I’ve been to those places in the EU and Eastern Europe. I tend not to sneer at them or at their American counterparts, because I come from a pretty poor rural background – my family lived in a mobile home for a few years when I was a kid, although it was on a wooded lot up in the Appalachian foothills, and not in a park. My grandparents’ house had no indoor toilet. We moved on and moved up, although in our particular case a knife fight at the roadhouse a little further up the mountain that left a neighbor missing an ear helped with the decision to get out of Dodge.

The attribute that separates American poor people from Europeans in my experience is where they are headed, not where they are. Even Americans whose work habits are so poor that you just know they are never going anywhere still have dreams of getting to a better place. The European poor I’ve met are just waiting for the next government handout. Not that a lot of American poor don’t have that attitude, too, but there are very, very few European poor who will move out of their socio-economic situation, whereas for lots of Southern people like my family, the trailer is only a stop along the way. That striving for upward mobility is less true in the American inner city, where European-style welfare programs have warped people’s thinking, but it’s still more true there than in any European (or Eastern European) slum.

I meant wealth, not poverty.

In recent presentations, Smeeding has been a bit hesitant in how to interpret the absolute poverty measures. When questioned about them he conceded that the US has had — over a longer period of time — a larger pool of low-wage immigrants than Europe and that consumption and income figures track each other very poorly for the lowest quintile in the US. He agreed with someone’s guess that tracking US and European citizens and their children from the 1970s to 2000 (excluding immigrants) would probably not lead to such dramatic differences in absolute poverty. This suggests that part of the variance for the US comes from immigration as well as from high birth rates among the poor — which is consistent with the dynamic nature of the US economy — as well as with poor measures of non-wage income. He has been doing work on poverty which has equally large problems of interpretation. Mid-level Italians seem to have more wealth than Americans, but it is mostly in housing/land and is highly dependent on how that housing is valued (given that housing is not an internationally trade commodity).

However byzantine their bureaucracy may be, India has gone a long way to clean it up. Also, being a parliamentary democracy, there is less likelihood of the government taking arbitrary action against foreign firms.

Goldman Sachs, in their BRIC discussion paper, pointed out that India suffers relative to China due to the amount of FDI. This is remarkable given that India’s capital markets are more mature and their loan failure rate is less than half the PRC average.

My worry is that investment in the PRC will become the undoing of many companies. Either through unilateral actions from Beijing, the trading band of the Yuan, or the number of bad loans that come to surface from their banking sector, or all of the above, it may become a bubble ripe for bursting.

I’d rather invest in India if I had a choice between the two populous neighbours…

This pro-consumer bent helps the poor(er) because it provides them with much more purchasing power per dollar.

-I met an American guy who got an academic job in Sweden a long time ago. He married a Swedish woman and has children. He told me that he can’t leave Sweden, among other reasons because Swedish tax rates are so high that he has been unable to accumulate significant assets and is therefore dependent on the Swedish state for his retirement income. I don’t think he minds this situation, since he seems to have made a satisfying life for himself in Sweden. He has security of a sort. However, he lacks choices and in that sense is in a much different situation than are many Americans of similar age and professional achievements. Even Americans who have fewer talents than he does may have more opportunities, because of the more open and competitive nature of our society.

-A long time ago I visited relatives who lived on an Israeli kibbutz. In discussing kibbutz life they pointed out to me that the kibbutz took care of its members after they retired, and that someone who developed health or other problems and couldn’t work would always be taken care of. Moving forward to the present, my surviving relatives from that and another kibbutz have all left the kibbutz system. The kibbutz system, which for all the years was living off government subsidies, is now struggling and trying to compete in the market economy. The security of knowing that you would always be taken care of may not exist anymore, and even if it does it is decreasingly competitive with alternatives available to people in the profit sector of the economy.

The observation that Europeans “feel” more secure strikes me as important & probably right. It also implies that we have made different tradeoffs & that we see the “good life” differently. Others tend to think we see the “good life” in terms of goods – and it is true, I have trouble seeing people with cell phones, multiple televisions, cars, etc. as “poor” in any historical sense. But I think we choose vitality over security – and there are places where some choices have to be made that prioritize these.

Mitch, that’s true, but I think too many leftists would attribute our good fortune to luck or avarice.

As James’ peice points out, we made good decisions, or rather, we made better decisions than our global competitors only because competition forced us to.

1. Get a HS education.

2. Don’t get married until after age 20.

3. Don’t have kids until after married.

That’s the secret of staying out of poverty, barring unforseen circumstances.

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I just read part of India are becoming less vegetarian. A theory is that they’re becoming more prosperous and can afford meat.

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I should have added, maybe our “elders” are poor because they’re spending too much time in the cas***ino (for some reason, the filter doesn’t like that word) or there’s just too much to buy and do.

There’s lots of elderly driving big Lincolns and Caddys in the no state tax FL.

Just another argument to lower or erase corp. taxes and get tort reform. Then watch our possibilities.

However, Norway – don’t they get a lot of income from their natural resources??? It’s a shame we can’t.

They have enough money to go to the cas***inos. And they certainly have better teeth than Britain.

What age do they define “elderly?”

To sum up their conclusions:
“The United States has
one of the highest poverty rates of all the countries participating in the [study], whether poverty is
measured using an absolute or a relative standard for determining who is poor. Although the
high rate of relative poverty in the United States is no surprise, given the country’s well-known
tolerance of wide economic disparities, the lofty rate of absolute poverty is much more troubling.
After Luxembourg, the United States has the highest average income in the industrialized world…. yet it ranks third
highest in the percentage of its population with absolute incomes below the American poverty
line. The per capita income of the United States is more than 30 percent higher than it is, on
average, in the other ten countries of our survey. Yet the absolute poverty rate in the United
States is 13.6 percent, while the average rate in the other 10 countries is just 8.1 percent…
The relative size of the low-income population in the United States is larger than in other
rich countries for two main reasons: low market wages and limited public benefits.” They show that children and the elderly in the US are, in particular, much more likely to be poor than in W. Europe.
I’m not sure why, in fact, Mankiw drew his graph from these folks’ “Luxemburg Income Study”.

We’ve got good bankruptcy procedures. This is a huge advantage. Failed businesses can be sent to the slaughterhouse in a cold, efficient, orderly and non-violent manner. This something most other cultures don’t do well at all.

I’m not sure what “electronics” refers to, but if you take the remaining industries, Autos, Steel and Banking you have two of the most unionized industries (steel, autos), two of the most regulated (autos, banking) and one of the biggest beneciary of tarriffs (steel.)

If we got rid of the tarriff’s, regulations and disbanded the unions we’d probably lead in those industries as well.

Another great post James. When are you yourself going to write a book instead of reviewing those of others, or have you already?

http://gregmankiw.blogspot.com/2006/10/us-and-european-inequality.html

-You are confusing wealth and income.

-Why is the distribution of wealth outrageous? What would be a non-outrageous distribution of wealth? How do you think the world would differ if such a wealth distribution existed?