as a whole in this here ‘murikka, workers get told to be grateful to even have a job. How many people are working 10+ hour days sitting in front of a computer screen and hardly even taking the breaks allowed by law. We are now hearing that sitting is almost as bad as smoking for one’s health. In a country just slightly more labor friendly there is going to be pressure for shorter hours. How much stress does a worker face when they know there is not much of a safety net and people shame them for taking things like unemployment or going onto food stamps.

    Also think of the 20 yr old guy working part time at Best Buy, he is being shamed for not manning up and told he is a video game playing loser. He is being told by older men that they were buying houses when they were his age. And these older guys ignore the fact that even in an “affordable area” the down payment will be more than this guy makes in a year.

    I spoke to an Indian guy who was an engineer. He told me that if you aren’t making at least 80k, life sucks in the US. He said he would rather be poor in India as your family will help you out.

    So even if (and this is a big if) the health system in the US is the best place to be in a catastrophic car wreck as you will be quickly airlifted to a hospital, many other stresses that slowly grind one down are ignored in the US.

    I wish I had articulated my points here better, but I speculate your next article will touch upon one or two of them.

  5. chaoserrant
    January 22, 2017 at 1:44 pm

    Good points in the previous comments. What pisses me off the most in the USA healthcare system is that even BEFORE a reform is made, several common sense changes would reduce the cost such as allowing insurance companies to operate across states, making easier for individuals to create insurance pools, allowing drug importation from safe countries (Canda, EU, etc.). All these would reduce the out of pocket expense because I still think the USA has a fundamental problem related to cost control not coverage. Lack of coverage is a symptom of astronomic costs.

    In retrospect, Obamacare could have been saved if it provided catastrophic coverage at a very low cost. For example something that covers only expenses over 10K or something similar but, again, for a very low premium. Maybe also impose a one year waiting period for pre-existing conditions. As it is now it is the WORST of all worlds: enormous premiums, very high deductible, not enough incentive for healthy to enroll but mandating the enrollment of those already sick. Even a 12 years old would understand this is doomed to fail

  6. Lab Guy
    January 24, 2017 at 5:08 pm

    Government is the source of many of these problems (housing, education, healthcare). The main issue is the monetary system which is the same in every other country; the central banks hold on to massive gold reserves but the serfs are reduced to peons because of a depreciating currency.

    I had an older uncle that died in the late 90’s who worked a modest job at a parts counter for a number of years and farmed and his wife worked a department store. They still had a house, a car, a TV; not a large house or luxuries for the time, but more than enough. It is true it cannot be done today in the US. Maybe at best a dual earner could bring home $25/hour before taxes.

    Housing and healthcare are heavily influenced by government policies. The feds set the interest rates so every dumbass with just a job briefly became a property owner for a while. Obama did nothing to make healthcare better; hospitals shut down thus depriving some communities of health care and the insurance mandate did nothing to improve anything for anyone. Companies kicked retired employees to exchanges that became progressively more expensive. Doctors stopped taking the crappy insurance because of heavy handed bureaucracy or not getting paid in a timely manner.

    Education both k-12 and the community colleges and universities have become worthless thanks to ‘gubmint’ loans for even the dumbest to major in degrees with no utility. Even STEM degrees are not a great bargain anymore.

    And no point making a good salary when the government steals a 1/3 of it before and after your check, but most Americans are happy with this slave status.

  7. Genius
    March 2, 2017 at 2:29 am

    Mongloids naturally have longer life expectancy than caucasians.

    So you are saying that caucasians are genetically inferior to other races? *S*

  8. Genius
    March 2, 2017 at 11:06 am

    Also countries with less welfare are more economically dynamic than welfare states.

  1. February 28, 2017 at 7:37 pm
  2. March 31, 2017 at 7:05 pm

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