America and Europe Are Equally Poor

Gabriella Clare Marino/Tourists and locals mingle at sunset in Giardino degli Aranci in Rome, Italy

“Honey, don’t worry,” I said, reassuring myself as much as her. “I see a big crowd up ahead. It’ll be fine.” We were wandering down Market Street in San Francisco, after sundown. Despite the towering buildings looming over us, designed to host tens of thousands of people, the streets were quiet and empty. Except, of course, for the shadowy figure shuffling around without direction on the other side of the street, and the occasional and deeply unnerving scream.

There is no shortage of anecdotes about Americans who visit Europe for the first time and are shocked to discover streets that are safe at night, food that is tastier yet healthier, and large cities that are nonetheless beautiful and walkable. The reverse is much rarer, if only because true Europeans don’t write about their experiences on the internet in English. As a dual European-American citizen from birth, I have spent roughly half my life in North America and half in Europe, so neither continent is capable of giving me culture shock. The same was not true of my wife, a true European whom I was hazing with a not-so-grand tour of the great cities of the United States of America.

“I’ll call an Uber up there, okay?” Even for me, the haunted atmosphere was a bit much and significantly worse than I remembered from just a few years before. But there were clearly people in the distance ahead of us, I thought, so we shouldn’t inordinately frighten ourselves. But, fast-walking forward, it didn’t take us long to realize that those weren’t tourists or late-night shoppers strolling down from Union Square, but what must have been a hundred homeless people hanging out, sprawled out on the pavement, and doing drugs. Many Europeans, my wife included, will gripe incessantly about the alleged lack of public safety and order in Europe. Suffice it to say, she has not mentioned it a single time since visiting San Francisco—on paper, one of the richest cities in the richest country in the world.

Comparing the World’s Paper Wealth

The discrepancy between America’s paper wealth and its real wealth is not something that can be ignored when comparing America’s wealthiness to the rest of the world, especially Europe and East Asia. Since 2008, nominal U.S. GDP has outpaced that of the European Union to the point that the EU is now just two-thirds the economy that the U.S. is, rather than the prior near-parity. U.S. nominal GDP per capita is nearing Singapore’s, while all of Europe except for small rich states like Norway or Monaco are significantly behind. After a decade of sluggish growth, Europe’s fortunes compared to America’s took another sharp turn for the worse following the 2020 COVID-19 pandemic and then the 2022 Russian invasion of Ukraine.

But these aren’t reasons for American triumphalism, let alone reasons to claim that America is now unfathomably wealthier than Europe. To begin with, just looking at more numbers makes the picture far less dramatic. Europe’s GDP was also one-third smaller than the United States’ in 2000, before growing to parity by 2008 and again falling behind. Simply adjusting for purchasing power to remove the distortions caused by exchange rate fluctuations takes the GDP per capita of Germany—the largest country and economy in Europe—from less than two-thirds of America’s to nearly 90% of it. By this metric, the EU as a whole was 75% as affluent as the U.S. in 2022.

The OECD gives less favorable, but still fathomable, figures: in 2021, the average household in the European Union had 61% of the gross disposable income of the average household in the United States. Germany was at 77% of the U.S. figure. Then again, the same numbers say that Japan is poorer than Lithuania and that South Korea is poorer than Portugal. We might want to take the significance of such numbers with a grain of salt. The gap between what statistics purport to capture and what they actually capture means we can use them as pieces of evidence, but we still require a principled model of reality in which to fit and judge them—as well as interaction with reality itself.

Money, wealth, and value are three related but different things that are easy to confuse with each other. Money is what you use to exchange wealth, that is, actual goods or services, from which you then derive some tangible or intangible value. The traditional view of wealth is that it is not just about having money, but also about having that money go somewhere, far enough to provide a certain amount of value from a certain amount of wealth. Gold and jewels, but also cattle, fields, spices, exotic fruits, glittering palaces, large estates, rare books, leisurely afternoons, beautiful wives, healthy children, loyal friends, dutiful servants, and so on. It’s why you can say the average inhabitant of a developed country today is in some ways richer than Chinese Emperors used to be.

We can update the list somewhat for the modern day, but the principle of having a holistic definition of wealth independent from mere money remains. There is arguably already such an updated modern-day definition, which we term “quality of life” and, ironically, is something Americans far more readily admit is superior in Europe. To say that the “quality of life is higher” in Europe because there is less work, less crime, less driving, better and healthier food, and more beautiful people and buildings, is just to list a bunch of ways that Europeans are collectively wealthier than Americans, but framed in a specific way to prevent this wealth from being accounted.

