Monday, April 05, 2010

Chart of the Day

I've occasionally addressed the common miss-perception -- including by Nobel Prize-winning economists -- that the standard of living in Europe is similar to America's. I've even specifically compared the U.S. and Sweden, citing disparities created by the high-tax/over-regulated welfare state.

So I was intrigued when Tino at Super-Economy suggested a comparison that controlled for cultural factors:
The graph is income per capita in Sweden and the U.S (for Americans with Swedish ancestry) for 10 income groups, based on official Swedish statistics and census data. I define you as American with Swedish ancestry if the main ancestry group is Swedish. Americans with Swedish ancestry have a 55.8% advantage in income compared to people in Sweden. . .

Swedes under the American small-government system beat Swedes in the Swedish welfare system for almost 90% of the income distribution. Among the first 10th percentile the Swedes in Sweden do better. By the 15th percentile or so the Swedes in the U.S have caught up, and vastly outperform Swedes in Sweden for the rest of the income distribution. . .

source: Super-Economy

The median is 42% higher for the Americans compared to the Swedes. Overall, the middle 60% of the population earn 46% more in the American Super-Economy versus welfare state Sweden. . .

The claims of the left, such as the claim that welfare state is better for ordinary people, are the results of incorrect comparisons. Sweden is homogeneous, whereas the U.S is not. Second, Swedes are a uniquely productive people (as indicated by their performance under the U.S system, and Sweden’s performance before the expansion of the welfare state), which should be taken into account.

The fact that the aggregate results are not even better is due to homogeneous Sweden having innate advantageous in income distribution. Most of the problems of the U.S are concentrated a few distinct populations and geographic areas (such as Appalachia). When we make apples to apples comparisons, it is clear that the American system is better for almost everyone, and almost as good even for the very poor.

The Swedish system is a losing proposal for almost all the population. Unless someone spends their entire life in the bottom 10% of the population [NOfP note: this group is tiny; in the U.S., poor isn't permanent] they are better off under the American system. . .

If you want one picture to demonstrate that free markets and limited government are better for almost everyone in society, this is it.

Note that Tino claims to have included all government transfers in Swedish income calculations. Separately, he also says that economic freedom is more correlated with life expectancy than income equality.

1 comment:

Assistant Village Idiot said...

The Swedes (and perhaps Lutherans in general) have a notable tradition of hard work and high social capital in working for the common good of other Swedes. As Malmo becomes an increasingly Moslem city, this is coming under stress. (The current Swedish solution is to whistle and pretend it's not there - unless you live in Malmo, of course.)

By remaining neutral in WWII, the Swedes were the only ones with money to invest after the war, and they put it into shipping, state-of-the-art steel-producing, Saab, and Volvo. They rode this wave of out-competing other nations to a very high growth rate in the 50's and 60's. This has slowed down, but remains high.

The slowdown because of their heavy socialism, coupled with immigration, has hurt their economy badly. Swedes, however, unlike Americans, have started to make adjustments in the direction of economic freedom.

A nice people, but overrated.