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Comparing Empires: A Tale of Four Countries

NEW YORK ( TheStreet) -- Working overseas and doing research on countries, I have always noticed striking differences and what explains them. Here, I look at four countries: China, Greece, Japan, and the U.S.

I chose these four for specific reasons: The U.S. is the aging empire. In the '70s, it was thought Japan would be next, but China is now is expected to succeed the U.S. I selected Greece because it has been in the news recently, along with other reasons.

Let's start by looking at a few common yardsticks for economic well-being.


Consider first government debt. In its reports on Greece, the IMF has said repeatedly that a debt-to-GDP ratio of 160% cannot be sustained. And indeed, the primary purpose of the "haircut" forced on its private sector creditors was to lower Greece's debt ratio. Look at Table 1. It provides the debt-to-GDP ratios for our four countries. Japan -- is that a typo? No. Japan has a debt ratio far higher than Greece. China's debt is low - No. 132 out of 164 countries. More on this later.

Table 1. - Government Debt-to-GDP Ratios, 2011

Source: IMF

Government Deficits

There is much concern about the size of government deficits and the tradeoffs between stimulus and austerity. How do our countries stack up on this measure?

Table 2. - Government Deficits-to-GDP Ratios, 2011

Source: IMF

Once again, Japan leads, with the U.S. just behind. Greece doesn't look so bad. But what goes with Japan? Nobody is talking about a Japanese bankruptcy.

Current Account and Balance Sheet

If a country's exports exceed its imports, maybe it can build up enough reserves so as to "neutralize" large government debts/deficits.

So look at Table 3, below. It gives both current account data (a slightly more complete picture of a countries' international transactions than just the trade balance) and balance sheets (assets and liabilities in billions of U.S. dollars). Things are now a bit clearer.

Table 3. - International Transactions and Balance Sheets, 2011

Source: IMF

These data go at least part of the way to explain why Greece is having serious "survival" problems while Japan is not. Greece is running a large international transactions deficit while Japan is running a surplus. Greece does not have its own currency, so deficits reduce its money supply. Also, Greece's liabilities exceed its assets. Japan is quite different. It has a trade surplus and balance sheet with a $3 trillion balance.
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