According to the latest CIA World Factbook the world consists of 238 nations that come in all different sizes, shapes, and makeup. In my last article for Talkmarkets, I promised my followers that I would explain my approach for forming peer groups within this conglomeration of nations for my macro-globanomic model.

As I explained in that earlier article, my macro-globanomic model uses the Performance Evaluation Report Card (PERC) methodology as the tool for measuring national performance. If one is going to evaluate performance of any kind, it is very important to compare apples to apples and oranges to oranges. Regardless of how one uses the PERC methodology, probably the most important step in its use is the initial determination and identification of comparable peer groups for comparison purposes.

And in almost every PERC application “size does matter” especially from a mathematical and statistical basis. Mathematically, statistical variations tend to be more extreme for smaller organizations than larger organizations, thus without forming comparable peer groups based upon size, one would expect to find the best and worst performers coming from smaller organizations.

So, when I first began to establish my peer groups by nation, I thought it would be best to look at two different criteria by size: (1) National Wealth and (2) Population. In other words, the question became should I form national peer groups in terms of national wealth, population, or a combination of both.

As my measurement for national wealth, I used what is called the GDP (PPP), or GDP (purchasing power parity). GDP (PPP) compares the gross domestic product or value of all final goods and service produced within a nation in a given year.  A nation’s GDP at purchasing power parity (PPP) exchange rate is the sum value of all goods and services in the country valued at prices prevailing in the United States.

Thus, the first thing I did was to gather the GDP (PPP) and population data for each of the 238 nations and to sort the list descending from largest to smallest in both categories.  Having used the PERC methodology in previous consulting engagements for other organizational performance measurements of similar-sized wholes (i.e., 238 nations), I knew that I wanted my peer groups to consist of at least twenty-five entities for statistical and analytical purposes, knowing that PERC analysis improves as the number of entities within a peer group increases.

What did I discover when I looked at the first thirty nations in my two different wealth and population national sorts? I discovered that twenty-two nations made the top thirty list in terms of both wealth and population.

The twenty-two nations that made both lists include (in descending order of wealth measured by GDP (PPP)): China; United States; India; Japan; Germany; Russia; Indonesia; Brazil; United Kingdom; France; Mexico; Italy; Turkey; South Korea; Spain; Iran; Thailand; Egypt; Nigeria; Pakistan; Philippines; and South Africa.

The eight countries that made the population list, but not the wealth list were: Bangladesh; Ethiopia; Vietnam, Congo; Thailand; Burma; Tanzania; and Columbia.

The eight countries that made the wealth list, but not the population list were: Saudi Arabia; Canada; Australia; Taiwan; Poland; Malaysia; Argentina; and Netherlands.

Considering the above inclusions and exclusions, and thinking in terms of which countries I felt would be more fairly comparable to my knowledge of the United States, I decided to go with the list of the top thirty countries based upon wealth rather than population to form the top peer group in my macro-globanomic model.

These thirty nations overall account for 83.5% of the world’s wealth in terms of GDP (PPP) and 78.2% of the world’s population.

As an aside, I think it is important to point out that in terms of “wealth” there is probably a better indicator than simply the GDP (PPP). Truly, the best indicator for determining a nation’s wealth is the GDP (PPP) per capita, or in other words, a nation’s GDP (PPP) divided by the nation’s population. This indicator shows the average GDP in terms of each of a nation’s citizens. I mention this because, as part of my peer group selection process, I also looked at how the 238 countries sorted out using this indicator of wealth. 

Here is what I discovered using GDP (PPP) per capita.  Only two countries from the list of twenty-two countries that met both my earlier wealth and population criteria were on the top thirty list sorted by GDP (PPP) per capita. These two countries were: (1) United States and (2) Germany. 

Four other countries from my previously described peer group selection that made the top thirty on the GDP (PPP) per capita list were: (1) Saudi Arabia; (2) Netherlands; (3) Taiwan; and (4) Australia.

Of the six countries from my peer group that made the GDP (PPP) per capita list, the United States ranked the highest, coming in sixteenth of the 238 nations under what many people may consider the best measurement of a nation’s wealth. In a way, this provides a good example of how statistics could be used to disparage a country like the United States.

For example, how would you feel if you heard that the United States was only the sixteenth wealthiest nation in the world without further explanation? My guess would be that most of the “Make America Great Again” people would probably not be surprised by such a statement. More skeptical people on the other hand, might want to try to understand a little more about the analysis behind the claim.

Further analysis would show that five of the fifteen countries with greater wealth in terms of GDP (PPP) per capita than the United States have populations less than 100,000: (1) Liechtenstein; (2) Monaco; (3) Bermuda; (4) Falkland Islands; and (5) Gibraltar.

The largest populated nation with per capita wealth above the United States is Switzerland (ranking fifteenth) with a population of 8.2 million. In terms of population, the United States is approximately 40 times larger than Switzerland.  In other words, Switzerland hardly meets the criteria for being a peer to the United States.

Essentially, in terms of average citizen wealth in terms of the production of goods and services, the United States is doing quite well. Although China has recently surpassed the United States in terms of wealth measured by GDP (PPP), it is also very important to consider this wealth measurement in terms of population differences. Whereas the GDP (PPP) per capita of the United States is $59,365, the GDP (PPP) per capita of China is $16,791.

In relation to the Switzerland-United States comparison I mentioned above, China ranks 103^rd on the wealth per capita list just below the nation of Iraq.   

Well, I believe that is enough discussion, for now, relating to the peer group selection for my macro-globanomic model, keeping in mind that my overall model considers national wealth to be only one weighted factor amongst many including others such as food; water; shelter (housing); personal safety; health; employment; business development; infrastructure; energy; technology; scientific and other creative activities.

In my next article, I will discuss how my macro-globanomic model groups and weighs these numerous factors to come up with an overall evaluation score for each country's report card.  So, stay tuned and later find out how the United States can improve its globanomic report card in order to keep its overall number one globanomic ranking and its valedictorian status. 

Until then take care.