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The Myth-Busting Economist by Larry Malone

Are Americans Still the Wealthiest People on Earth?

Photo of George Hamway from the Facebook Group “If You Grew Up In Oneonta, NY, You May Remember…” (Photo provided)

This time out, we remember an Oneonta legend and debunk a big myth concerning what it means to be wealthy. We also consider whether Americans are still the wealthiest people on Earth.

Most folks think you are wealthy if you have a lot of money. But having a ton of cash does not necessarily mean you are wealthy. That’s one of the bigger myths about how the economy works. To debunk it, we only need to revisit stories of individuals who die and leave behind loads of cash after appearing to be poor during their lifetimes.

Years ago, there was one such individual in our region by the name of George Hamway. George would sit in his rusted pickup, parked opposite Southside Mall in Oneonta, and wave at passing vehicles. He was elfin in look and appeared destitute by every visual yardstick. But George and his family had owned the land WalMart now sits on, and large sums of cash were rumored to have been found in his modest home after he died.

Let’s assume George left a substantial cash hoard behind. From the recollections of many, George wore infrequently laundered clothing, rarely showered, and spent most of his waking time in the truck. Was he wealthy? The answer is a resounding NO.

The true meaning of what it means to be wealthy is best captured in a popular T-shirt from the 1980s. It was white, with a quote attributed to Malcolm Forbes in black letters: “He Who Dies With the Most Toys Wins.”

If you have lots of money, but spend none of it, you are essentially poor. And if you are poor, due to a lack money, unwillingness to spend, or misfortune, you aren’t as wealthy as others because you don’t own what they own. That’s why the uber rich trot out their wealth by launching themselves into orbit and buying influence with the president. Did you hear that Jeff Bezos and Lauren Sánchez are planning a $500 million wedding on his $500 million yacht this summer?

In recent years, those of us who are not members of the new oligarchy class had a painful reminder that inflation makes us less wealthy if our wages and salaries don’t keep up with the prices of the things we consume. We had to stop purchasing some of the necessities and “toys” that we normally bought with our hard-earned income. At the end of the day, the money we have at hand is merely the means to achieve a comfortable standard of living and the occasional enjoyment of some pleasures of our choosing.

Since 1776, when Adam Smith published his “Wealth of Nations,” economists have tried to compare the wealth of different nations. Today, Gross Domestic Product (GDP), per capita—the dollar share for each citizen in the total produce of a nation—is used to compare the wealth of citizens in different countries. It’s basically calculated by taking the GDP, which is the total dollar value of everything a nation produces in a year, and dividing that number by the total population.

According to the World Bank, the U.S. GDP per capita (per person) in 2023 was $81,695.00. That means the average share of our national wealth for a household of four would be $326,780.00! Gimme some of that, right?

The reason the average U.S. household doesn’t have that much money income is because a few households are eating MUCH bigger slices of the national pie.

A recent Princeton University study estimates that 2,400 U.S. citizens have an average monetary worth of $1 billion and control five percent of total income in the nation. I hope everyone is taking comfort in knowing that 13 of those billionaires are taking seats in the president’s Cabinet.

Elon Musk has 12 children from three different women and an estimated net worth of $435 billion. That means each of the 16 members of his household would have GDP per capita shares of over $27 billion. Elon’s household alone gobbles up the equivalent of about 1.5 percent of our total national wealth!

By comparison, last year the median household income for Otsego County was just over $67,000.00, with 14 percent of our friends and neighbors living below the household (two adults, two children) poverty line of $31,200.00. Neither of those two incomes, or any income number in between, buys a lot of necessities and “toys.”

All this means that GDP per capita isn’t particularly helpful in determining whether or not MOST of us are wealthy or even “income healthy.”

GDP per capita is also not useful in determining if Americans are the wealthiest citizens of the planet. A comparison of GDP per capita among nations ranks the U.S. at #14, behind such countries as Brunei, Ireland, Luxembourg, Norway, Singapore, Switzerland, and Qatar. Does that mean the average citizen of 13 other countries is wealthier than the average American?

Not necessarily. The cost of living in those nations has to be taken into account, but that’s also difficult calculate. In 1986, “The Economist” magazine rolled out its Big Mac Index to compare the price of a Big Mac across countries. The average price of a Big Mac in the U.S. in the most recent index was $5.69. Meanwhile, the most expensive Big Mac in the world is found in Norway, where one costs $8.07.

Should the cost of a Big Mac—one consumable among millions—lead us to conclude that it costs more to live in Norway than in the U.S.? If so, why does it cost more to live in Norway? We’ll take up those questions next time when we explore the 21st Century Distribution Economy.

Larry Malone is professor emeritus of economics at Hartwick College.

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