28 September, 2002

Sweden, GNP, and net national welfare

Some little time ago, there was a bit of a flurry on the conservative blogs about a study which showed Sweden in a bad light. It was pointed out that the average Swede was less wealthy than even poor Americans. Even an average citizen of a poor American State like Mississippi was better off than the average Swede. This was taken as some indication that "heartless" American capitalism was in fact kinder to the poor than was the Swedish welfare State.

This was of course a bit of a red rag to those who admire the Swedish welfare State and various refutations of the claim were produced -- even causing Instapundit to waver over the matter:

One of the chief debunkers of the claim was Prof. Mark Kleiman, from the UCLA School of Public Policy and Social Research:

Kleiman's claims had a number of apparent peculiarities in them, however, so I emailed him about some of them. It turns out that he concedes that Gross Domestic product (GDP) per capita is considerably higher in the USA than in Sweden but disputes that GDP is a good measure of average welfare.

This might seem surprising considering the very widespread use of GDP as a measure of national economic performance but is in fact an old point in economics. GDP is essentially an accounting measure that just adds up all the money that people earn and spend in a given year. Kleiman rightly points out that GDP is not the whole picture. A classical point is that GDP ignores the very valuable work done by housewives because it is not paid for publicly.

As soon as you start "correcting" GDP to make it a better measure of welfare, however, you rush headlong into political judgments. For instance, Leftists might argue that a country with a highly multicultural population is a lot better for you in various ways so a country with such a population should get an extra mark for that. Conservatives, on the other hand, would probably argue that multiculturalism is a pain and would mark a country down for that.

So Kleiman is perfectly right to say that welfare is a matter of opinion but it still remains that on the most objective and most widely used measure of national economic performance, socialized Sweden shows up as considerably poorer than the more capitalistic USA.

I did explore with Kleiman the idea that either one of us should put up on our respective blogs our full correspondence about the matter but he declined. I was going to let the matter rest at that but, on looking into the matter, I was a little concerned that others seem to have felt that he and his ilk had "won" the debate concerned. I have therefore departed from my usual posting practices to put up the above summary.




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