Beyond Labels

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National debt and national wealth

The usual analysis of government debt compares debt to GDP.  But when you analyze an individual or a company’s debt you first compare it to their assets.

This article in the Economist, “The Real Wealth of Nations,” makes the point: “Gauging an economy by its GDP is like judging a company by its quarterly profits, without ever peeking at its balance-sheet.”

We are constantly reminded of the US National debt, which now stands at around. But what’s the value of the National asset? Or national wealth, as it’s usually termed.

Examining various wealth estimates, we can see:

  1. National wealth much larger than national debt.
  2. National wealth is growing faster than the national debt.


Size and allocation of National Debt

This Forbes article, from earlier this year, says the debt is $18.2 trillion.  They make it $154, 161 per taxpayer. The “US National Debt Clock” site allocates debt per citizen, and makes each citizen’s share $56,489.  

Size and allocation of National Assets (Wealth)

This Wikipedia article includes a graph of net worth of US households from 1945 to 2009.


Here you can see clearly the exponential rate of growth of this form of wealth.

But that’s not the whole story. The nation’s roads, tunnels, airports and other infrastructure are a form of wealth, not accounted for as part of household income. Federal and state governments own large swaths of land and mineral and other natural resources, also not accounted for.  And there are other forms of wealth, less tangible as well.

The Economist article reports an estimate of the the United States “Inclusive Wealth” made in 2008 at $118 trillion. Inclusive Wealth includes physical, capital (machinery, buildings, infrastructure and so on); human capital (the population’s education and skills); and natural capital (including land, forests, fossil fuels and minerals). That’s a better estimate, but I think it still understates total wealth.

A more recent report, with a refined methodology gives the wealth of the United States at $143 trillion. But I think that’s low, too. Much of the world’s wealth is not owned by any individual or any nation: it’s the value of knowledge.

The entire electronics industry, for example, is based on knowledge of physics that is not owned by any individual, corporation or nation. Take that knowledge away and progress stops. Take the fruits of that knowledge away and the whole industry collapses, and with it modern civilization.

The ability to communicate is based on knowledge of knowledge. What’s that worth? Clearly it’s worth something. People have spent untold hours developing and refining language. But its value doesn’t appear in any personal or national accounts.


We can argue about the correct value of the total wealth of the United States, and we can argue about my speculative inclusion of knowledge. But even if we take conservative estimates of wealth that can be measured in dollars, it’s clear national wealth is far north of the National Debt.

At the end of World War 2 the national debt was about $250 billion. In the intervening years, the debt has grown by nearly 18 trillion. But national household wealth has grown to nearly 84 trillion  according to this article by Reuters.



For further investigation:

  1. What is the growth in US national wealth — by any of the available measure?
  2. Does the “inclusive wealth” measure stand up to scrutiny?
  3. Is debt really the problem it’s claimed to be. I’ve made the case that it is not, but are there holes in the argument that I don’t see?
  4. Is there something wrong with  the way debt is growing and wealth is being captured?
  5. Are there other forms of wealth that are not being captured, even by the inclusive wealth measure. I think there are.

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