One can derive value from wealth without being its owner, which is the more important facet of wealthiness when comparing continent-sized societies of hundreds of millions of people, rather than two particular individuals. We recognize that the children of the wealthy are themselves wealthy too, if only through their parents’ doting rather than paper ownership of assets. Based on the same principle, we can recognize that public wealth also exists and ought to be factored in when making comparisons of societies. Just because public wealth is more difficult to measure, apportion, or liquidate than individual wealth or one’s personal bank account does not make it less real or relevant, not least because such wealth is necessarily made possible only through many acts of individual sacrifice and effort orchestrated by unique social technology.

In addition to adjusting for purchasing power and disposable income, an easy way to get closer to a real comparison of affluence is to adjust for hours worked, which lets you guess at leisure time, one of the most obviously desirable forms of wealth. According to The Economist, when adjusting for purchasing power and hours worked in 2022, the two most affluent countries by far are Norway and Luxembourg. Once you add in Denmark, Belgium, Switzerland, Austria, and Sweden—all the other countries ranked higher than the U.S.—you are no longer talking about one or two small and unrepresentative rich countries, but 52 million Europeans who are more affluent than the U.S. average. Perhaps we should think of these countries, collectively, as “Europe’s California,” rather than a few irrelevant and unrelated Vermonts. In any case, the 83 million Germans are at 97% of the U.S. figure, while the 68 million French are at 93% of it. Another chart, measuring net household disposable income in 2021 adjusted for actual individual consumption, purchasing power parity, and hours worked, found that Germany was the highest at 87% of the U.S. figure, followed by France at 85%, and Belgium at 85%.

Both sets of figures clash with our assumptions in other interesting ways. For example, the United Kingdom and Italy are roughly on par with each other and both far below Germany or France, the powerhouses of the continent. But Canada—America’s little brother—is below any of them! Despite vigorous catch-up growth since the fall of communism, Eastern Europe is still only about half as affluent as America. The highest-ranked former communist country is Slovenia, which is on par with Spain. The largest, Poland, is between 46% and 58% of the U.S. figure, depending on the chart. Then again, maybe we shouldn’t be so dismissive, given that these countries were actually unfathomably poorer than the United States just one-and-a-half generations ago. As a kid in formerly communist Europe, I still remember washing myself in a bathtub with cold water. But there is a nice hot shower there now—and even air conditioning! I like to joke that, when seeing ugly communist apartment blocks today, you should remember that the post-communist GDP increases all went into the insides of buildings rather than their outsides.

It is also worth noting that economic inequality is simply higher in the United States, which means the European numbers will more coherently apply to the societies they are intended to represent. This inequality is usually articulated as a negative thing by commentators, as if the U.S. does not take care of its poor people, but it is equally because the much more dynamic U.S. economy produces more genuinely very wealthy people per capita—more outlier multi-millionaires and billionaires—than any European country. Income inequality in the U.S. is higher than any country in Europe, even Russia. Wealth inequality is higher than all European countries except Russia and esoterically inegalitarian Sweden.

According to UBS’ Global Wealth Report for 2023, the mean wealth per adult in the U.S. was higher than any surveyed country in the world except Switzerland. But the median wealth per adult was the same as Spain or Italy! Here it was Belgium that came in first place, with both France and the United Kingdom pulling ahead of the U.S., though notably with Germany and Sweden falling far behind. No statistic is a perfect substitute for an informed generalist appraisal, and different statistics tend to disagree with each other on exact rankings. But it is safe to say that the statistics themselves make the notion that the United States is unfathomably wealthier than Europe untenable—something that can also be verified by just visiting.

City Life is a Way to Measure Wealth

I can hardly speak for rural life, since I have never lived in the countryside for any substantial period of time. But given that well over half the populations of both the U.S. and every European country live in urban areas, it is urban and suburban life that is more relevant to compare. In my experience, one cannot find the amenities typical of even mid-sized and second-tier European cities anywhere in America except Manhattan and perhaps a few small and select neighborhoods in other top-tier U.S. cities. Most of America is, in fact, defined by highways and strip malls and this, in fact, sucks—which is why nobody ever seriously defends it on its own merits, but just claims it is the legitimate result of the impersonal hand of the market satisfying consumer demand. In Europe, it is unremarkable to live in a city where you can leisurely accomplish all conceivable errands by foot or, perhaps, by jumping onto a bicycle or tram. Density and walkability energize social life and ubiquitous low-commitment bars, cafés, eateries, parks, and even nightclubs make spontaneity possible.

