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Are we too negative on the UK?

A look at median income and GDP versus France and Germany.

Negative headlines on the UK seem pervasive. For example:

  1. Britain is a Developing Country

  2. Highlights from the Comments On British Economic Decline

I’m skeptical when I read heavy negativity, so I generated some graphs myself – and I don’t see the same trends. You can check my spreadsheets here.

GDP per capita:

I looked at GDP per capita using World Bank data. The data uses current prices for each year – so it’s not purchasing power adjusted (we’ll get to that later). I want a raw sense (no adjustments) of how much the UK is producing per capita compared to other to countries.

Approach: I divided per capita data for each country by the UK per capita GDP for that same year.

UK GDP per capita seems to be trending similar to Germany and France for the last twenty years. The US is pulling ahead over the last ten years. Poland is making great progress.

Median (not mean!) Disposable Income – PPP

Approach: I take OECD data for disposable income – that’s after taxes and social charges. Disposable income is recorded in local currency (e.g. Euro for the France). I then:

  1. Apply the purchasing power parity (~cost of living) adjustment for that country for that year (also provided by OECD in the same dataset). This means adjusting median disposable income for the cost of living.

  2. Normalise each country’s PPP median disposable income by the UK’s.

  1. US disposable income is clearly increasing relative to the UK over the last few years.

  2. France has moved closer down to the UK over the last 15 years, and Germany has increased relative to the UK. Overall, median disposable income adjusted for the cost of living has had a similar trend in the UK, France and Germany.

  3. Poland has radically increased it’s median disposable income relative to the UK.

I’m not seeing much

Still, GDP data and disposable income for the median person suggest that the US is improving relative to the UK, France and Germany – but those three countries are performing similarly. Poland, meanwhile, has improved significantly on GDP and median disposable income relative to the UK (and all other countries shown).

I’m not showing data for 2021 or 2022, so this analysis is incomplete.

Quick comment on a graph from Astral Codex

The following graph – via the Economist – shows a totally different picture:

Notice that the sub-title says ‘2019 prices’. I suspect that’s part of the issue. If you normalise relative to one fixed year then the results will depend on exchange rates at that time (even if PPP normalised). By contrast, my approach above only compares countries using numbers at the same point in time (i.e. divide one country’s results for 2018 by another country’s results for 2018).

I could be wrong on this – my level of confidence in my analysis is medium and comments are welcome.

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