Macroeconomic status of the United States of America versus the Great Britain Abstract

Macroeconomicstatus of the United States of America versus the Great Britain

Abstract

Theeconomy of the Great Britain (GB) has managed to weather economicturbulence among the European Union (EU) countries to emerge strongerand relatively stable. This paper will compare the macroeconomicstatus of the GB economy to that of the United States of America(USA) and discuss the economic strengths and weaknesses of theeconomy of GB.

TheMisery Index

Thisis the combination of a country’s unemployment and inflation rates.GB had 0% inflation and 5.4% unemployment rate as at 2015 translatingto a misery index of 5.4. This provides excellent support foreconomic growth and job creation. The USA has a slightly higherinflation rate at 0.1% and a lower unemployment rate at 5.3%translating to a similar misery index of 5.4. (Buttonwood, 2016 theWorld Factbook, 2016).

However,the misery index does not take into account wage growth.

TheEconomic Freedom Index OverallRanking

Incomparison to other countries, GB ranks at position 10 out of 159countries with the USA at position 16 in economic freedom. This meansthat GB citizens enjoy more economic freedom including better accessto overseas investment opportunities and a higher average income ofthe poorest compared to the USA (Gwartney, J. (2016)).

TheHuman Development Index OverallRanking

Acloser look at the people of GB reveals a less rich human life atposition 14 as compared to the USA at position 8 in the UnitedNations Development Program human development index rankings report.The GB economy focuses more on a richer economy as opposed to aricher human life. The better economic freedom enjoyed by hercitizens does not translate to better human development for GB(Jahana, S. (2015)).

PerCapita GDP

Asseen in the misery index, the living standards in the USA are betterthan in the GB as evidenced further by the per capita GDP for GB at41,200 compared to 55,800 for the USA. However, this is expected tochange by 2020 with proposals to reduce corporation taxes and lesspublic spending (WorldBank, (2015).

GINIIndex

At32.4 wealth is more equally distributed in the GB than in the USA at45 with 0 being absolute equality and 100 being absolute inequality(TheWorld Factbook).

CurrentAccount Balance

Withan account balance of -$484.1 billion,&nbspthe USA has a healthiereconomy than that of GB at -$123-5 billion (TheWorld Factbook).

BudgetBalance as % of GDP

Boththe USA and GB run on budget deficits with the USA at -2.4% and GB at-4.4%. This means that the USA‘s expenditures are higher than herrevenues but slightly lower than those of GB (TheWorld Factbook).

Economicstrengths of the Great Britain

GBhas maintained the ability to attract direct foreign investmentstwice as much as the average rich country. Despite the country’shostility to immigration, it has excelled at integrating immigrantsinto productive members of the society (“Little England or GreatBritain”, 2013).

Thecountry boasts of a vibrant services industry that contributes toover two-thirds of the country’s Gross Domestic Product (GDP). Thishas been attributed to a well-educated and skilled labor force(The World Factbook, 2016)

Economicweaknesses of the Great Britain

Themajor setback to the growth of the GB economy is the rapidly growingpublic and private debt. This places the accumulated debt burden at80% of the country’s GDP (TheWorld Factbook).

Politicalinstability is another major weakness of the country’s economy. Itsrecent exit from the EU has seen its economy suffer immensely withthe country’s currency dropping significantly against other majorcurrencies. The possibility of Scotland voting to leave the UnitedKingdom would largely reduce the country’s economic influence inthe world (“Little England or Great Britain”).

Conclusion

Thereis a significant difference between the two countries’ economicfreedom overall rankings. GB ranks six places higher in economicfreedom than the USA. This means that despite a similar misery indexto that of the USA, GB citizens enjoy more economic freedom includingbetter access to credit, more access to international trade andbetter legal structures and property rights.

There’sa further significant difference in the human development indexrankings with the USA ranking higher than GB. However, theunemployment rate in the USA remains slightly lower than in GB (R.A,2014).

References

Buttonwood,(2016, February 23). America`s misery index: a presidential ranking.Retrieved January 05, 2017, fromhttp://www.economist.com/blogs/graphicdetail/2016/02/daily-chart-13

Gwartney,J. (2016).&nbspEconomicFreedom of the World: 2016 annual report.Vancouver: Fraser Institute.

Jahana,S. (2015).&nbspHumandevelopment report 2015: work for human development.New York, NY, USA: United Nations Development Programme.

LittleEngland or Great Britain? (2013, November 09). Retrieved January 05,2017, fromhttp://www.economist.com/news/leaders/21589420-country-faces-choice-between-comfortable-isolation-and-bracing-openness-go

R.A.(2014, November 25). How strong is it? Retrieved January 05, 2017,fromhttp://www.economist.com/blogs/freeexchange/2014/11/americas-economy

TheWorld Factbook: UNITED STATES. (2016, December 21). Retrieved January05, 2017, fromhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.html

TheWorld Factbook: UNITED KINGDOM. (2016, December 21). RetrievedJanuary 05, 2017, fromhttps://www.cia.gov/library/publications/the-world-factbook/geos/uk.html

WorldBank, (2015). GDP per capita (current US$). Retrieved January 05,2017, from http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

CountryAnalysis Matrix

Economic Metric	United States	Great Britain
Per Capita GDP	55,800 (The World Factbook, 2016)	41,200 (The World Factbook, 2016)
Misery Index	5.4 (Buttonwood, 2016)	5.4 (The World Factbook, 2016)
GINI Index	45 (The World Factbook, 2016)	32.4 (The World Factbook, 2016)
Economic Freedom Index Overall Ranking	16 (Gwartney, J., (2016))	10 (Gwartney, J., (2016))
Human Development Index Overall Ranking	8 (Human Development Index Report, 2015)	14 (Human Development Index Report, 2015)
Current Account Balance	-$484.1 billion&nbsp (The World Factbook, 2016)	-$123.5 billion (The World Factbook, 2016)
Budget Balance as % of GDP	-2.4% (The World Factbook, 2016)	-4.4% (The World Factbook, 2016)