The United Kingdom as the 51st State
How does it compare?
Our time has finally come. Now that the United States has successfully infiltrated the British royal family, we can begin what was started in 1776 and complete the American Revolution. We should annex the United Kingdom and make part of the United States. After all, the UK left the European Union several years ago. They need a new group to join. Why not make it the United States? London is far closer to Washington, DC than Anchorage or Honolulu so geography isn’t a problem. Both countries are diverse democracies. Both have English as the most common language. This could work!
So let’s say the UK decides to formally join the US and become the 51st state. We could call the new country USUK. How would the UK measure against other states? In terms of wealth, measured by GDP per capita, where do you think the UK would rank? Before reading the answer below, please humor me and take the poll. Disclaimer: I cannot see how anyone voted, or even who voted. I will update this article to show results one week after publication.
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It may surprise many readers that the correct answer is 40-51. This polarizing conclusion was first made by Fraser Nelson in The Spectator in 2014. His article set off a firestorm of controversy, as both Americans and Brits were shocked that the United Kingdom is so relatively poor. Many assumed that the UK would be one of the ten wealthiest states, or at least in the top half.
Fraser concluded that the UK would rank 50th, right above Mississippi and below Alabama. This is bad enough for the Brits, but then others jumped in to say that Fraser was wrong. Others claimed the UK would not be the second-poorest state, but that it would actually be the poorest state, even poorer than Mississippi. This led to another round of hand-wringing across Twitter.
To the delight of economists, the media rediscovered this fact last month, when John Burn-Murdoch at the Financial Times wrote about it here. Burn-Murdoch concluded that today the United Kingdom is wealthier than six US states. So progress of a kind. Just like in 2014, other journalists jumped in to say that even ranking the UK 45 out of 51 was too generous. The reality is that the UK would be more like 50 out of 51. Douglas Carswell, a British journalist living in Mississippi, has a good explanation here.
So what’s going on?
First, wealth needs to be calculated for each state and the UK. This is generally done by determining GDP per capita, or the dollar value of goods and services produced per person per year living in a region. The problem with this is that the cost of living is different in different countries. So the value of the goods and services produced per person in Peru may only be $7,772 compared to a US average of $80,034, but this doesn’t account for the vast differences in the cost of living. Any American who has been to Peru will tell you the US is more expensive, but it isn’t over ten times as expensive. Someone who makes $35,000 in Peru would be wealthier, in real terms, than someone who makes $100,000 in Ohio because the cost of living in Peru is so much lower.
In order to account for cost of living differences, GDP per capita needs to be altered. The resulting alteration is called the purchasing power parity (PPP) value. This is a subjective number, so it needs to be taken as a rough estimate, but GDP (PPP) per capita does a fairly good job of allowing us to compare the wealth of one place to another. When Burn-Murdoch did this at the Financial Times he came up with this graph:
This shows the average GDP (PPP) per capita of the UK, Germany, Netherlands, and the US as the blue bars on their respective lines, and the average GDP (PPP) of those four countries without their wealthiest city as the red bars. According to this chart, the UK would be slightly wealthier than Alabama, with Germany and the Netherlands roughly equal to Florida.
This, however, is still incomplete. I believe that Burns-Murdoch has made the same mistake as Fraser did in 2014 (I tried to verify this, but my email to Burns-Murdoch went unanswered). Given the very high GDP (PPP) per capita of San Francisco, it looks like the United States was assumed to have the same cost of living across the entire country. This is clearly inaccurate and would explain why San Francisco appears so high on the chart. Making $100,000 a year in Mississippi is going to put you in a far better financial position than making $150,000 a year in the Bay Area because the Bay Area is so expensive.
If cost of living is going to be accounted for, it needs to be determined individually for each state. According to one source, Mississippi’s cost of living is 86 percent of the national average. Burns-Murdoch calculates that using a national PPP Mississippi’s per capita GDP is $46,841, while the UK’s is $54,590. Taking into account Mississippi’s cheaper cost of living, using a state PPP Mississippi’s per capita GDP would then be $54,466, or a virtual tie with the UK.
How is it possible that the UK is about the same as Mississippi from a wealth perspective? Isn’t the UK filled with fancy blue bloods while Mississippi is a poor backwater?
The best answer is branding. The UK has successfully convinced the world that it is much wealthier than it is in reality. Every British show that is packaged for international consumption shows wealthy Britons, from Downton Abbey to The Crown. Additionally, most American tourists only visit the wealthiest parts of the United Kingdom, namely London. As the chart above shows, however, London is far wealthier than the rest of Britain. On top of that, a lot of London's wealth isn’t generated domestically. The wealthy elite from around the world live in London after generating their wealth abroad. This makes London feel much wealthier than it is for the typical Englishman. If Americans were to visit Wales, Northern Ireland, or the Midlands, they would see a far different kind of Britain than tv would lead you to believe.
Mississippi, on the other hand, is a branding disaster. For decades it has been a byword for poverty. This narrative, also, is incomplete. Parts of the Magnolia State, such as the Mississippi Delta, are the poorest in the country. Holmes County is one of the poorest in the US. But that is not the entire state. Madison County is in the top 10 percent. Oxford, Mississippi is a beautiful southern town with a well-regarded research university. The Mississippi Gulf Coast has hotels and resorts that might as well be in Florida.
The fact is that the United States is a fabulously wealthy place. Compared to many other nations that a casual observer would regard as similar, Americans have significantly more wealth. The result is that, yes, the United Kingdom would be one of the poorest US states. So maybe the American takeover of England should wait.
To your last sentence, what if we were to add just England? As you stated Northern Ireland and Wales are likely bringing down the overall UK PPP.
One hypothetical that would be hard to parse out is the economic effect of joining the US. At the very least American tourism dollars would go up (enough to offset decreased EU tourism, perhaps); there are all sorts of other implications that may or may not be a net benefit. It's one thing to start at the bottom of the list, but I wonder how they would stack up after 10 years or 50 years.