Sweet Economy Alabama


Is the U.S. rich because it's rich because it's rich, thus obviating any worries that socialist-leaning policy change could make us poorer, as Matt Yglesias sort of argues here? The Super-Economy blog has some analysis about economic growth levels and rates worth contemplating on this point, accusing Paul Krugman of leading Yglesias astray on this point, and loaded with charts showing per capita GDP growth rates circa 1980-2008 for the U.S. and Europe, including U.S. broken down by state. Some of his conclusions:

Theory and a mass of empirical evidence show that in general, richer countries grow slower and poorer countries grow faster….

The fact that America has not only kept its advantage over Europe but also even expanded the gap is extraordinary. The US is the exception, the only country in the top five 100 years ago that is still in the GDP top five (and yes, the snide remark aside, the US in 1900 had far more pro-market institutions than Germany or France). And even the gap between the US and Western Europe has closed in the last 100 years, it only stopped converging in the 1980s.

The pattern during the last 100 years has been for countries with functioning economies to grow faster the lower they start…

I pointed out yesterday that the E.U 15 has the same per capita GDP as Alabama. Being a poor American state, Alabama grow faster than the US average between 1990-2008. In fact it grew by 1.75% per year. During the same period the EU.15 managed to grew at 1.64%. (in other words Alabama per capita earnings grew by 37%, the E.U 15 by 34%). In the same period rich Maryland grew by only 1.39%. By Krugmans "logic", Maryland should be learning from Alabama.

Alabama has the same per capita income and slightly faster growth rate as the Social Democratic EU.15, which Krugman wants us to believe is a "Dynamic" region that the US should "learn from". Has Paul Krugman ever written a column asking us to learn from the economy of Alabama? Of course not. That would be simply idiotic. Alabama is poor, and has a lower standard of living, just like the E.U 15. It only manages to grow faster than others because it starts off at such a low level (the EU doesn't even manage to do that).

The Krugman column that started the brouhaha, and Matt Welch's blogging on it yesterday.