The Poland-based Warsaw Enterprise Institute released the sixth edition of the annual Wealth of Nations Index (Index). The WNI measures the economic prosperity of nearly 40 more developed countries according to private sector spending per capita and the Public Expenditure Value Index in each nation. The WEI is a global partner of the Tholos Foundation and Tholos contributed the U.S. profile in the WNI.
The Index differs from GDP measurements in its approach to public spending which includes not just a dollar amount of economic activity, but the quality of spending in terms of the benefits citizens derive from it. In the private economy, private actors allocate their money to what they want most, fulfilling their individual needs. On the other hand, public spending is done to fulfill others’ needs on their behalf. Therefore, it is pertinent to also assess the value of public spending, not just the total amount.
The public expenditure portion of the index includes seven subcategories: national defense, internal security, infrastructure, state of the environment, healthcare, schooling, and higher education––all of which have their own respective indices to indicate the value of that spending.
This year, as in all years in which the Index has been released, the U.S. commands a strong lead overall with a combined score of 1,000 points, with 694 points for private and 306 points for public expenditure. The second and third place overall go to Norway with 919 points and Switzerland with 877 points. The U.S. also far exceeds its neighbors’ scores, with Canada and Mexico earning only 740 points and 401 points, respectively.
America’s high score is largely due to the high-performing private expenditure measurement, which far exceeds the other countries in the index. While most other countries on the Index outperformed the U.S. in the public value measurement, the U.S. far outpaced every other country in the private sector spending per capita, with the next highest country, Switzerland, lagging by 162 points.
The U.S. score has steadily increased since the first index was released in 2015, with a total of 907 points. This increase was also largely due to the rise in the private score. The majority of this contribution comes with household consumption, which exceeds every other country by more than seven times.
The lead in private investment is also makes up some of the lead. The next highest country, Turkey, only has a third of America’s private investment contribution. One advantage the U.S. has in this regard is that it has large levels of both domestic and foreign direct investment (FDI), unlike some other countries in the index which are more dependent on FDI.
Overall, a strong private sector proves, yet again, why America’s is the strongest economy in the world. The other countries measured in the Index would do well to follow the U.S. example by allowing their private economy to flourish.