Friday, 10 October 2014

Which Yardsticks

I was listening to a radio programme the other day in which a man was reading the book "A Brief History of Humankind" by Yuval Noah Harari .... and something the reader said made me think. He mentioned something about the fact that since 1945, while the USA has moved on, and is still the leading nation on Earth, the book reading suggested that Europe's decline over the same period had been marked.

I stopped listening to the radio and started thinking about this ..... firstly was it correct? After some thought I concluded that the answer to this lies in the measuring criteria. Certainly compared by the economic standards, the USA still displays much of the technological prowess that took it to number one spot in the last century, while Europe, which was initially the leaders in this area with Britain, Germany and France the driving forces, has certainly fallen behind in many of these fields. However compared with South America, the Middle East and Africa, Europe in the form of the European Union (EU), is still driving forward. Only the Oriental far east of Japan, China and South Korea have seriously challenged this second spot.

In fact as a unit, the EU is still the biggest or second biggest economic block in the world ... it depends on whose figures you use. The International Monetary Fund has the US first in 2013 with (GDP measured in Billions of US$) $16,799.7 with the EU at  $16,260.6 and China $13,395.4 (India and Japan are $5,069.2 and $4,698.8 respectively), while the World Bank has the order reversed with the EU at $17,402, and the US at $16,800 and China on $16,158  .... the clincher for the US is the CIA World Fact book, which puts the US top again .... but as this may not be an entirely unbiased opinion, lets leave it as an open question.

China will undoubtedly become the biggest economy (if only for a while), and in fact if you include Hong Kong and Macao, they may well be nearly second now, but of course, economically, the question of population is a significant one .... wealth measured as GDP per capita  makes a massive difference. China for example divides its wealth by a population of 1,366,690,000 heads or 19% of the world population. India divides its wealth by 1,249,160,000 heads or 17.4% of the world population, while the USA does so by 318,725,000 heads or a mere 4.43% of the world population.  The EU has approx 500 million inhabitants, or 7.3% of the world population .... so its firmly in second place when you combine economic might, with per capita wealth.  China has about a third of the per capita wealth of the EU (and less if only northern and western Europe counted), while India has only about an eighth the EU  average. So by the criteria of wealth, the US is hardly powering ahead and leaving Europe behind, but I guess they are Number One.

But what if you look at another criteria ...... Health care maybe?  According to some figures around 84.7% of Americans have some form of health insurance, which means 15% have no health care provision. However even that 'fact' hides the real facts ..... 

US Health Insurance Coverage 2009

As you can see, areas where there are high Black or Hispanic populations show a marked lack of health insurance, with over 25% of the population having no health coverage outside of the legal provision for accident care, and whatever basic provision the Federal government or State government may offer. In total there were reportedly 48.0 million people in the US (15.4% of the population) who were without any health insurance. However these basic provisions which have been improved (after the map above was compiled in 2009) as Medicaid eligibility which has been expanded, and the Patient Protection and Affordable Care Act, also known "Obamacare" became law in 2014, so the figures should have dropped and this will reflect in the next census.

In Europe and the EU in particular, health care is provided through taxation and is under what is known as Universal Health Care (UHC) .... this can mean differences in what's provided e.g. The UK's National Health Service is amongst the most generous in what's provided, but requires 96.9% public funding, while others provide basic care, but patients have to pay for more via insurance schemes. The French scheme is rated the best in Europe by the World Health Organisation, but is only 76.9% publicly funded, with the rest via private insurance schemes. Ironically despite its objections to universal care as being 'socialist' in some way, the US spends a fortune on health per capita, for its non universal care compared with the UHC countries  ......So in this area, the US lags behind the EU and even its neighbour Canada. 

Universal Health Coverage Europe and Health Expenditure Per Capita

So getting back to the original question posed by the statement in the book reading  ... has Europe's (in the form of the EU), decline been that marked over the last 70 years or so? 

I don't think so .... I admit we are not the powerhouse of ideas and technology we were 140 years ago, but we have hung on to our wealth and social progress remarkably well over this period, and in some regards such as social support we are still the benchmark. Whilst China is growing economically, its light years behind the West on levels of public corruption, health care provision, state respect for human rights and the law (including International law), private ownership or political freedoms .... but while the US is still in the vanguard for some of these ideals, its not for all. 

Europe (I am still referring to the EU here), has nothing to be too ashamed for. Its ideas such as universal suffrage, free speech and press, respect for the law and an independent judiciary, universal health care, universal schooling, etc are still the benchmarks for human progress, even if we don't always live up to them ourselves.

Update 17/12/2014:

The IMF have announced today that for the first time since 1872, when it overtook the UK, the US has been knocked off the top spot as worlds largest economy, at a worth of $17.6tn, slightly higher than the $17.4tn the International Monetary Fund (IMF) estimates for the US. It has used purchasing power parity (PPP) which enables you to compare how much you can buy for your money in different countries to calculate this. As money goes further in China than in the US, the figure for China is adjusted upwards.

However without the PPP adjustment, the IMF estimates that China's economy is worth far less - $10.3tn which is tiny compared to the US but the IMF predicts that by the end of this decade the Chinese economy will be worth $26.98tn - 20% bigger than the US at $22.3tn.

But while the US held the top spot for 142 years, China may not be able to match that record - as the long term financial forecasts from the IMF and others indicate that by 2100 India could overtake them both.

But finally, if you use per capita spending power - the value of all goods and services produced within a nation in a given year, divided by the average population for the same year - then, even adjusted for PPP, China ($11,868) is still lagging a long way behind not only the United States ($53,001) but also the likes of Turkmenistan ($12,863) and Suriname ($16,080).

So that's as clear as mud then ......


  1. An interesting analysis. I find it interesting just how similar the GDPs are of the top three economies, so similar that different sources can rank them differently. This, I suspect, is a natural function of the ability to create wealth and the availability of natural resources.
    The measure per capita is all significant because it shows what proportion of the population are active participants in the economy. The USA is able to lead China and India in terms of GDP despite having a much smaller population because more of them are participating.
    If the economy were an engine then the GDP would be the heat that it generates. Heat is an undesirable by-product of the combustion of fossil fuels - and that is not a metaphor, they're the same in both cases because industrialised economies are based on fossil fuels. So, the correct way to measure progress has to include sustainability, otherwise the only thing that we're measuring is how soon it will be going over the cliff. As it is, the figures are telling us that the USA is ahead.

    1. Hmm .... not sure that the heat and sustainability analogy is as hard and fast as you suggest. China for example is busily destroying their own environment at a record rates, with soil loss, pollution and now heat-waves. They started later, but are on target for environmental degradation well before the US ....

      Also Europe and China both have few natural resources left, as they expended them centuries ago, so there appears to be a cultural aspect to wealth creation.


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