Is Mississippi actually wealthier than Europe? A criticism of GDP/capital as an economic indicator.

Think of this: The GDP per capita of Mississippi, one of the poorest states in America, is higher than the whole of the European Union (EU). This would suggest that the average citizen in Mississippi is wealthier and has a better life than the average citizen in the EU. 

However, Mississippi is a state in the US which does badly on many fronts. Mississippi has the highest percentage of citizens living in poverty, and it is also ranked 49th out of 50 for economic opportunity by U.S. News. In the states, it is commonly laughed at on social media platforms as a poorer state. On the other hand, many Europeans are envied throughout the world for their high quality of life. 

Is life in Mississippi really better than life in Paris, where you dine on the finest baguettes and croissants while looking at the Eiffel tower, or on the beaches in Spain, where citizens enjoy tapas, good weather, and soccer all year round?  

GDP (Gross Domestic Product) is defined as the “total market value of all finished goods and services produced within a country's borders over a specific period”. GDP per capita is the total GDP divided by the total population. Most economists use GDP per capita as an indicator of wealth and the standard of living. On paper, Mississippi has a GDP per capita of around 53,000 USD, while the EU combined has a GDP per capita of only 38,000 USD, which means that Mississippi is technically “richer” than Europe.

Well, it is farcical to think of it in a way like this. Most people would argue that life as an average citizen in the EU is preferable to being a resident in Mississippi. Simply put, GDP measures all economic activity, but it doesn’t account for efficiency or whether citizens truly benefit. In Mississippi, manufacturing and agriculture makes up a huge proportion of its GDP. These industries are dominated by large corporations, meaning that profits would be channeled to stockowners and other states, not its labour force. As such, even if a factory makes a lot of money, its workers do not benefit highly from it, such as in Mississippi. This demonstrates to us inequality, which GDP per capita does not account for. 

In conclusion, once you look into details, GDP per capita is not the golden yardstick for comparing wealth between nations. Essentially, GDP per capita can still be used as a rough indicator on whether a country has low, medium, or high development. While Mississippi might be more of a laughing stock in the states, it is still part of a developed nation compared to Sri Lanka, where the GDP per capita is around 4,500 USD. What this means is that GDP per capita is effective as a tool to measure whether a country roughly falls under the developed, developing, or undeveloped bracket, but within each bracket, it is not very effective in distinguishing between which country actually has better economic equality and standard of life for citizens. 

In other words, Mississippi is not actually richer than Europe - the opposite, in fact!