Living Well: Purchasing Power Parity

Jul 26, 2009 by

Often, people say that they wish America was more like Europe, as Europeans supposedly have a higher quality of life. Just as I have previously concluded that people are financially better in “expensive” American cities than in the hinterlands, after a trip to Germany, I have concluded that Americans are able to purchase more stuff than Germans.

Imagine an American and a German consultant, both of whom sell their skills in the global market. If the two were to earn the same amount of money, measured in gold, the American would be able to buy more stuff than the German. (The average income is lower in Germany, so reality is even more tilted in America’s favor.)

In Germany, bananas seem to run around €1.6 per kg, or about $1 per pound. In Philadelphia, bananas cost around $0.60 per pound. Likewise, 0.5 liters or about 16 oz of Coca-Cola costs €1.90, or around $2.75, whereas a slightly larger 20 oz bottle costs around $1.25 in the U.S. These trends also extend to public transportation, electronics, clothing, and many other goods. Gasoline costs nearly four times as much. To make matters worse, average salaries tend to run higher in the United States.

While I am not going to speculate on the causes of these differences in this article, I will state that I feel that they lead to a lower quality of life. When considering where to live, it is essential to consider both salaries and prices in the area. Returning from my trip, I am filled with pride in knowing that America offers some of the most affordable goods in the world, while enabling its citizens to earn a decent living. Rather than striving to be more European, perhaps we should be proud of the high standard of living we have achieved. Americans may work long hours and have fewer social benefits, but they are able to purchase relatively large amounts of goods and services.

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