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Last Updated: Monday, 7 January 2008, 18:19 GMT
When UK GDP last outstripped the US
By Iain Haddow
BBC News

Queen Victoria
'Long to reign over us' - but not over the US economy
The average UK person will this year have a greater income than their US counterpart for the first time since the 19th Century, figures suggest.

Data from analysts Oxford Economics shows the fast-growing US economy first outstripped that of its former colonial power in the early 1890s, when Queen Victoria was Empress and Benjamin Harrison was American president.

At the time, Britain ran a fifth of the world through her Empire, while the Americans were only just defeating the Native American tribes after years of conflict driven by US expansion into the West.

So how did our American cousins overtake us so spectacularly and for so long?

Economies of scale and a single market had a lot to do with it.

British mirage

British manufactured goods only really dominated world trade for a few decades. Despite industrialisation, many areas of the Victorian economy were still labour-intensive.

Small backstreet firms employing people in sweatshop conditions were far more common than large machine-operated factories and mills.

And on the world stage, the British Empire relied on her commercial and political clout to edge out her rivals.

US-UK PER CAPITA GDP (US$)
1870: US - 2,445 UK - 3,190
1913: US - 5,301 UK - 4,921
1950: US - 9,561 UK - 6,939
Source: OECD

By contrast, productivity levels in the United States were much higher.

US industrialisation, even though it occurred later than in Britain, was far more efficient.

The Americans adopted a standardised, high-volume, low-margin approach to products and services. And the blueprint first used in railroad building was adopted for a whole range of goods and services.

The sheer size of the United States - swelled by millions of immigrants - meant a homogenous sales market.

US boom times

Brands born then are still booming a century later.

Colonel Harland Sanders, the brain behind Kentucky Fried Chicken, was born in 1890.

The following year, the first American Express travellers' cheque was exchanged, while Coca-Cola was patented shortly afterwards.

ENDURING US BRANDS
1890: KFC founder Colonel Sanders born
1891: First AmEx travellers' cheque cashed
1893: Coca-Cola patented

Meanwhile, Britain was beginning to lag behind.

In 1892, the world's first automatic telephone exchange opened in the US state of Indiana. It was another 20 years before Britain - under King George V - adopted the same technology.

World War One gave the US economy a huge boost. More than four million Americans served in the armed forces and the US economy turned out a vast supply of raw materials and munitions.

Empress Victoria and President Harrison were a distant memory. But by then, the US economy was in a class of its own.

So, a century on, are we really catching up with our American cousins?

Warwick University economics professor Stephen Broadberry says Britain is closing the gap on the US.

But he dismisses the idea that 2008 will be the year when living standards on this side of the Atlantic outstrip those in the US.

Referring to the dramatic fall of the US dollar since 2001, he says: "The distortions in the exchange rate can make it look as if the gap is closing.

"But that's just an illusion."

Professor Broadberry says: "Overall, the US economy is still 25-30% bigger than Britain's."

SEE ALSO
Britons 'richer than Americans'
07 Jan 08 |  Business
Country profile: United States of America
09 Oct 07 |  Country profiles

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