The United States Has Always Been Rich

Greg Mankiw says that even though European growth rates have been comparable to America’s, we should still fear the European economic model because America is richer than the biggest European countries:

Here is GDP per capita, adjusted for differences in price levels (PPP), from the IMF, for the United States and the five most populous countries in Western Europe:

United States 47,440
United Kingdom 36,358
Germany 35,539
France 34,205
Italy 30,631
Spain 30,589

Okay, but look at the same (well, almost the same, it inconveniently doesn’t include the UK) table using data from 110 years ago:

United States 4,320
Germany 3,134
France 2,849
Italy 1,746
Spain 2,040

Was this also due to the job-killing impact of universal health care and cap-and-trade? In general, rich countries normally stay rich and poor countries normally stay poor. When you’re asking about policy, you’re either going to be asking questions about growth rates or else you’re going to find very little of interest to say. In particular, the United States has been richer than France or Germany since at least 1820. This fact, on its own, doesn’t have much to say to us about policy.

Gilbert Cette, Yusuf Kocoglu, Jacques Mairesse have an interesting table in their “Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century”:

productivity 1

Inconveniently for everyone’s political agenda, the laggard here is the United Kingdom, which has generally followed a policy path that’s somewhere between an American and an European social model.