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Comparing Income across Countries in USD is Detached from Reality: 2

In the previous post of this series, I pointed out that comparing total or per-capita GDP or GNP of countries in USD (or any other west-european currency) is now an exercise in stupidity and self-delusion. Using healthcare as an example, I showed readers that countries with per-capita healthcare as little as 1/10th of the USA (after adjustment for purchasing power) have higher average life-expectancy and better health outcomes than the USA. In fact, it looks even worse for USA if you don’t adjust for purchasing power.

One of the most fundamental and direct measures for quality of life in the world is now, therefore, irreversibly divorced from spending in USD another west-European currencies. Towards the end of that post, I also made commented that many other basic and direct measures of life quality such as quality of education, housing and general standard of living around the world are increasingly, and now very visibly, not linked to their price in USD.

In other words, the most important proxy measure of power that western countries (especially the USA) use to gauge their relative power and dominance in the world is now worse than useless. But how did we reach the tipping point and when.. at least approximately? Let me explain that through one example in this post.. will talk about more in subsequent post of this series.

For a long time, even small triumphs and success of Indians living in the west (especially the USA) were widely celebrated in Indian media and society. This occurred in spite of many of the later denying or obfuscating their ancestry. Similarly, Indians who lived in the west (especially the USA) were treated with a certain degree of respect when they visited India- which they did largely to feel better about their second-class status in the west. In my opinion, the peak of real-life adulation for Indians living in the west occurred during the late 1990s-very early 2000s. But then something changed.. irreversibly.

Sometime around the mid-2000s, I noticed a change in the way people in India started seeing those living in the west and perhaps more importantly- themselves. This change first manifested itself as a far more critical look at Indians living in the west and was more pronounced in the younger generations. Basically, people in India gradually stopped celebrating the achievements of Indians in the west and started being more critical about the attitudes exhibited by those people towards themselves. But it did not stop there..

Increasingly, educated and affluent Indians stopped seeing residency in the west (especially the USA) as a goal to be reached under any circumstances. It was, more and more, a conditional thing- based on them having a decent job and working conditions. Also, moving back and forth between two (or more countries) based on the best deal available to them became the default mode of operation. To put it another way, having a good career and making money had replaced moving to the west as the main goal of many upper-middle class Indians.

But why did that happen? and what changed?

The short answer is that the quality of life possible in India changed a lot between the late-1990s and today. The slightly longer answer is that a large part of the respect and adoration of people in India for their relatives living in the west was linked to their superior material possessions. As some of you might know, a number of stupid and paternalistic government policies prevalent in India between 1947 and late-1980s had stunted the quality of life possible in that country. That changed dramatically after 1989.. and the result (so far) has been beneficial to most people in that country, but especially to its upper-middle class and increasingly its middle-class.

Therefore, the kind of people who might otherwise want to immigrate to the west can now enjoy all the material goods and services enjoyed by their counterparts in the west- and then some more. This prosperity and equal (or superior) access to material goods and services is also why they no longer look up to or celebrate Indians in the west. I mean.. ask yourself, would you tolerate a self-hating asshole if you had nothing to gain from doing so? But what does this have to do with comparing income across countries in USD? As it turns out.. a lot!

See.. the income of Indians with an upper-middle class lifestyle might seem more comparable to the working class in USA if you measure it in USD. However, it is very clear that their lifestyle and access to material goods and services is identical or better than those defined as upper-middle class in USA. But why is that so? and why was that not the case in the past?

Well.. it comes to who makes things and provides services. Comparing quality of life and power in the world in USD (or other west-European currencies) was feasible only as long as they were the sole providers of such material goods and services. As you know, that is simply not the case today. Most of what you consider high-tech and necessary for a high quality of life (from computers and smart phones to chemicals for making drugs and other useful stuff) is no longer made exclusively in the west- IF they were made there in the first place.

Consequently, the cost of many material goods (and services) that define a high quality of life are often far less expensive in the rest of the world. Moreover, the price of other essentials such as quality healthcare, quality medications, quality food, quality shelter is much lower in non-wetsern countries. The net result of these changes is that the upper-middle class, and increasingly middle-class, in non-western countries enjoys a quality of life that is equivalent to those the west. Did I mention that their disposable income and net worth (even when measured in USD) now often surpasses those of their supposed equivalents in the west?

To summarize this post- most of the existing delusions.. I mean beliefs prevalent in USA (and the west) about its relative power and dominance vis-a-vis the rest of the world are based on a metric that is now worse than useless.

