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Coffee House

Why Britain is poorer than any US state, other than Mississippi

22 August 2014

10:41 AM

22 August 2014

10:41 AM

Now and again, America puts its inequality on display to the world. We saw it after Hurricane Katrina and we have seen it again in the unrest in Ferguson, Missouri. A white police offer shoots dead a black man, after having stopped him for jaywalking. Britain’s police don’t have guns, so these scenes are unthinkable to us. But American-style inequality? We have plenty of that too, we’re just better at hiding it – as I say in my Telegraph column today.

I came across a striking fact while researching this piece: if Britain were to somehow leave the EU and join the US we’d be the 2nd-poorest state in the union. Poorer than Missouri. Poorer than the much-maligned Kansas and Alabama. Poorer than any state other than Mississippi, and if you take out the south east we’d be poorer than that too.

I’ve been asked (on Twitter) to link to my source, but I’m afraid there’s no study to point to. It’s original research. But it’s also a fairly straightforward calculation. You take the US figures for GDP per state (here), divide it by population (here) to come up with a GDP per capita figure. Then get the equivalent figure for Britain: I used the latest Treasury figures (here) which also chime with the OECD’s (here). A version of this has been done on Wikipedia, but with one flaw: when comparing the wealth of nations, you need to look at how far money goes. This means using a measure called Purchasing Power Parity (PPP). When this is done, the league table looks like the below. I’ve put some other countries in for comparison.


It’s not surprising that America’s best-paid 10 per cent are wealthier than top 10 per cent. That fits our general idea of America: a country where the richest do best while the poorest are left to hang. The figures just don’t support this. As the below chart shows, middle-earning Americans are better-off than Brits. Even lower-income Americans, those at the bottom 20 per cent, are better-off than their British counterparts. The only group actually worse-off are the bottom 5 per cent. Here are the figures:-


[Alt-Text]


In America poverty is more obvious due to White Flight, a phenomenon we just didn’t have. In the era of the motor car, the middle class (who tended to be white) worked out they could buy a lovely house in the safer suburbs and commute. The population of St Louis, where Ferguson is a neighbourhood, has halved since 1970. And back then, Ferguson was 99 per cent white. Now it’s 67 per cent black. Any Brit who has walked the streets of today’s Detroit will be stunned: this supposed city looks like a bombed-out ghost town. But 45 minutes up the I94 lies the gorgeous sprawl of Ann Arbor, and some of the loveliest spots on earth. America’s White Flight has created a visual spectacle with no equivalent in Europe. When urban trouble kicks off in America, this spectacle is there for all to see.

Britain has no space for white flight, we’re forced to live closer together. And we fool ourselves into thinking that proximity has brought cohesion. In fact, we have developed a new kind of segregation: keeping the poor cooped up in council estates, a stone’s throw from the posh parts – yet abandoning them in a welfare trap from which escape is pretty damn hard. Brits may be appalled at America’s gap in black-white life expectancy. But our Liverpool-SW1 life expectancy gap is just as big; we just don’t get upset about it. When you walk south over Westminster Bridge from the House of Commons, life expectancy drops five years.

No one beats up America better than Americans. They openly debate their inequality, conduct rigorous studies about it, argue about economics vs culture as causes. Their universities study it, with a calibre of analysis not found in Britain. Americans get so angry about educational inequality that they make films like Waiting for Superman (trailer below). And the debate is so fierce that the rest of the world looks on, and joins in lamenting America’s problems. A shame: we’d do better to get a little angrier at our own.

PS If anyone hasn’t seen Waiting for Superman, I can’t recommend it highly enough: it’s on iTunes.

 

PPS Time Magazine has run Screen Shot 2014-08-29 at 09.09.30a peculiar critique of the above with has a smug sub-headline (with “er, not quite” at the end) implying they spotted a massive flaw. And what is it? My table adjusts for spending power between countries, it says, but not within states! Dohh!

The idea that a dollar spent in New York goes equally as far as a dollar spent in Alabama is laughable, but the comparison he uses proceeds from that assumption.”

I’m not sure that the author has worked out that he’s accusing me of understating my case. To adjust for spending power within US states makes Alabama look richer and Britain’s position look even worse – as Time would have realised had the author “proceeded” a little more from his own assumption.

Forbes magazine has done the maths which Time couldn’t quite bring itself to. The author, Tim Worstall, says that if you do adjust for spending power within US states (which I didn’t) then Britain ends up below every single one of them – including Mississippi.

And for those interested, the most thorough critique comes from Chris Dillow, who has also Fisked my figures here. GDP per capita is one way of measuring wealth; it’s also the most widely-used way. I’d (again) like to say that, while its fun to trade figures, all of the above working was done for one sentence into a 1,250-word Daily Telegraph column not about Alabama or Mississippi but the British problems that I recommend Brits focus on rather than gawp at Ferguson.

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