Living standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy. The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans.
It says that GDP per head in Britain will be o23,500 this year, compared with o23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy's record run of growth and rising incomes going back to the early 1990s. In those days, according to Oxford Economics, Britain's GDP per capita was 34% below that in America, 33% less than in Germany and 26% lower than in France. Now, not only have average incomes crept above those in America but they are more than 8% above France (o21,700) and Germany (o21,665)....
Oxford Economics says that while the comparisons are affected by sterling's high value against the dollar, they also reflect longer-term factors. "The UK has been catching up steadily with living standards in the US since 2001 -- so, it is a well established trend rather than simply the result of currency fluctuations," its report says. It concedes, however, that a significant fall in the pound against other currencies would push Britain back down the ladder. It has assumed an exchange rate of just over $2 for the purpose of the calculation but in recent days the pound has slipped below that level.
The Oxford analysts also point out that Americans benefit from lower prices than those in Britain. With an adjustment made for this "purchasing power parity", the average American has more spending power than his UK counterpart and pays lower taxes. (In the run-up to Christmas many Britons travelled to New York and other American cities to take advantage of the strength of sterling against the dollar and those lower prices.)
GDP per capita is an important statistic -- much more objective than the various "national welfare" and "quality of life" indices. But it DOES need to be adjusted for domestic purchasing power. The above results simply reflect the fall in the external value of the US dollar -- but a buck still buys much the same as it used to in the USA itself. Something which I and many others have informally noted is that in Britain, a pound buys about the same as what a dollar buys in Australia -- yet the external value of the Australian dollar is (like the US dollar) about half the value of the British pound. On that admittedly rough criterion, the average Brit is only HALF as well-off as the average American or Australian. That sure is how it looked to me last time I was in Britain. And it has in some ways apparently got worse since then. Note the following report, also from "The Times":
"The crowds are packing the pavements around Oxford Circus Tube station. On the roads, cars and buses are jammed in a giant gridlock. This is central London - but it's not the pre-Christmas rush or the height of the sales. It's just the start of another working day. Similar problems afflict many city centres: Birmingham's New Street, Glasgow's Sauchiehall Street and Edinburgh's Princes Street see similar daily throngs. It is something that city dwellers have become accustomed to, but living in British cities used to be a very different experience."
I used to love London but I am glad I don't live there now.
Posted by John Ray