Since COVID-19, a narrative about economic stagnation in Europe alongside booming productivity in America — “Eurosclerosis,” to use an old but newly fashionable term — has attained the status of accepted fact in discussions of global politics. Though analysts may differ about what conclusions to draw or what steps should be taken, the “fact” itself is seldom questioned.
Since all of the relevant numbers on this subject come from a handful of marquee statistical series produced by leading international organizations — and since they’re all constantly scrutinized and litigated by legions of economists and policy experts — you might think the raw facts contained in them would be a settled question. But there’s a serious problem lurking in these data, one that seems to have gone entirely unnoticed in the discourse.
To compare gross domestic product (GDP) levels between countries, raw monetary figures — like the UK’s 2024 GDP of £2.9 trillion or the United States’ $29.2 trillion — have to be converted to a common unit of measure. This is typically done using purchasing power parities (PPPs), which are like ordinary exchange rates, but adjusted for differences in national price levels.
For example, in 2024 the UK’s market exchange rate was £0.782 to the dollar, meaning $100 could buy £78.2 on the currency market. But according to the PPP data, a basket of goods that cost $100 in America only cost £66.40 in the UK, because the UK price level, after converting from dollars to pounds, was about 15% lower than America’s. At the PPP ratio of 0.664, therefore, UK GDP was about 15% higher than at market exchange rates: $4.2 trillion vs. $3.7 trillion.
The national price levels that go into these calculations are measured just as you might expect: armies of clipboard-wielding field economists in countries around the world collect prices on thousands of products, which are then carefully matched with comparable products in other…
Auteur: Seth Ackerman