Even where such amenities are available in America, not gated by miles of driving, one is not as free to use them due to rampant crime. In Europe, urban crime is more of a regional phenomenon, rising higher in Southern Italy or the high-immigration cities of France, Sweden, and England, but leaving even large and dense cities like Amsterdam, Madrid, Copenhagen, Warsaw, or Munich safer than Salt Lake City. In America, crime is a national phenomenon, far more common than in Europe, and far more violent. In 2022, the U.S. had an intentional homicide rate of 6.4 murders per 100,000 people, just above Yemen and below Zimbabwe in the rankings. France, Sweden, and England were all at about 1.1 murders, and most of Europe is lower still, such as Germany at 0.8 or Italy at 0.5. America is literally ten times more violent than some European countries and still more than five times as violent as some of the largest ones. If one is unable to derive value from some item of wealth, public or private, due to the risk of intentional injury or death, then one is not being made wealthier by it.

America does not lack its own forms of public wealth, some that are even unthinkable to Europeans, like the national parks or vast tracts of public land. One could say, provocatively, that while Europe’s public wealth rests mainly on social technology, America’s rests mainly on its surplus of land. The EU is three times as dense as the U.S. in terms of population, which might go a way towards explaining why American dwellings are three times larger than European ones.

But overall, it is hard to say that America is significantly wealthier than Europe, or vice versa. As someone who has had one foot in each continent his whole life, Europe and America seem roughly equally as wealthy. That Europeans don’t use dryers or air conditioners is as absurd and impoverished, in my mind, as that Americans nonchalantly become obese through copious consumption of sugar water or evacuate from downtown urban areas at night due to crime and disorder. The American advantage in earning hard cash, in practice, just seems to be undercut or balanced out by the American disadvantage in public wealth, and the reverse is true for Europe.

Papering Over Impoverishment to Turn Back the Political Clock

The debate over whether America or Europe is more affluent is a relatively new one and one that is brought up by only one side of the debate and always in the same context: Americans trying to flex on Europe in order to gin up patriotic sentiment on behalf of America’s incumbent political and economic institutions. American populism, as represented by Donald Trump, outrageously declared that America was not a great and wealthy country, but “like a Third World country” that needed immediate and sweeping reforms in trade, industry, immigration, and infrastructure to live up to its economic potential.

The idea that the unreformed America of today is an untrammeled economic success is the consensus narrative under which the remnants of this defeated populism are cleaned up and recuperated, and a reversion to the contentless and jingoistic norm that prevailed before widespread internet usage. To question America’s economic performance is taken as a lack of patriotism, as if “the economy” were itself the country, or as if only a socialist could notice the merits of European social democracy.

The debate is also, therefore, an omen of what the consensus of America’s incumbent elites has in mind for Europe’s future. Today, Europe is still not significantly poorer than the United States. But it is now on a trajectory to become significantly poorer, in part because of an ideologically-motivated, heavily U.S.-backed proxy war against Russia in Ukraine, which has cost Europe its previous energy strategy of piping in cheap Russian gas. In Europe, there was no Plan B, just a rationalization of decline as environmentally-friendly “degrowth.” In Washington, nobody cares about European prosperity; helping to destroy it may even be an opportunity! It is this downward trajectory, rather than the current reality, that America’s jingoists are gleefully celebrating when they gloat about GDP figures. They know the figures don’t really check out—yet. But they are looking forward to the day they do, since this will justify further U.S. interventions in Europe on the basis of the superiority of the American model of society.

It is however a mistake for America to want Europe to fail. Many of the same forces that will drive Europe’s economic decline will also drive America’s: low fertility rates, an aging population, ideological opposition to growing energy usage, inflexible and increasingly fragile institutions beset by succession failure, post-industrial exhaustion and the resulting lack of vision—all against the backdrop of a still economically rising China. Europe is not a cautionary tale for America, but the canary in the coal mine.

In many poor countries, there is no amount of money that can buy you the amenities of the developed world. Some items of wealth, even basic things like food that won’t make you ill, are beyond the capability of those societies to provide at any price. This is well understood when thinking of the value of a U.S. dollar in developing countries such as Brazil or South Africa. Rather than justifying the status quo, we should ask ourselves what things no amount of money could buy even in the developed world today.

Marko Jukic is a Senior Analyst at Bismarck Analysis. You can follow him at @mmjukic.