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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Why Singapore and Hong Kong Are Richer Than the U.S.



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Matt Yglesias thinks that the U.S. can and should be richer than Singapore:

There’s only so much a giant country like the United States of America can learn from a very small one like Singapore. But I do think the way that Singapore has not only caught up to western living standards but largely surpassed them is an important antidote to certain kinds of techno-pessimism and defeatism about the world. With good policies in place, people can accumulate tons and tons and tons of wealth. And unlike Singapore, the United States has tons of useful natural resources and abundant land and political democracy. Historically we’ve been a lot richer and frankly we ought to be richer. But we’re not.

Matt’s observation reminded me of a 1998 lament from Milton Friedman:

According to the latest figures I have, per capita income in Hong Kong is almost identical with that in the United States.

That is close to incredible. Here we are—a country of 260 million people that stretches from sea to shining sea, with enormous resources, and a two-hundred-year background of more or less steady growth, supposedly the strongest and richest country in the world, and yet six million people living on a tiny spit of land with negligible resources manage to produce as high a per capita income. How come?

Not surprisingly, Friedman believed that Hong Kong’s advantage over the United States was that it had a small, limited government. Though I’m sympathetic to the basic arguments advanced by both Matt and Milton — that the U.S. can do much better — I think both of them are mistaken in arguing that a country with “tons of natural resources and abundant land” would necessarily have an edge over small entrepôt economies.

If we’re using GDP per capita (PPP) in constant 2005 dollars, Singapore surpassed the United States sometime between 2003 and 2004, and while the U.S. now has a GDP per capita of $43,063, Singapore has a GDP per capita of $53,266. Not only has Singapore pulled ahead — it has pulled far ahead during a period in which growth in U.S. GDP per capita has essentially flatlined — U.S. GDP per capita (PPP) in constant 2005 dollars actually peaked in 2007 at $43,635. The Hong Kong Special Administrative Region surpassed the U.S. between 2009 and 2010, and its GDP per capita is now $44,770. I don’t doubt that America’s lost half-decade could have been avoided through better public policy.

But keep in mind that cities are generally more productive than other regions. Recently, the Brookings Institution assessed the GDP per capita of metropolitan areas across the world. Drawing on the data, Wendell Cox made the following observation:

Among the 10 metropolitan areas with the highest GDP per capita, nine are in the United States (Figure 1). Hartford ($79,900 per capita), for the second year in a row, was ranked the most affluent metropolitan economy by Brookings. The US accounts for 36 of the top 50 metropolitan economies, and 67 of the top 100.

Europe is also strongly represented, with 23 of the most affluent 100 economies as rated by Brookings. Yet for the most part European metropolitan regions were concentrated between 50th and 100th. Only seven European metropolitan areas made the top 50. The highest ranking was Edinburgh, Scotland ($59,400), at 21st. Two former East Bloc European metropolitan economies also broke into the top 100, Prague at 70th and Moscow at 92nd.

East Asia placed 3 metropolitan areas in the top 100. Singapore ($62,500) did best at 14th. Singapore’s ranking behind so many US metropolitan areas may be surprising, since Singapore has a higher GDP per capita than the United States. However, the most affluent US metropolitan areas are more affluent than Singapore, which is both a city and a country. The highest ranking Chinese metropolitan area was Macau, the former Portuguese Special Administrative Region, which ranked 26th. [Emphasis added]

One of the best ways to make the U.S. a more prosperous country is, as Matt has often argued, to relax local land-use regulations while also taking steps to reduce congestion costs, thus allowing our big cities to become bigger. But compact city-states have a number of advantages over big, sprawling countries. Granted, compact city-states are not the only countries in the world richer than the U.S. The same goes for Qatar and Norway and a handful of other petrostates. What is really striking to me is that the U.S. is far and away the richest country with over 10 million people. If we use constant 2005 dollars, the U.S. is richer than Switzerland, with a population of 8 million. This is not to say we should rest on our laurels. The U.S. has a very high GDP per capita, yet much of the U.S. population is operating at far less than its full economic potential. But I can’t help but be pretty impressed by what we as a country have accomplished despite a history of enslavement and segregation, a fairly shoddy public sector, including underperforming K-12 schools, and an extraordinary collapse of stable, two-parent families over the past four decades. 



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