Globalist economists tend to use purchasing power parity (PPP) when measuring the size of an economy or the salaries of people around the world. And while PPP has its place, it makes little sense to use PPP when measuring the relative size of a country’s economy. At the national level all raw materials are priced in real U.S. dollars. So, although a given quantity of yuan may be worth more in China than the U.S., both U.S. and China pay the same number of U.S. dollars for petrol, wood, iron ore, and other imports.
When it comes to the average salary, yes, a Cambodian can survive on $250 US dollars a month, so PPP has to play a role in the calculations, but when a Cambodian flies to France and wants to buy things or stay in a hotel, he/she has to pay in real money, and a Cambodian who saved one-month’s salary would have $250 US dollars, while German who saved one-month’s salary would have $4,000. The German would obviously be able to buy more goods and services in France, Mexico, or Djibouti, than a Cambodian.
By real dollar measures, the US has the largest economy. China is second. And India is seventh. When you use purchasing power parity, China is first, U.S. second, and India a close third. And while this type of voodoo maybe interesting to graph on the whiteboard in a college classroom, it does not match the reality on the ground. When you live in China, you don’t look around you and say “Wow, this country is so much richer than my country.” Yes, the high-speed rail is nicer than the railroad in U.S. but this because Americans can afford to own cars. 91.5% of Americans own cars, where as less than 1/3 of Chinese people own cars. Additionally, China has an estimated 250 million migrant workers who shift from the countryside to the cities in order to earn an average salary of around $400 U.S.D a month. Even if you believe that with PPP this $400 is worth more than $400 real dollars, it still says that development in China is so lopsided that people will leave their homes, travelling hundreds of miles, to live in deplorable conditions, illegally, in order to earn a low-level factory salary. That is not the case in the U.S.
As for India, while I love the country, when I laned, I did not think, “Wow! These guys are only slightly behind us in development”.
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