Americans Don’t Know How Good They Don’t Have It
Tell them.
Photo from iStock
About a decade ago, French economist Thomas Piketty’s Capital in the 21st Century showed that the main driver of inequality across a number of markets was the tendency of returns on capital (r) to exceed the rate of economic growth (g). A society in which returns that were largely held by the wealthy, outpaced economic growth over a prolonged period threatened to generate extreme inequalities that stir discontent and undermine democratic values. Simply put, if r>g in an economy for a long period of time, those with investable assets will see their wealth grow, and those without investable assets will be left behind.
An interesting note from Piketty’s research was that although the top 10% of Americans were wealthier than their European counterparts in 2014, the opposite was true of the bottom 90%. Europeans of a decade ago were better off economically than those in America if they were outside the wealthiest 10%.
Here we go again.
Over the holidays, I read the blog from Hans Stegman, Chief Economist from Dutch Bank Triodos titled; The European dream differs from the American Dream. If you don’t already read Hans’ blog - System Economics, I highly recommend it. Hans is one of the preeminent voices in the degrowth world. As a chief economist of a large European Bank, he is more plugged into the financial world than I am. He’s also quite a bit less sarcastic.
Hans uses the recent Draghi Report on the competitiveness of the European economy to ruminate about the different economic priorities of the EU and America.
Stegman gently chides the Draghi Report for worrying that the overall GDP growth of Europe is lower than that of America. The Draghi Report seems to make the conclusion that since overall GDP in Europe is lower than in the US, European citizens must be worse off.
Stegman shows that though economic growth and productivity have risen more in the US than in Europe, the benefits of those gains have only reached a small fraction of the US population and are highly concentrated in the tech sector. Stegman goes on to warn the EU to not look to replicate the “mirage” of US success. He digs into the data to show that relationship between the wealth of the bottom 90% of societies in Europe and the US still holds. Those in the bottom 90% of Europe are better off economically than their US counterparts in the bottom 90% in America.
Europe tends to perform better than the US on most measures of quality of life. But the narrative for decades is that Europe sacrifices economic growth and wealth for that higher quality of life. That just isn’t true. The top 10% of Americans are wealthier than the top 10% in Europe, but the bottom 90% in Europe are better off financially than their American counterparts, and they are healthier and happier as well. The average American is getting a raw deal in life when compared to their neighbors across the pond. They just don’t know it.
I’ve copied the below graphics from Stegman’s blog (with his permission). The last two graphics show that the bottom 90% of those in Europe outperform the bottom 90% in the US in terms of GDP per person by 5%. If you look at the bottom 50%, Europe outperforms by a whopping 19%. The timeframe is from 1990 - 2023.
Source: #32 The European dream differs from the American dream (Stegman, 2024).
In the words of Stegman:
Europe deserves so much better than a comparison with the US. Not all is good in Europe. And yes, we should innovate, improve, and invest. But do not forget: For 90% of the population, Europe has been a better continent than the US in the last 35 years. The European dream is so much richer than the American dream…
If most Americans knew these facts, they might just want what Europe has, a more egalitarian society, with better healthcare and better quality of life. I don’t expect American media to be sharing this data with their viewers anytime soon, so share this blog (and Hans’ blog) with an American friend in that bottom 90% that thinks they are so better off than the rest of the world. If they demanded a move away from GDP growth and towards quality of life, they might just be richer, and healthier, and happier.
Let us know their reactions.
This is something that Americans in general have no idea is the case. They think that we have the best country on earth since we have the highest GDP. But, your article aptly points out that it's only the top 10% that really benefits from our present economic system. It is the propaganda of the "trickle down theory" that has convinced people for years that eventually they'll get a bigger piece of the pie. But as we've seen, it has only added to an ever increasing wealth gap. I had this conversation with a neighbor and was shocked when he insisted all the tax subsidies should go to companies and the wealthy, otherwise we working class people would not have jobs. It never made sense to me and you have confirmed the bias of American capitalism. It does not work for the working class and it certainly doesn't make us, the bottom 90%, healthier, wealthier or happier.
The whole bogus trickle down thing was touted by Reagan and was no more true then than it is now. I would be much happier and healthier, probably, with a European system.