Friday, March 09, 2007

Account balances per capita by country

I've long assumed the surest way to avoid becoming overweight is to expend more calories than you consume. It seems foolproof. The motley mix of diet strategies is hard to make sense of and often times just doesn't seem to work. The same inklings arise when pondering international trade imbalances. Consumption drives economic growth, but so does feeding consumption. Earn more than you spend and you're viable long-term.

Who enjoys a healthy trade surplus? The per capita account balance by country follows:

CountryAB per capita
1. Kuwait$16,850

2. Qatar

14,130
3. Norway13,735
4. UAE10,331
5. Luxembourg9,759
6. Singapore7,920
7. Switzerland6,704
8. Virgin Islands5,814
9. Saudi Arabia3,842
10. Sweden3,173
11. Trinidad & Tobago3,057
12. Netherlands3,042
13. Hong Kong3,011
14. Bahrain2,862
15. Libya2,457
16. Oman2,288
17. Finland1,672
18. Germany1,635
19. Japan1,368
20. Gabon1,268
21. Cook Islands1,247
22. Venezuela1,237
23. Botswana1,035
24. Denmark907
25. Algeria783
26. Russia737
27. Palau733
28. Malaysia732
29. Austria722
30. Belgium667
31. Angola635
32. Canada621
33. Taiwan421
34. Azerbaijan344
35. Congo, Rep. of328
36. Equatorial Guinea324
37. Chile314
38. Iraq304
39. Namibia280
40. Israel230
41. Tuvalu197
42. Iran191
43. Argentina146
44. China136
45. Papua New Guinea117
46. Nigeria95
47. Yemen79
48. Bolivia77
49. Brazil72
50. Turkmenistan64
51. Philippines55
52. Ecuador54
53. Peru54
54. Uzbekistan52
55. South Korea41
56. Egypt34
57. Burma26
58. Cote d'Ivoire26
59. Cameroon24
60. Vietnam12
61. Morocco12
62. Kazakhstan9
63. Indonesia7
64. Bangladesh2
65. Comoros-2
66. Mexico-4
67. Burundi-7
68. Ghana-10
69. Tajikistan-10
70. Rwanda-12
71. Samoa-14
72. Thailand-14
73. Malawi-14
74. Zambia-14
75. Uganda-15
76. Swaziland-20
77. Zimbabwe-22
78. Honduras-22
79. Mozambique-23
80. India-24
81. Tanzania-24
82. Cambodia-27
83. Madagascar-27
84. Syria-28
85. Kenya-32
86. Chad-32
87. Pakistan-33
88. Gambia-33
89. Guinea-36
90. Lesotho-37
91. Tonga-38
92. Ukraine-41
93. Burkina Faso-43
94. Benin-44
95. Ethiopia-45
96. Paraguay-46
97. Togo-47
98. Belarus-50
99. Colombia-51
100. Kyrgyzstan-55
101. Sri Lanka-55
102. Haiti-71
103. Senegal-75
104. Tunisia-75
105. Laos-79
106. Macedonia-81
107. Armenia-83
108. Eritrea-92
109. Cape Verde-106
110. Cuba-107
111. Sudan-109
112. Guyana-110
113. Poland-118
114. Dominican Republic-122
115. Guatemala-125
116. Moldova-126
117. Sao Tome-126
118. Vanuatu-136
119. Panama-146
120. El Salvador-155
121. Georgia-158
122. Nicaragua-159
123. Uruguay-175
124. Kiribati-188
125. Albania-190
126. Serbia-261
127. South Africa-287
128. Costa Rica-289
129. Micronesia-318
130. Jamaica-352
131. Turkey-369
132. Bosnia & Herzegovina-385
133. Slovenia-393
134. Italy-408
135. Czech Republic-425
136. Jordan-480
137. Fiji-514
138. Mauritius-525
139. Romania-558
140. Belize-603
141. France-606
142. Croatia-643
143. Bulgaria-691
144. Slovakia-695
145. Lithuania-717
146. Hungary-841
147. United Kingdom-952
148. Seychelles-964
149. Latvia-1,116
150. Antigua & Barbuda-1,207
151. Cyprus-1,340
152. Lebanon-1,378
153. Estonia-1,449
154. Portugal-1,579
155. New Zealand-1,949
156. Greece-1,999
157. Australia-2,054
158. Ireland-2,326
159. Malta-2,414

160. United States

-2,889
161. Anguilla-3,181
162. Iceland-9,793

Oil-rich exporters are raking it in. High IQ East Asian tech hubs, immersed in a Confucian ethos that values parsimony rather than glorifying consumption, are also wealth magnets. Norway, awash in money, enjoys the rare combination of both valuable human capital and abundant natural resources.

