The good, the bad, and the ugly…A similar piece from the Chief Economics Commentator at the FT.
It is the best of countries, it is the worst of countries, or at least of the high-income ones. The US stands out for its prosperity and its brutality. This is how I have felt about it since I visited in 1966 and lived there throughout the 1970s.
The sustained prosperity of the US is astounding. A few western countries have even higher real incomes per head: Switzerland is one. But real GDP per head in the larger high-income countries is below the US average. Moreover, these countries have fallen further behind in this century. In 2023, German real GDP per head was 84 per cent of US levels, down from 92 per cent in 2000. The UK’s was 73 per cent of US levels, down from 82 per cent in 2000. This relative outperformance is remarkable if one considers how big and diverse the US is or that one would have expected catch-up, not relative decline, by poorer countries elsewhere.
Not surprisingly, the US economy also remains far more innovative than other large high-income economies. Just look at its leading companies. These are not only far more valuable than those in Europe, but far more concentrated in the digital economy, as Mario Draghi pointed out in his recent report on EU competitiveness. Andrew McAfee of MIT stresses that “The US has a large and variegated population of valuable young from-scratch companies. The EU simply doesn’t. The American population of arrivistes worth at least $10bn is collectively worth almost $30tn — more than 70 times as much as its EU equivalent.”
The US then is an economic powerhouse, so much so that it has persistently run a large deficit in its capital account. Donald Trump protests. Yet this is a powerful vote of confidence.
So, how can such an economic marvel also be “the worst of countries”? Well, its homicide rate of 6.8 per 100,000 inhabitants in 2021 was almost six times as high as that of the UK and 30 times that of Japan. Again, the latest US incarceration rate was 541 per 100,000, with a total of over 1.8mn people in prison, against 139 per 100,000 in England and Wales, 68 in Germany and a mere 33 in Japan. This US rate was the fifth highest in the world, behind those of El Salvador, Cuba, Rwanda and Turkmenistan. It was, incredibly, over four times China’s.
According to the Commonwealth Fund, maternal deaths were, most recently, 19 per 100,000 live births for US white women, against 5.5 in the UK, 3.5 in Germany and 1.2 in Switzerland. For US Black women, mortality rates were close to 50 per 100,00 live births. Child mortality is also relatively high: according to the World Bank, under-five mortality was 6.3 per 1,000 live births in the US in 2022, against 4.1 in the UK, 3.6 in Germany and 2.3 in Japan.
The most telling indicator of a people’s welfare is life expectancy. US life expectancy is forecast at 79.5 years for both sexes this year. This makes it 48th in the world. China’s life expectancy is forecast to be almost as high, at 78. UK and German life expectancy is 81.5, French 83.5, Italy’s 83.9 and Japan’s 84.9. Yet the US spends far more on health, relative to GDP, than any other country. This shows great wastefulness, though this low US life expectancy has a number of additional explanations. Yet, what does the high measured US GDP mean if some 17 per cent was spent on health, with such poor results?
More broadly, what does US prosperity mean when combined with such potent indicators of low welfare? These outcomes are the result of high inequality, poor personal choices and crazy social ones. Some 400mn guns are apparently in circulation. This surely is insane.
Then there is a related question, which is whether the relatively high inequality of the US and the insecurity of those in the bottom and middle of the income distribution inevitably lead to what I called “pluto-populism” in 2006: the political marriage of the ultra-rich, seeking deregulation and low taxes, with the insecure and angry middle and lower middle, seeking people to blame for what is going wrong for them. If so, what made the US dynamic, at least in this age of deindustrialisation and unbridled finance, led to the rise of Trump and so to a shift to a dangerous new demagogic autocracy.
That in turn raises the most fascinating question of all: might Trumpism kill the US golden economic goose? What ultimately underpinned the US rise to prosperity and power were the rule of law, political stability, a sense of national cohesion (despite many differences), freedom of expression and scientific excellence. Is there not a danger that the weaponisation of justice, the hostility to science, the attempts to curb critical media and, more broadly, the apparent indifference to many constitutional norms, including Trump himself, will threaten these fragile achievements? The US republic is, flaws and all, perhaps the most striking success in world history. Is it possible that its strengths are now combining with its weaknesses to overthrow that legacy?
Draghi was right: we must try to learn from the US. But, today, those who cherish ideals of a law-governed democracy must also worry for it.
