Economic Growth and Poverty Rates: A Comparative Analysis of the USA and Italy
When comparing the economic performance and poverty rates of the United States and Italy, it becomes evident that these two countries present unique challenges and dynamics. The article explores why Italy, despite low poverty rates, has experienced little economic growth over the past two decades.
Understanding Absolute Poverty in the USA and Italy
In the USA, absolute poverty is around 12%, while in Italy, it is around 8%. Despite this, Italy has not seen significant economic growth over the past two decades. This seeming contradiction raises important questions about the nature of economic success and poverty. According to the U.S. poverty line, someone earning $50,000 a year would be considered almost upper-class in places like Joplin, Missouri, where costs of living are significantly lower.
The Influence of Cost of Living
The standards for poverty in these countries are significantly different. In Italy, the poverty line is set at 650 euros a month, compared to 2000 euros a month in Switzerland. This means that in Italy, it is easier to live on a lower income, resulting in a relatively lower poverty rate. For example, in a place like Joplin, Missouri, an income of $50,000 a year would make an individual almost upper-class, whereas in cities like San Francisco or New York, this same income would barely cover rent and living expenses.
Why Italy’s Poverty Rate Is Lower
Italy's lower poverty rate can be attributed to its cost of living. Cities in Italy, such as Rome or Naples, are generally cheaper to live in compared to U.S. cities like New York or San Francisco. In Joplin, Missouri, a house can be purchased for as low as $50,000, making it feasible for people to maintain a comfortable lifestyle on a fixed income. In contrast, even someone earning $100,000 a year in New York City would still struggle with high rent and other expenses.
No Universal Definition of Poverty
The definition of poverty can vary significantly depending on the location and the cost of living. The U.S. poverty line considers $12,000 to $15,000 for an individual, but it also includes billionaires who have years of negative income due to market losses. While the U.S. definition of poverty may include some relatively wealthy individuals, in some countries, the same individuals would be considered affluent.
Comparing Economic Performance and Innovation
France, Germany, and Britain have traditionally excelled in various sectors such as fashion, luxury goods, automotive, and technology. Italy, known for its contributions to middle-class fashion for Americans, has seen a decline in innovation over the past decade, partly due to adopting a social democratic model. This model may limit the full spectrum of human intelligence and creativity, which is crucial for innovation.
The Impact of Social Democracy on Innovation
Social democracy, while providing social benefits, can sometimes stifle the creative and innovative thinking that is essential for economic growth. It might block the full spectrum of human intelligence, leading to a lack of innovation. On the other hand, countries like Switzerland, which have a different economic and social model, can nurture a wide range of intellectual abilities.
Conclusion
The economic performance and poverty rates of the USA and Italy highlight the importance of considering location, cost of living, and economic models in assessing economic success. Italy's lower poverty rate is linked to its relatively lower cost of living, while the lack of economic growth in recent years can be attributed to a number of socio-economic factors, including the impacts of social democratic policies.