Friday, 5 September 2014

We are all poor

So, as you may have read, Britain is poorer than (i.e. has less GDP per capita at purchasing power parity than) every US state except Mississippi or, if you are going to be strict about doing PPP comparisons, every US state including Mississippi. If you're not doing PPP comparisons at all, my figures put Britain in 2013 at about the Kentucky/Maine level, i.e. about 8 from the bottom (assuming Nelson's US figures are correct).

Whether Fraser Nelson's figures are correct (first link above) is open to doubt. For one thing, I couldn't replicate them exactly. Moreover, clearly something has gone wrong with the figure for the Euro area, because he has put it in at 44.1 when the figure he gives would suggest 48.1 was more accurate; similarly Germany is in the wrong place too as it should be 40.1 not 39.1 on his figures (and Sweden should be 39.1 instead). And, if you want to raise more objections, you can argue about the accuracy and relevance of PPP: certainly if I were to sell all my worldly goods, go to America and start buying things there, then I would care about the real exchange rate, not the PPP rate.

But these are quibbles. Broadly speaking, Europeans, even rich ones like Germans, Swedes and Brits, have noticeably less GDP per capita than Americans in the likes of New York, Texas, California and Massachusetts.

What I found even more interesting was this in Tim Worstall's article (second link): "As an example of output from the LIS they had a wonderful paper a decade ago showing that the bottom 10% in the US have the same incomes (yes, PPP adjusted) as the bottom 10% in either Sweden or Finland. While the top 10% have very much larger incomes than the top 10% in either country. All that redistribution hasn’t made the Nordic poor richer than the American poor but it has made the rich poorer."

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