The Truth, Partial Truth, and Statistics: World's Biggest Economies Get a Ranking
BOSTON — In the presidential debate Oct. 6, Republican candidate Bob Dole called the United States "the greatest nation on the face of the earth."
Is it really? Many citizens of Japan, Canada, and Western European nations would find such an assertion distasteful, if not chauvinistic.
But if economic statistics are an indication of greatness, the US is great by many measures, such as per capita annual income and the unemployment rate. In other areas, including the savings rate and income equality, the US does poorly. Such statistical comparisons of the economies of industrial nations have been compiled for the first time in a 141-page book by economists at the Organization for Economic Cooperation and Development in Paris.
Even though Americans may rightfully claim a No. 1 economic status, citizens of other nations may agree with medieval writer John Fortescue that "comparisons are odious" and add that such comparisons do not adequately represent the high quality of their lifestyle and culture.
The OECD comparisons offer some statistical facts, or, at least, numbers as close to being truly comparative as number-crunchers of that "rich nations' club" can devise.
Countries can use the figures as corporate executives do when they examine the "benchmarks," or best practices, of companies in their own industry. They try to emulate those competitive practices in their own companies.
Cross-country economic comparisons have become common as statistics in more nations have become more sophisticated and accurate. For example, Harvard University economist Robert Barro examined 100 industrial and developing countries for the 1960-90 period to find what stimulates economic growth.
Growth "is enhanced by better maintenance of the rule of law, smaller government consumption, and lower inflation," Mr. Barro writes in a recent paper for the National Bureau of Economic Research in Cambridge, Mass.
Increases in political rights, he adds, initially increase growth but tend to retard growth once a moderate level of democracy has been attained. Growth is also stimulated by higher initial schooling and life expectancy, lower birth rates, and improvements in the terms of trade with other nations.
The charts on these pages list the nations by their rank in gross domestic product, the total output of goods and services in a nation. The GDP of each country (other than the US) is converted into US dollars according to the rate prevailing on foreign exchange markets.
But sometimes when money is involved in statistical comparisons, the OECD makes them fairer by using what economists call "purchasing power parity" measures. Foreign exchange rate conversions can be distorted by movements of capital or market sentiment. So economists devise a standard market basket of goods and services for each country. Then they measure how much of that basket a currency unit will buy and compare it with the purchasing power of other currencies in their own countries. This method puts the US on top in both how much an employee is paid on average and in national output per person. But average annual growth of compensation in the US in the 1970-94 period has been slow, a fact that has become a political issue in the presidential election campaign.
Inequality of incomes is another political theme. The OECD employs the Gini coefficient, one standard measure of inequality wherein higher numbers reveal greater inequality. The US has a worse income distribution than any other OECD nation by this measure. But the US Census Bureau last month reported that the poorest fifth of households saw their share of national income rise slightly in 1995 over 1994.
While pay is a hot issue, job security can be hotter. The tough bargaining over auto union contracts in North America - 20,000 Canadian autoworkers are now on strike against General Motors - is just one example.
Europe faces an even bigger battle against unemployment in the industrial sector.
Different nations define unemployment in varying ways. In some nations, for example, only those persons registered at government labor offices as seeking work are counted. The US takes a national survey to determine unemployment. To avoid such differences, the OECD uses a standard definition of who is unemployed. The latest numbers show Japan and the US with the lowest unemployment rates. For Germany, the OECD's standardized rate of unemployment of 9.1 percent last spring was well below the 10.3 percent rate cited by the German government.
"Global competition" is often one of the factors blamed when jobs disappear. Economists differ on how big a factor this is. But, like other nations, the US has become more dependent on exports and imports. Exports still make up a much smaller share of gross domestic product (GDP), the nation's output of goods and services, than in other industrial nations.
Except for Canada, most other nations save more than the US. Savings are important because they can be used for investments that boost a nation's living standards. A recent study by McKinsey Global Institute in Washington, though, indicates that good corporate management makes the US more efficient than Germany or Japan at using capital.
Another hot political issue is taxes. Mr. Dole, in the presidential debate, talked of a 40 percent tax rate. That may be true for some high-income Americans when state and local taxes are added to federal taxes. But it can't be the case for most Americans, since, total tax revenues in the US amounted to 29.7 percent of economic output in 1993, and the tax changes since then have barely altered that percentage.
By comparison with most industrial nations, the US has both a low overall tax burden and a low marginal tax rate - the rate that higher-income citizens pay on their last dollars earned. Japan and Australia are also relatively low-tax countries. Nations that have nationalized health insurance channel health spending through the government and thus end up with higher taxes. These include Germany, Britain, France, Canada, and Italy.
Overall, the industrial nations and developing countries also are doing well economically these days. US Treasury Secretary Robert Rubin late last month said: "The fundamentals of the world economy look as solid as they've been for a long, long time."