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Nine years ago, Fraser Nelson raised the question of where the UK would rank among the US states in terms of economic strength. Adjusting for price differences, the UK would sit in 49th place out of 50 states, narrowly surpassing Mississippi.
Since then, the Mississippi Question has gained popularity. Will the US state with the highest poverty rate and shorter life expectancy than the UK surpass its economy? The answer, so far, is no. The UK’s GDP per capita has remained about 15% higher than Mississippi’s over the past two decades. In 2019, it even ranked ahead of six of America’s poorest states.
However, focusing solely on this comparison overlooks more interesting trends. If we compare the UK to individual US states, why not consider the UK’s constituent parts? London notably contributes significantly to the UK’s output, to the extent that removing it would lower living standards by 14%, placing the UK behind the last US state. In comparison, removing Amsterdam from the Netherlands would lower living standards by 5%, and removing Munich from Germany would only lower them by 1%. Even if the entire San Francisco Bay area seceded from the US, the country’s GDP per capita would only decrease by 4%.
London plays a vital role in the UK’s economy, contributing not only to the production of goods and services but also generating higher tax revenues and fiscal transfers to poorer regions. Despite concerns about the impact of Brexit, the capital’s economy has grown by 4% since 2019, bucking the national trend of stagnation or decline. However, London’s position as a global financial hub is weakening, and its productivity growth has lagged behind other parts of the country for the past 15 years.
The UK’s heavy reliance on London as an economic powerhouse has hindered the development of other regions, preventing them from becoming significant drivers of their own destinies. To overcome this, the UK needs multiple economic engines rather than relying solely on its capital.
Contact [email protected] / Twitter: @jburnmurdoch
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