What do you think? Comments?

  1. March 1, 2017 at 3:22 am

    Also, follow me back on twitter @akshaybhat2012 so that I can message you.

  2. March 1, 2017 at 3:22 am

    Definitely being poor in America is harder than being middle-class in India for example. Definitions/metrics may vary but the broad conclusion is the same no matter how you slice and dice.

    It depends partly on which corner of the developing world you are talking about (South America, Africa, India, China, SE Asia), but from my experience of India and what I’ve read of the other big regions (see ‘Young World Rising’ by Rob Salkowitz for instance), being middle class in the developing world (at least the safe, crime/violence/war-free parts) is easily way better than being poor in the US.

    Asia, other than parts of the middle-east, fulfill that definition and include most of the highly populous countries such as China, India, Indonesia etc.

    Two things confuse people and lead them to doubt this pretty obvious conclusion: they confuse “stuff” for “good life,” (Americans typically have more “stuff” ergo, they must have a better life) and they think America is the “land of opportunity” for anyone who can get there (ergo, anyone who is already there has a head start, and no excuses for failing… mistaking access to opportunity for capacity to pursue it). In fact, many middle class members of the developing world mistakenly define “making it” as “getting to America and having lots of stuff.” They badly misunderstand where their wealth actually lies, and how much of it they already own.

    And even that has changed over last decade or two.

    First, the “stuff equals good life” error of confusing correlation for causation. In most of the developing world, owning a car (or motorcycle/scooter) is a symbol of arrival into the middle or upper-middle class. In America, you can own a car and still have a train-wreck of an impoverished life that imprisons you completely. Ditto TV, refrigerator etc. They simply aren’t the signifiers of middle class status, well-being and quality of life in the US that they are in the developing world. When I lived in India, I used to be completely taken in by this, because I didn’t think about it deeply enough. I genuinely mistook “stuff” for “middle class status” and used to get impatient with anyone who even mentioned poverty in America. A conversation in a middle class living room in India among people who’ve never been to America might go as follows: “what do you mean poverty in America? How can someone be poor when they have a car and refrigerator? And look at how fat they are, they obviously have enough food… they ought to get off their butts and work; there’s opportunities all around them. Our maid who lives in a slum, now THAT”S real poverty.”

    Only older generation in India and those without any knowledge of west now believe that crap. Even that has changed a lot because of internet etc.

    Second: access to opportunity versus capacity to pursue it. The middle class in the developing world, at least until the recession, saw migrating to the US as such a tough, aspirational goal, they couldn’t really imagine that life could be tough here. The typical middle-class Indian mindset pre 2000, for instance was “if only I could get there with an F1 scholarship or an H1B job, I’ll work like crazy and make it” (now it is more likely to be “startup in Bangalore after a couple of years learning the trade at Infosys.”). They confuse access to the opportunities in the US for the social capital wealth that enables you to pursue them. And they get off the boat armed with a lot of this social capital: cheap and good basic K-12 and undergrad education at 1/100 the American price, a safe and secure childhood, generations-old family cultures emphasizing education/good work ethic, family social net, and strong and well-placed social networks (a typical middle class Indian or Chinese can usually find a useful connection in any corner of the globe a few hops away, willing to make introductions for instance; the poor in America truly cannot even reach out of their blocks in some cases, truly a “ghetto” condition in the fullest sense of the word). It is these advantages that middle class migrants “cash in” on to “make it” in America. So despite what they think, it is actually easier to make it in America if you start by being born somewhere else, than in some parts of America itself. Weird but true. The route from the middle-class neighborhoods of India to million-dollar homes in Silicon Valley is actually far shorter than the route to the same destination starting in a bad, drug-riddled inner-city block in Detroit.

    Yes and that is why I said that late 1990 to very early 2000s was peak of adulation for west in countries like India. A lot has changed since then.

    So no-brainer here. I’d definitely choose middle class in developing world over poverty here. Anybody who has seen both sides of the comparison would do the same I suspect.

  3. hoipolloi
    March 1, 2017 at 4:32 am

    @: “…most of the existing delusions.. I mean beliefs prevalent in USA (and the west) about its relative power and dominance vis-a-vis the rest of the world are based on a metric that is now worse than useless.”

