Does David Brooks Heart the Chinese Economy?
David Brook’s latest attack on America’s liberals points to European policies and claims that folks with relatively high income are worse off than folks whose income may be low but rising:
Anybody who has lived in Europe knows how delicious European life can be. But it is not the absolute standard of living that determines a people’s morale, but the momentum. It is happier to live in a poor country that is moving forward – where expectations are high – than it is to live in an affluent country that is looking back.
With U.S. GDP growing at 3.5% per year and China growing at a rate near 9% per year, David’ argument is that we should ignore the fact that China’s real per capita GDP is $5600 versus U.S. real per capita GDP near $40,000. But then David turns to a comparison of output per person:
The Western European standard of living is about a third lower than the American standard of living, and it’s sliding. European output per capita is less than that of 46 of the 50 American states and about on par with Arkansas.
Matthew Yglesias points out a few reasons why David’s argument is “a pretty silly way to think about the problem”. Those of us schooled in Solow growth model thinking might ask questions such as the level of capital per worker at the end of World War II and how much has each nation invested in new capital each year since. The U.S. had enjoyed a period of strong savings and investment from 1946 to 1980 – but then the fiscal irresponsibility during the Reagan and Bush43 Administrations have undermined this commitment. Yet, David does not mention savings and investment at all in his op-ed.
Update: While AB added a trackback to perhaps the best comment on the Brooks op-ed, I’d also like to thank Brad Plumer for pointing out this statement from Robert Pozen:
Gross domestic product has grown at an average rate of 3.3 percent a year in the United States over the last decade, compared to 2.1 percent a year in the EU15. Per capita GDP growth, however, has been very similar: 1.8 percent a year in the United States, 1.7 percent in the EU15. The main factor driving higher U.S. economic growth is not greater productivity gains; it is a more rapidly expanding population.