John Hood: Which is Wealthier: Germany or North Carolina?
RALEIGH — Although our state’s economy has grown faster than the national average over the past decade, not everyone has fared well. Some regions and communities are struggling — a condition now worsened in parts of western North Carolina by Hurricane Helene. Moreover, too many of our fellow North Carolinians lack the knowledge, skills, and opportunities to prosper even in our fastest-growing metros. Much work remains to be done.
Nevertheless, it is important to put such challenges in proper perspective. North Carolina’s problems aren’t structural. We have a wealth of human, cultural, and natural resources. Our policy infrastructure is fundamentally sound. Many other states, and countries around the world, would welcome our problems if they also came with our successes and advantages.
I’m not just talking about places you might normally associate with disadvantage, poverty, and despair. The average North Carolinian is wealthier, and has better prospects, than the average German.
No, I’m serious. According to a recently published study by the European Centre for International Policy Economy, North Carolina’s gross domestic product was approximately $60,000 per resident in 2021. Among the European Union countries with lower GDPs per capita than North Carolina’s were Germany, the Netherlands, France, Sweden, Italy, and Spain.
More broadly, reports The Economist, American output per capita is currently about 40% higher than in Canada or western Europe and 60% higher than Japan. That gap between the U.S. and its peers is about twice as large as it was in 1990.
“Since the start of 2020, just before the COVID-19 pandemic, America’s real growth has been 10%, three times the average for the rest of the G7 countries,” the magazine observed. “Among the G20 group, which includes large emerging markets, America is the only one whose output and employment are above pre-pandemic expectations.”
International comparisons of economic output and incomes are, admittedly tricky. Different statistical adjustments for purchasing power will produce different rankings. There are other economic measures that tell a similar story, however. Our homes are quite a bit larger, for example, than is typical in European or East Asian countries. They’re more likely to be air conditioned and contain modern appliances and amenities.
Some years ago, the Pew Research Center compared living standards in the U.S. with those of other developed countries. By German standards, 72% of its residents can be classified as “middle income” — that is, their incomes are between two-thirds and double the median income in Germany — while 18% are classified “lower income,” living on less than two-thirds of the median. By this definition, Americans are less likely to be middle-class, and more likely to be poor, than Germans.
But again, on average, we earn more in real terms (partly because we work more hours, to be fair) and can afford a larger basket of goods and services. When the American income thresholds are applied to Germans, 63% of the latter are middle-income and fully a third are lower-income, a significantly higher share than ours.
None of this is to suggest that we have little of consequence to learn from other countries. Germany has an excellent system of apprenticeships and job-training programs. The education systems of such countries as South Korea and the Netherlands combine high academic standards with significant parental choice and competition, features that we are only now adopting. Most European countries make extensive use of efficient private owner-operators for seaports, airports, rail lines, and other infrastructure. And a number of countries get a better bang for the buck on their health care expenditures than we do.
I’m all in favor of borrowing good ideas from wherever we can find them. But when it comes to economic performance as a whole, America remains a leader, not a laggard — with its recent growth powered by states such as Florida, Georgia, and the Carolinas that boast many innovative companies and industries, healthy inflows of people and investment, and pro-enterprise policy environments.
For that, and for much else, North Carolinians should be grateful.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
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