A sideways look at economics

Earlier this month, I arrived in Washington DC to set up Fathom’s US office. I finished high school in the city so it hasn’t been a huge culture shock. However, having lived in the UK for most of the past decade, there are some differences that have immediately caught my eye. Yes, the weather is better. (Hard to imagine the opposite?) And the food portions are bigger. But it’s more than just that.

The Good
Innovation: Americans are generally more outgoing and optimistic than Brits. If you ask someone how their day is going, they might actually tell you. A cynic might say that these connections are superficial, but it generally makes life more fun.

Optimistic people


Moreover, there seem to be economic benefits that go with it. The US is known as a risk-taking and entrepreneurial place. Optimism not only leads to ‘dream big’ founders, it also leads to ‘dream big’ investors who are happy to back many horses and don’t automatically see previous failure as a bad thing. This idea appears to be borne out by data that measure US productivity levels and its share of world stock market value.

Incomes: The US is noticeably richer. From the range of cars on the roads to widespread air conditioning, it’s hard to not notice. (Public infrastructure is a different story.) Those high levels of productivity (combined with an unusually high level of average working hours) deliver substantial spending power. Gross household income per capita in the US is $55,000, much higher than the UK’s $34,000. This isn’t just a coastal observation. The poorest US state (Mississippi) has $42,000 average income per capita. It’s not unreasonable to think that in the UK’s poorest region, one dollar in income is equal to an equivalent Mississippian’s two.

Immigrants: 13.4% of the US population is foreign born. While this percentage is not the highest in the OECD, its history as a nation of immigrants is woven into the fabric of the country. Americans are much more likely to say immigration enriches the country than Europeans. Meanwhile, Pizza and Irish pubs are now as American as apple pie. Indeed, some even claim that Americanised Chinese food is better than the original — the jury’s still out on this one. Not just a ‘nice to have’, this openness is associated with large economic benefits. Almost half of Fortune 500 companies were started by immigrants, who overall start businesses at twice the rate of those born in the US.

The Bad
Prices: Inflation remains the hottest topic in markets, but levels matter, and the price of some everyday things is higher than in Blighty. Visitors from other parts of the UK often remark on the price of a pint (and much more) in London (£5+). My initial research suggests that would be considered a bargain in DC (before tip). It’s difficult to console yourself as you get 17% less beer in an imperial pint. I’ve noticed something similar in supermarkets, where my rough math(s) suggests that a trip could cost up to 50% more. Admittedly, it’s pretty easy to reduce this to just 30% more if you sign up as a member and log all your purchases. Is Safeway keeping track of my bacon purchases any worse than Google knowing that I tend to go there at around 7pm? I don’t know. The good news is that the US is the only OECD country without VAT, so many tradeable goods (think Apple) are much cheaper. However, I do have some sympathy for the heckler who told former NY Fed President William Dudley that you can’t eat an iPad.

The Ugly
Inequality: The US economy is world-leading, and for immigrants with drive and a great product to sell (ahem), there may be no better place in the world. However, the spoils don’t seem to be equitably shared. It’s impossible to avoid noticing a much higher number of panhandlers and rough sleepers. In a city where the Federal Reserve can make the money printer go brrr, I’d have thought that there’d be sufficient resources to prevent homeless tent encampments just down the road.

One thing that’s equally true on both sides of the pond is that nothing quite beats that Friday feeling: thank Fathom it’s Friday!