Excepting Canada, the biggest overspenders are the free-trading Anglos. Idyllic little Iceland isn't exporting enough fish, or is eating too many of them. The land of the spartanic Hospitallers has become the island paradise of the self-indulgent. The countries with the least favorable trade balances are interestingly also largely those of many elders and few children. The US' antagonists are all taking in lots of IOUs in return for oil and cheap consumables that'll lose their value tomorrow--Russia, Iran, Venezuela, China.

The US has gone from the world's number one creditor to its greatest (third greatest per capita) debitor in just 25 years.

The dismal week that saw the DJIA shed 4.2% of its value natrually gives rise to the question of whether the anemic performance of global stock markets over the last several days is a hiccup or the precursor to a long-term trend. In either case, it should give pause to anyone who assumes a perfectly efficient market. Equity markets are no exception to the broader fact that the business world is riddled with inefficiencies, hyperbole, and unexploited opportunities. The ascension of low cost online brokers and the frenzied rush into an immature Chinese market that is trading at more than twice the P/E ratio of the more sound Hong Kong exchange are probably making equity markets less efficient if anything.

Most worrisome about this precipitous fall is that several hedge funds took it in the teeth and led the exodus. That'll create at least some rebound, as smaller retail investors leap in to try and take advantage of the slump. Whatever happens in the near future, trying to ascertain what's forming on the horizon is more important.

Much of the world's economic growth is fueled by US consumption. Americans enjoyed increased buying power through bargain-basement borrowing and an absurd run up in real estate prices in a post-2001 environment that hardly could have been more pro-growth.

But today US residents don't even make what they spend. Save? Invest? Better to spend our way out of this mess!

Citizens of the world's financial capital (no pun intended) are for the first time in nearly a century coming out behind the curve in net investment returns. Flush with so much money, we should at least be coming out ahead in terms of absolute returns. To be in the red is analagous to a bank paying more in interest to its customers with savings accounts than it is making through its lending operations before even taking expenses like salaries, overhead, taxes, and transfer expenses into account.

With saleable inventories expanding by almost 40% in the span of a year and the median home values growing at less than the rate of inflation, the fuel source of the American consumption machine is drying up.

A syllogistic analogy goes something like this: You make $40,000 a year and you spend $50,000. Fortunately, the value of your home has been rising $12,000 each year. You've taken home equity loans out against the valuation increases to cover your income shortfall. You let half of that $12,000 go into investments. You put the $4,000 of spending that still wasn't being covered on credit. And the good times rolled on.

But the value of your home has now become stagnant. And your investments aren't doing as well as they used to. In fact, the interest on what you owe is outpacing the growth of your savings. Maintaining your current lifestyle is becoming increasingly difficult. Your neighbors, Yoshio and Huang, keep on buying the IOUs you offer them, but you wonder how much longer they'll keep it up. You shutter at the thought of pawning off some of your actual possessions to them, until on second thought you realize you're already on your way to doing that.

If American plastic is maxed out, who else is going to keep the voracity going? A tepid European economy is seeing its aged population being replaced by less industrious settlers from Africa, Central Asia, and the Middle East. Resurgent socialism in Latin America doesn't hold much promise of exploding prosperity there. India is still too poor. In China, an artificial yuan makes buying up assets and saving more attractive relative to consumption that it otherwise would. And the CPC still has a lot of redistributing to do before it allows that to change in a substantive way.

If the US consumer-China producer relationship is dampened by what I see as an unavoidable attenuation of American wealth (to show up as a continued decline in the value of the dollar), the PRC has to find out how to get its own population to consume more and find other markets like the kinds it is cultivating in Central Asia and Africa to keep the growth machine rolling. In the US, the adjustment will be more challenging--the US will have to find a way to make itself a net producer of wealth again instead of remaining a net consumer of it.

