The Richest Country On Earth

If you thought the richest country on earth was the United States, you were wrong. If you thought it was China, you may be right. The truth is, it is pretty damn difficult to determine which country is the richest one on earth. This is because answering that question implies answering a broader question: "What is to be rich", but we can always try.

Whenever referring to the US economy, you will hear that it is the biggest economy in the world. That claim rests on the fact that the US has the largest GDP in the world. However, being the fattest cat in the alley does not mean you are the healthiest one, you could be bloated and malnourished.

The following table will provide a few minutes of comfort to Americans who still think the US is a powerful economy.

There are two problems however with that table. The first problem is that it measures

]]>GDP]]>, and GDP itself has a number of methodological problems. You can see part of the discussion at Wikipedia

. But let's say that GDP is a measure of all the economic transactions in a country, not of the wealth those transactions produce or not. To give you an example, 200 people exchanging one $100 bill a million times will give you a higher measure than 10 people exchanging $1,000,000 one time each. So per se, GDP is meaningless to measure the economic power of a country.

The other problem with the table is the "

]]>purchasing power parity]]>

" issue. What you see for the other countries is the sum of all goods and services produced in that country, priced in US Dollars. Now, this table has data from 2007 and the value of the Dollar has declined against the rest of the currencies (or should have declined, were there not fixed exchange rates in some of those countries). So, adding up the problems with the GDP methodology, and the lack of data about exchange rates, that table is pretty much useless. Little comfort there for Americans.

If we measure riches in terms of Reserve Assets (monetary gold, special drawing rights, reserve position in the IMF, foreign exchange assets and other claims), we get a slightly different picture.

Can't find the USA on the list? Ouch... Under this measure it is the people of Kazakhstan who should making fun of us, not the other way around. As a matter of fact, the US ranks 130, under countries like Burundi and Sierra Leone, with only Germany, Finland and Denmark being "poorer". So, maybe other countries saved more money than us, but they are not richer only for that reason, are they? From a conservative and monetarist point of view, you are forced to admit that Sudan is richer than Denmark. That pretty much should kill any further argument with fiscal conservatives, but we know that they are pretty resilient. Stinginess by itself is not a measure of wealth.

According to Dick Cheney, "Reagan proved deficits don't matter", as he told former Treasury Secretary Paul O'Neill, one month before firing him. Well, he'd better be right, because if deficits do matter, the US is the poorest country in the world and the following are the richest ones.

The mere fact that the US has the biggest deficit in the world, and that this happened during a Republican administration, should convince every single Republican that if they are fiscal conservatives, they are backing the wrong horse. But we know how resilient stupid ideas can be, so I will not expect any single republican to do a mea culpa and retire from public life for the rest of his or her life.

To try to figure out which one is the richest country on earth, I've used the current account balance and the current external debt. That should give us an idea of the ability of the country to use borrowed money to create internal surplus.

Again, the US does not show on this table among the 10 richest countries. Actually, by this measure it ranks 147 (at the bottom of the list).

And yet, this way of measuring how rich the country is does not take into account the size of the economy (the GDP) so it may be unfair.

In trying to come up with a realist picture, I calculated how much of the total economy of a country it would be needed to pay off both internal deficits and debt. This will give us a better idea of the health of a country because many of the components of GDP balance out with debt components. For instance, a big component of US GDP is Government expenses, which in our case gets reduced by the Account balance deficit and external debt, thus reducing the size of the economy.

The following table ranks the countries based on what percentage of their total economy deficits and external debt are. This is the table of countries without deficits.

Again, by this measure, the United States ranks 126, between Lebanon and Australia.

The Most Powerful Country on Earth

If you are convinced of the might of the United States, at this point you are dismissing all the data on this post. You don't know how but for sure all this data is manipulated to make the United States look bad. For you there can't be another explanation because you know that the United States is the mightiest country on earth.

You may smirk and say, "So, if the US has the biggest government deficit, is the biggest debtor, and has one of the lowest saving levels in the world, how come it is still a world power?"

The answer may be on the following table from

]]>Wikipedia]]>

showing data from the

]]>Stockholm International Peace Research Institute]]>

.

As you can see, the United States spends roughly 10 times more than the next country on the list to strong arm the rest of the countries of the world to finance its deficits. The funny thing is that the external debt of the US is $12,250,000,000,000, so all the military might of the US is on borrowed money.

You would say that, with such military might, the US should be able to solve the Iraq war. However, the last country who was able to overpower the Iraqi people was England. Are we going to resort to the methods the British Empire used to maintain control of Iraq? Are we ready to bomb any group of more than 10 people? Are we ready to bomb villages with time-delayed bombs so the villagers can't get back to their homes? Are we willing to impose a regime of terror and torture? To kill civilians indiscriminately?

Our military power is designed to fight other armed forces. Armies like ours are ill prepared for conducting war amongst civilians if the rules of engagement respect the lives of civilians. Not even the Soviet Union, which had lesser human rights standards than the US, was able to defeat the Taliban in Afghanistan, even after more than 10 years of conflict (a conflict that took the Soviet Union to its demise).

Continuing the war in Iraq and Afghanistan will certainly bring the demise of the United States. So you need to ask yourself, how long until other countries (rich countries, for that matter) stop lending us money so we can feel powerful? How long until they start to strong-arm us into submission to their needs?

My guess is that if you were born after 1945, you have a pretty good chance to see the tide reversing.

However, there is a way out. We still live in a democracy and we can still influence the destiny of our country. We need to be smart about it, though. It is time to be real patriotic and stop the path of ruin the Bush administration put the country on. In the name of patriotism, they have put our country on the brink of being forced into submission by foreign powers, and it is now our patriotic duty to reverse course, and make our country strong again. Strong for real.

All the data is available at the linked sites and at the

]]>CIA - The World Factbook]]>

.