    AD: Your points are well made. Nothing to refute. I venture to add this, since 9/11 no body thinks in high terms about America and the West. All ethnics including whites in America today do not think America is invincible or is an exemplary society. All the manufacturing and intellectual (software) production capabilities are leached out of this country since 1980’s. This has been reflected in Trump’s pronouncement during campaign that, we (the USA) have become a third world country. As of today it is difficult to be proud of America in a justifiable manner.

    Perhaps, but many in the west have still not yet accepted their now irreversibly changed position in the world. On the other hand, their acceptance or rejection of it does not change the course of events.

  4. March 1, 2017 at 1:12 pm

    This is a question that has troubled me for years. Whenever I went to foreign countries considerably less wealthy on paper than the US I was often struck that most people seemed like they cheerfully going about life, often in a carefree way seldom seen in the states. It did not match with the stories of universal squalor I had been told at home.
    I wrote about it some years ago.

    Seemed like there was little audience for that kind of sentiment 4-5 years ago yet just in the last year or two curiosity about alternatives to a failing American lifestyle have exploded.
    I did not have enough experience living abroad to approach the subject in depth but am glad others from around the world are doing so.

    It’s still more possible in the US than other places to accumulate more stuff, but social capital is very hard to come by. You’re on your own here, everyone is just looking to make a buck. Food and clothing are cheaper than ever so even the poor have junk food, electricity, and basic appliances.
    But property, income security, medical care, employable skills, the means to start families grows ever scarcer and more expensive. So most can stay alive, but for many of them it’s a cursed life.

    What was just starting to become apparent in 2010 is now established and obvious fact.

    Also, USA and rest of the west are a textbook example of what happens when a proxy marker of prosperity (money) starts to be seen as prosperity itself.

  5. Genius
    March 2, 2017 at 3:08 am

    Indian middle class is like 5% of the population. you are like one of those western communists who believe people living in communist backwaters are happier and more spiritually rich than those unhappy people in capitalist societies.

    If you had said 5% is upper-middle class, I would have said.. ok. But once you say middle class, the percentages and numbers are much higher. Also, the majority of people in India (especially those with money) do not report their income accurately. Therefore, you have to look at how they live, how much savings they have, how they spend money rather than official numbers.

    FYI- Half of white americans cannot come up with 400$ in an emergency.. 400$!


  6. Anonymous
    March 3, 2017 at 12:07 pm

    This article has a lot of truth in it. However, I notice on the Internet that many young Indians seem to be worrying about the impending loss of H1B visas. It seems that many Indians still consider moving to the U.S. as their main ambition.

    Only presstitutes (“journalists”) in India care about that sort of stuff.

    Also many Americans now understand that things are not so bad elsewhere and that the World is catching up. This is one reason that Americans support the America First policy. Before , they would have felt magnanimous towards poor third worlders but now see less reason to be generous to those who are often better off than many Americans.

    Given what we know about history, the words “Americans” and “magnanimous” should not appear in the same sentence.

  7. Anonymous
    March 4, 2017 at 12:21 pm

    One thing you shouldn’t forget is how incredibly greedy Indians are. Their desire to accumulate will send them to the USA..

    Greedy =/= Stupid.

    • hoipolloi
      March 4, 2017 at 1:08 pm

      South Asians in general are deprived of material advancement for so long that money simply sticks to their fingers. 🙂

      Good one.. LOL

  8. Stoner With A Boner Up His Ass
    March 7, 2017 at 1:29 am

    I mean beliefs prevalent in USA (and the west) about its relative power and dominance vis-a-vis the rest of the world are based on a metric that is now worse than useless.

    so what you’re saying is that India …… will be a superpower in 2030?



    i have a serious question though: will you will follow your own advice and move back to your shithole country?

    I prefer places with somewhat lower population density. Curiously, many of my cousins don’t and they have excellent jobs and livelihoods + tons of money + multiple fancy condos and houses.

    That is what I meant by people from that country taking the path which best suits their choices and best interests.

    • hoipolloi
      March 7, 2017 at 5:46 am

      I sometimes feel that some kind of international pressure should be brought on Indian state to eliminate open air latrines in the country. This is a shame on humanity and an affront to human dignity. The tourist industry outside India should boycott bookings to India, unless the government pledges to eliminate this abomination by law. May be the UN should take this up, like human rights issue, or eradicating plague, small pox etc.

      Agree on that! Too many people from rural areas still behave like total morons.

  1. March 4, 2017 at 10:18 am
  2. March 31, 2017 at 7:05 pm

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