January 8, 2008 | posted by Michael Baxter in UK economy, US economy |

Cast your mind back to the 19th century. Can’t remember that far? Well, that’s a shame, because that was the last time your average Brit earned more money than the average American.

But this year, something extraordinary is expected to happen, for the UK’s GDP per capita is expected to overtake the same measure in the US for the first time in more than 100 years.

According to Oxford Economics, the UK’s GDP per head will reach £23,500 this year. Pity the Americans, your average Joe will see a mere £23,250, while in Germany, your average Klaus will enjoy GDP of just £21,655 and your average Jean Pierre will see GDP per head in France of £21,700.

“No longer are we the ’sick man of Europe’,” Adrian Cooper Managing Director at Oxford Economics said.

And by the way, in 1993, the UK’s GDP per capita was 34 per cent lower than in the US, 33 per cent lower than Germany’s and 26 per cent lower than France’s.

Mind you, maybe the figures don’t tell the full story. Economists often use two measures of GDP. GDP measure in a currency, say the dollar, and GDP at Purchasing Power Parity, which takes into account that the exchange rate can distort the true picture.

As we all know things are cheaper in the US, so your average American might have less than your average Brit, but he enjoys more bang for his buck.

Then there’s house prices. House prices are cheaper in the US, and a lot cheaper in Germany and France. Presumably the Brits spend a higher proportion of their income on repaying a mortgage.

But it seems there is another measure that economists don’t yet truly take into account.

When a company issues its results, it publishes PL and a balance sheet.

When we look at economic performance we tend to only look at PL, or GDP.

By the balance sheet, we are not just referring to debt levels, but also to assets such as natural assets, and man-made assets such as the beauty of architecture. These assets can provide us with dividends that are not measured in pounds, shillings or greenbacks.

Do economic statistics really reflect the negative effect on our wellbeing of being stuck in traffic jams, for example, or of travelling on overcrowded trains?

Remember also, your average French and German worker works shorter hours, so gains more leisure time, which is presumably a boon. So actually, in measuring economic wealth, GDP per capita is little more than a very vague guideline.