Our decision to declare independence from the British two hundred and fifty years ago has paid off economically.
The U.S. economy and population have grown at a faster rate than the U.K.’s in the years since independence, with higher stock returns, better bond yields, and lower inflation, according to Bank of America’s chief investment strategist, Michael Hartnett.
Hartnett titled his latest weekly “Flow Show” note “Red, White and Boom.” He calculates that nominal gross domestic product has grown at an average annual rate of six percent in the U.S., beating the UK’s average growth of 5.8 percent. After adjusting for inflation, the U.S. economy has expanded at an average rate of 3.6 percent and the UK’s at 2.1 percent.
Inflation has run lower in the U.S., as well. In the U.S., inflation has averaged 2.5 percent since 1789, according to Hartnett. In the U.K. it has averaged 3.9 percent. An online CPI calculator says that U.S. inflation has averaged just 1.47 percent since 1776 and 2.17 percent in the U.K. Cumulative inflation means prices are up 3,752 percent in the U.S. since 1776 and 21,173 percent in the U.K.
Holders of U.S. government debt have done better, as well. The U.S. ten-year bond has yielded an average of 5.8 percent over the past 250 years, while the U.K.’s yield averaged 5.6 percent.
The U.S. population has grown two percent on average versus 0.8 percent for the U.K.
Data from the Global Change Data Lab, a UK non-profit, says that the U.S. economy has grown an average of 3.35 percent since 1820. That compares very favorably against growth in Europe. The fastest growing countries over the period have been Scandanavia, with Norway clocking in a 2.98 percent growth rate, Finland 2.53 percent, and Sweden 2.48 percent. France, Spain, Italy, and the UK have all grown an average of less than two percent during the period.
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