Things Could be Worse – You Could be British!
April 04, 2022
I asked my British nephew (and namesake) to contribute to our weekly blog post to provide a slightly different perspective. Here are his words:
Javier Blas, energy, and commodities columnist at Bloomberg, recently wrote on Twitter:
“Big, big trouble for the White House. U.S. average retail gasoline price has hit its highest since Sep 2014 at $3.343 per gallon, according to motoring club AAA. Every state (including the likes of Mississippi and Alabama) is above $3. California is approaching $4.70.”
Reading this as a Brit, I couldn’t help but be a little amused. On the day of this tweet, a gallon of gasoline in the UK cost $7.45.High gasoline prices are rarely seen as a cause for political concern in the UK which is even more surprising given our GDP per capita is a third less than the USA. If $3.34 gasoline is “big, big trouble for the White House,” then I’d like to know what kind of trouble they’re in at 10 Downing Street (quite a lot of trouble as it so happens but for entirely unrelated reasons.)
Sometimes I think that Brits and Europeans are naïve about how much richer their American friends are. Perhaps this reflects the way in which most European and British media outlets cover US news – with an attendant focus on political division and income inequality at the expense of all those things that make America great.
Most people refer to the UK as a rich country. The UK economy is indeed the fifth-largest in the world, ranking behind only the US, China, Japan, and Germany. But perhaps a better measure of prosperity is GDP per capita, at purchasing power parity, which is the average citizen’s purchasing power for real goods and services in any given year. On this measure, the UK ranks only twenty-sixth. The average American consumer is nearly 50% better off than the EU average. Moreover, the UK ranks poorer than Mississippi, the poorest US state.
Prices at the gas pump are not the only place where the average UK consumer suffers. For a long time, the average UK house price was higher than the US. Thanks to a strong dollar, weak sterling, and an enormous rise in US house prices in 2020/21, this is no longer the case. The median sales price for houses sold in the US reached $408,000 in Q4 2021. The equivalent price in the UK was $374,000. But dig a little deeper, and you’ll find the Brits still have the shorter straw. An average house in the US is an impressive 2,301 square feet (US Census data 2019) – in the UK, the comparable figure is a mere 800 square feet.
Despite all the focus on gas prices and inflation, the US remains the greatest economic machine ever assembled, and the American consumer continues to reign supreme on the global stage. If only a little of that economic magic could rub off on your cousins on the other side of the Atlantic!
Nick Hoffman