How to go about that? What stands in the way? Following are a few antagonistic factors and how they might be:

- An aging population that will, upon retirement (the first of the baby boomers will hit 65 in 2011), take with them earning power and knowledge, leaving skyrocketing Medicare and Social Security costs in their wake. The CBO predicts that Medicare will become insolvent in 2019, and Social Security by mid-century. Unfortunately, as the acuteness of this age-structure inversion is more greatly felt, it will become increasingly politically untenable to do anything about it. Currently, AARP has 35 million members. In a decade, it's expected to boast twice that number. Meanwhile, they're retaining the self-indulgence of their youth: the obesity rate for Americans 55-64 has jumped from 31% in the early nineties to about 39% today.

It's bad news for a democracy when a majority of the population is dependent on a minority of wealth creators. The former tends to vote to plunder the latter. There's little reason to assume the market-dominant minority phenomenon is releveant only whe considering ethnic composition.

The coming increase in the number of archaic dependents and the wealth transfer they'll demand will put a strain on the economic growth needed to fulfill those same demands. We'll be trying to squeeze more mustard out of fewer mustard seeds. Decelerating growth and greater rates of taxation are a one-two punch against affordable family formation. If a large, old population demands so much from the relatively few younger people providing transfers to it, these youngsters are going to increasingly find that having kids is economically inviable. In this case, the problem becomes self-perpetuating.

Some solutions? More research into rejuvenation therapies to keep the old from rusting out. An increase in the retirement age (and the age at which Social Security benefits can be collected, indexed to life expectancy). Legalize and provide optional government funding for euthanasia when the price tag to stagger on, moribund and in agony, for a briefly extended period of time outstrips the price tag to go out gracefully. Also, why not index Social Security benefits to average prices instead of average wages? It is supposed to be a safeguard against seniors starving. It is not necessary for a fallback plan of last resort to dispense to a senior an amount three times greater than the poverty rate.

- The ongoing replacement of the current population with a pliant Hispanic underclass will only make things worse, as our elites want to elect a less industrious populous than the one that elected them. Foreign-born households use welfare programs at a rate 50% higher than that of natives. They make living less affordable for the middle class. A less educable population will only accentuate our problems.

What do do? End underclass immigration. Curtail legal immigration and tailor it to offer residency to the cream of the world's crop. That is, institute a merit immigration system that brings people in based on several desirable attributes: Wealth, age, health, english fluency, educational attainment (or better yet, IQ), occupation, etc. No more absurd Diversity Visa Lottery, chain migration and its enabler, birthright citizenship, or dubious refugee asylum. In short, look at immigration from the perspective of bettering the US.

- The immensity of an external debt of more than $10 trillion, at a modest 5% annual average interest rate, comes to $500 billion a year. Currently, US GDP is increasing by $400 billion a year. Sending half a trillion-plus dollars out of the US each year in the form of financing costs severely handicaps our ability to grow our economy faster than our obligations do.

Possible solutions? Scrap the federal income tax. It discourages economic activity by penalizing productivity. It costs over $400 billion in compliance, 10,000 relatively bright IRS employees who could be engaged in something more constructive (not to mention a good portion of the 450,000-plus college-educated bean counters working for the Big Four), and more odiously still causes businesses and individuals to make decisions based not on pure economic utility but instead on utility post tax-consequence.

Replace the federal income tax with a national sales tax (also referred to as a 'consumption tax') levied on new items and services. Tax us on what we spend instead of what we earn, and we might start earning more than we spend! This would instantly propel the US back into the top spot in global competitiveness as production costs would fall by 35% of profits (essentially the current corporate income tax rate) for companies operating stateside and make the US an even stronger magnet for entrepreneurs the world over. It would make used items 23% (the estimated federal sales tax rate) cheaper relative to new items than they are today, rendering the cheap consumables dumped on our shores less attractive. The 50 million foreign visitors the US hosts each year would start contributing to our federal coffers. Illegal immigrants paid under the table wouldn't be able to mooch as much off the net taxpayer as they would pay in at the cash register instead of not at all.

