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Who’s Really More Productive? Ranking the Top-20 US vs European States

June 23, 2011
insider

The Daily Reckoning

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While famed New York Times columnist and Nobel Prize-winning Keynesian Paul Krugman has written, “Europe is an economic success, and that success shows that social democracy works,” University of Michigan economics professor Mark Perry argues quite a different story.

Based on recent data from the Commerce Department’s Bureau of Economic Analysis (BEA), Perry has compared the per capita output of the 50 US states to European countries and found that as a group Europe — in terms of GDP adjusted for purchasing power parity (PPP) — has a $32,700 PPP GDP per capita, and could likely benefit from learning a little something from even humble Mississippi, the poorest US state, at $32,764. Perry also highlights how even mighty Germany falls at #47 according to his measures.

Here are the top 20 from Prof. Mark Perry’s Carpe Diem blog comparison:

Rank | State | 2010 GDP per Capita (PPP)

* District of Columbia, $168,327

* Luxembourg, $81,383

1 Alaska, $70,814

2 Delaware, $69,880

3 Wyoming, $68,162

4 Connecticut, $66,022

5 New York, $59,596

6 Massachusetts, $58,339

7 New Jersey, $55,715

8 Virginia, $53,113

9 Colorado, $52,205

* Norway, $52,013

10 California, $51,905

11 North Dakota, $51,882

12 Minnesota, $51,238

13 Maryland, $51,224

14 Washington, $50,912

15 Illinois, $50,581

16 South Dakota, $49,741

17 Texas, $49,119

18 Nebraska, $48,708

19 Hawaii, $48,697

20 Oregon, $48,590

Only two European countries — Luxembourg and Norway (the latter of which is neither part of the EU, nor does it use the euro) — even make the top 20. In fact, the list would need to extend all the way down to #31, Georgia, and #32, Utah, to find the next European nation, Switzerland, wedged in between. This is despite being the famed private banking center and, again, the non-EU, non-euro using nation that it is.

Of course, GDP adjusted by PPP does not take into consideration certain quality of life issues such as living standards, vacation time, healthcare, and a host of other factors… however, it’s interesting to note that at least by some measures, the US continues to come out ahead. You can check out the complete top-50 list in a Carpe Diem blog post on how Europe could get an economic lesson from Mississippi.

Best,

Rocky Vega,

The Daily Reckoning

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Comments

extramiler
Extramiler - 3 years ago
Seems like a case of how to lie with statistics. DC is #1, wealthier than Switzerland and Norway?? Has this professor ever been to DC?? I lived there 9 years and let's just say it ain't Oslo or Zurich.
mla
Mla - 3 years ago
Debt distorts... everything.
Mick
Mick premium member - 3 years ago
According to his blog site Prof Perry is currently on sabbatical leave to visit, you guessed it already, The American Enterprise Institute right in DC. That puts him, according to his calculations, among the nation's greatest achievers of productivity and right into the heartland of GDP contribution – being over 2 times as productive as the nearest ‘real’ state in the US.

This relationship alone should give us pause.

A few systemic, distorting factors that bloat GDP may further contribute to this glimpse into fantasy world we get put before us here:

+ The US military spending (which the US includes in GDP, but other countries typically don’t) where tax dollars spent on wars gets converted into corporate profits for the Halliburtons and the Blackwaters around the country (and into GI pay, of course). Of all states DC would likely see the biggest impact per capita from such spending.

+ A second contributor are all the dollars spent in the worlds most expensive (but not most efficient) healthcare system. According to Wikipedia (link), the US recently spent 19% of GDP on health, compared to 9% for the rest of the world. But believe me, the average care dispensed here is nowhere near twice as good as in, say, Europe. Delivering average care for twice the cost does increase GDP numbers, but I wouldn’t dare claim this increase under productivity improvement; the contrary would be more accurate.

+ Another GDP-bloater is the monetization of higher education. Education is afforded free to the citizens of many other industrialized countries. In the US 5-6 digit number are spent for each kid and the need for education has been transformed into a huge source for revenue and profit in the US – making for a GDP contribution that many other countries won’t have.

In my view the true kicker is, however, the number of hours American workers have been spend at work in order to get to these ‘superior’ productivity numbers that Perry is parading here (and in prior publications).

If the author had chosen to look at Productivity Per Hour Worked (instead of Productivity Per Capita) the numbers might reflect much better the reality Extramiler is seeing, especially when compared internationally.

According to the latest 2010 OECD numbers (link) Americans spent about 1800 hours a year at work. However, Luxemburgians (1601h), Norwegians (1407h), and Germans (1390h) seemingly make their GDP numbers a lot more effortless. “Work smart, not hard” is a phrase that comes to mind. Comparing “per capita” numbers does hide this price for productivity.

Another way to look at the per-hour number is that German workers are productive enough to be afforded 30 working days of vacation each year AND make their GDP numbers. Certainly these Europeans have found something of value that many Mississippians and their employers quite possibly will never understand. (How many days was your official vacation allotment this year?!)

In summarizing, I think this is a text book example of precisely the kind of "made to order" fiction that serves the conservative circles in the US so well. We can therefore be assured to hear such dangerous nonsense repeated back to us in the mainstream media ad nausiam.

My advice: Don't fall for it.

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