TRUE DOLLAR JOURNAL

Back on August 22, 2014, The Spectator  published a work by Fraser Nelson whereby Nelson claims Britain is poorer than every state of the USA except Mississippi. Many have doubted Nelson's claims.

While working on the World Economy League, I decided to check out Nelson's claims using 2014 GDP data annualized and dispersed to regions or states in the same proportion as held for 2013 GDP.

Nelson almost has it right. However, he is quite off in his reckoning.

Unlike Nelson, the data presented here consists of the latest available GDP, latest population estimates, and the latest cash exchange rate.

For your convenience, I present to you a few tables, each with slight difference so you can better understand how the countries of the UK would rank against the states of the USA as well as how the countries would stack up against regions of the USA along with how the country of England broken out by region would stack up against the USA.

Taken as a whole, if the UK were a state, it would rank 43 ahead of eight states.

Table 1. UK vs the states of the USA


Here you can see, the UK as a whole ranks 43. And here is how the UK stacks up when split into its constituent countries.

Table 2. Countries of the UK vs the states of the USA


The English rank 41st, ahead of such fixed-income, retirement states as Arizona, Florida and South Carolina as well as much of forever-poor Appalachia. The Scottish rank 49th. The Northern Irish and Welsh come in next to last (53rd) and dead last (54th).

And here is how the regions of England stack up along with the remaining countries of the UK against the states.


Table 3. England Regions, Remaining Countries of the UK vs the states of the USA


 With England broken out into regions, we see Greater London comes in an impressive 4th. At last, Brits have something to cheer about, at least Londoners do.

And here are the countries of the UK against regions of the USA.

Table 4. Countries of the UK vs the regions of the USA


Neither the U.S. Congress nor its agencies recognize these regions as official. However, these regions best reflect allied trade activity.

To give you perspective, Americans living in Greater New York have more than twice the income of Brits living in Northern Ireland or in Wales, on average. Overall, Americans about 1.3 times the income of Brits, on average.

Americans living in Greater New York have about 1.6 times the income of Americans living in Appalachia. However, Americans living in Appalachia have 95% of the income of Brits living in England. Said another way, Brits living in England have a scant 5% more income than Americans in Appalachia, the poorest region of the USA.

On average, a Welshman Brit has half the income of an American living in New England and about three-fourths the income of an American living in Appalachia.

Back on October 25, 2014, I published WAKE UP BRITS. MEMBERSHIP IN THE EU MAKES YOU POORER BUT DOESN'T MAKE YOU ANYMORE EUROPEAN AS ANYONE ELSE, in which, tacitly, I stated that Brits ought to exit the EU and enter into an Anglo-American commonwealth. Without doubt, it doesn't seem that EU membership has made the wage-earning working-stiff Brit richer.

After seeing the foregoing numbers, it puzzles why Brits want to keep riding the wrong horse.

I'm sure glad that my nine-times great-grandfather left Kent, England, behind in 1630 and came to America.

BONUS FOR AMERICANS

Table 5. Income per Head Adjusted by Projected RPP for 2014



I'm not a fan of regional price parities for the same reason I am not for purchasing power parity (see below). That said, I've included the calculated numbers for Regional Price Parities (RPP), using a trend line estimate for the 2014 RPP percentages.

However, for a smartly constructed basket of goods — gasoline, milk, hair cut — for alike-sized markets by population with the same demographic profile, it might be possible to see the effects on prices caused by government bureaucracy stepping in and skimming from the top.

What About PPP?

Some might, "What about PPP?" Purchasing Power Parity is a flawed concept.

PPP reflects the flawed beliefs of academic economists and their pseudo-science of economics rather than reflecting the reality of commerce.

Purchasing power parity involves a wishful hypothetical versus the actual — what the exchange rate ought to be between the cash of two banking systems giving anyone the same buying power anywhere versus what cash exchange rates are.

In the reality of commerce, all prices adhere to the one, true, infrangible law that governs all of trade — the Law of Prices. The Law of Prices of holds the winning bids of purchase and sale for what is on offer set the price. Prices reflect buying power and willingness to bid.

Producers get constrained by the great Axiom of Profit. The Axiom of Profit holds the sum of sales must at least equal the cost of production otherwise producers go to ruin.

The whole trick of business is producing so that one can adhere to the Axiom of Profit on given prices set by winning bidders. The prices set by winning bidders determine the sum of sales for producers. At whatever price winning bidders set, those producers whose costs are higher than their sales get forced out of production.

For PPP to hold true, output, working-age demographics, return on capital, cash-to-deposits, and the various kinds of credit (commercial, realty, personal) credit would need to be proportionally the same in every comparing country. In short, countries would need to be fractal images of each other exhibiting self-similarity, varying only in size by the power law.

PPP cannot account for the commercial reality of return on capital, which gets driven by working-age demographics. Differences in capital structure shall govern differences in efficiency and hence output. Differences in output shall drive differences in prices.

Methodology