Also, consider something I've dubbed patriot bonds. Their function will be to bring debt held overseas back into the US. Offer these bonds exclusively to US citizens at interest rates tagged a few points higher than US treasuries of the same duration. Use the money raised here to pay off and buy back internationally held debt. If foreign investors try to buy the Patriot Bonds up from American holders, that's fine too. Just perpetually issue more, enriching US citizens in the process, until outside investors grow weary of taking a loss. It'll increase the US' total debt load (as the interest payments will be higher than currently held debt instruments), but at least the money paid out will primarily recirculate within the US economy.

8 comments:

JSBolton said...

Those are good suggestions, but I'm left wondering if the data table is going to sprout some new correlation.

al fin said...

An ominous debt pyramid, balanced on the apex.

Since the entire system is "locked-in" politically, the most likely correction in the log run is a political re-construction. The only way that is going to happen is in the aftermath of a major disaster.

A less likely possibility is the opening of a "new frontier." Not only longevity, but rejuvenation. Not only treatments for dementia, but intelligence boosting treatments. Breakthroughs that allow space colonisation. The old Tim Leary "SMI2LE". Space migration, intelligence squared, and life extension.

As bad as the US republican party is, the democratic party is even more spendthrift and fantasy driven. The current trend is toward a Pelosi presidency (third in line of succession).

Like I said, a major disaster and its horrific aftermath will be more likely to change current trends than the "new frontier" phenomenon.

Fat Knowledge said...

If you want a visual represntation of the data, I added it to Many Eyes here.

Kike said...

Nice article, but in the long-long-run what would those oil producing countries have? some properties and other assets but a population with no idea of how to do a living without oil. The US -like any other industrialized country- will be there, what about Venezuela and their Chavez-clown? ... those poor guys will just dissapear in oblivion.

Anonymous said...

Kike,
I think I know where all those Venezuelans, Mexicans, etc... will be. If you think that there are too many illegals here now, just wait. When those economies implode or explode or whatever, the current influx will be infintesimal in comparison (but at least the seniors get their "entitlements!"). And those lucky Europeans get even more muslims (I predict that Notre Dame will be demolished first, followed by Canterbury Cathederal).
al fin is correct, the can will continue to be kicked down the road until there is a major disaster. I will hold out hope for a "new frontier", but until that happens, if it happens at all, I'm keeping the pistol in the nightstand and the shotgun behind the door.

crush41 said...

John,

I'm confounded as to what that might be. Industrialized major proponents of unfettered fair trade tend to fare worse than industrialized nations less enthusiastic of it, probably because they feel the need to 'take the lead' and allow protectionist countries to strike more nationally favorable trade deals with them. But there are major exceptions, especially the small industrial centers of the world, like Singapore, Hong Kong, and the UAE. IQ doesn't appear to offer much of an explanation, while abundant natural resources do help.

Al Fin,

Right, the azoth. That introduces an entirely new set of considerations like the disadvantage position of youthfulness and overpopulation.

But are we in a race against the Idiocracy trend? As someone wise enough to see the potential but not smart enough to really contribute to it, I feel like a sports fan cheering from the sidelines.

Fat,

Geez, you're trying to convince me, aren't you? The ability to create a comparative global image of data is intriguing. I wonder if you can scale differently? Unfortunately, most of the countries fall within $1000 either way, so that only the 'outliers' really show up.

Kike,

So much wealth in the hands of backwards societies that happen to be sitting on scores of natural resources is worrisome, even if the long-term sustainability of the imbalances isn't likely (although, as interest, dividends, etc are part of that trade imbalance, the rich get richer so-to-speak).

Anon,

Exactly what I fear. I'm skeptical of Latin America's ability to build itself economically, etc etc that we hear as the panacea to the problem of third-world inundation, but any amount of self-sustainability will be beneficial when Venezuela and Mexico lose their oil chests, natural gas dries up in Bolivia, and so forth. We need a wall and a merit immigration system, and we need to construct both of them proactively.

crush41 said...

A logarithmic visualization of the data is here.

Fat Knowledge said...

That logarithmic version looks way better. I made a request a while back to the Many Eyes team to add a logarithmic version to the world map. I hadn't thought of modifying the data directly.

Hopefully they will add the feature soon. I also requested that they take the country names from the CIA Factbook directly without having to tweak names to fit Many Eyes format.