Why the US can't teach the world

While the US isn’t the richest country in the world in per capita GDP, it is by far the richest large country. It can boast of impressive results in science and innovation. Does that mean that anyone whishing to obtain similar levels of prosperity have to follow the American model for economic system and organization of society? My short answer is “no”.

The US is an outlier which has too many advantages not related to the organization of its economy or society. Advantages which can not be replicated anywhere else in the world. The US has enjoyed close to 150 years without any destructive wars on its land. Much of the rest of the advance world has suffered multiple destructive wars settings back the countries decades. America also enjoys an abundance of natural resources and huge amounts of fertile land available to each citizen. Agricultural land may not be that important today, but 150 years ago when America started surpassing other wealthy nations this was a large benefit. With so much cheap and fertile land American’s could afford to waste land in order to safe labour, thus greatly increasing productivity in a way unavailable to the rest of the world. When industrialization started America could benefit from large coal reserves, water power. Later the economy could be fueled by large reserves of oil. Other advance nations usually did not have these resources available within their own borders in large quantities except coal.

The problem with comparing the US to Europe or Japan

Even if we disregarded these benefits or resources, absence of war, large quantities of cheap land etc, there are other factors which make comparisons deceiving. Europeans have different preferences than Americans. They prefer leisure over money. Thus a large part of the difference in GDP numbers between the US and European states is due to Americans working far more hours. American GDP growth numbers often look impressive. However the American population increases much faster than the European and Japanese e.g. In terms of GDP growth per capita Japan has actually outperformed the US for the last decade, since they have a shrinking population and will actually obtain per capita growth with much lower overal GDP growth.

And then there is the problem calculating and comparing GDP numbers. Finding the GDP is difficult by itself. Adjusting GDP at PPP might be even more difficult. Consumption patterns and prices are quite different between America, Europe and Japan. Europeans often spend more money on traveling than Japanese and Americans. American’s seem more conserned with quantity of stuff than quality than Japanese and Europeans. That is likely a natural result of having much less space. Europeans and especially Japanese can’t accumulate a lot of stuff in their house because they don’t have the space. Italians might buy fewer but more expensive clothes than Americans. Likewise American restaurants seem very eager to point out the amount of food you get.

If you look at wealth indicators such as average house size, number of home appliances, TVs etc American’s will clearly come out on top. The problem with such comparisons is that they don’t offer any lessons to the rest of the world with respect to the possible superiority of American economic model. If American society was completely replicated in Japan, then houses and number of appliances would not magically increase to American levels. There is just not enough space in Japan. Houses would be much more expensive regardless of economic system. This is a matter of geography rather than economic model. If you live on tiny space you are not going to fill your appartment with 4 TVs as might be fairly common in the US, so house size affects many other aspects of life.

What can be compared

I don’t think it is possible to make comparison over very short term or comparison of absolute numbers because the potential in each country or region is tied to so many factors outside of political control, such as geography natural occurence of resources etc. However I do think one can compare trends. If one country stops growing while another starts a growth acceleraton after policy changes then it is natural to compare the effectiveness of each of these policies. Likewise it should be possible to compare health care. Living in a country with a lot of space or little space should not affect your health to a large degree.