More stuff will be sold in the shops and online this Friday than ever before. How do we know? Well, Thanksgiving is on Thursday and the day after is Black Friday, the biggest shopping day in the US calendar. American consumers outpace the rest of the world by a big margin – not only is the US economy by far the largest, and growing strongly, but the country consumes a high proportion of GDP, around 70 per cent, higher than Europe or Japan, much higher than China. It follows that Friday will be the biggest shopping day on earth.
So what? Step back a moment and look at what is driving the world economy. We are seeing a three-speed global recovery. The emerging world is growing at around 5-6 per cent, with both China and India at between 6 and 7 per cent. The Anglosphere – the countries where English is the native language – is growing at between 2 and 3 per cent. And the rest of the developed world, essentially the eurozone and Japan, is "growing" at between minus 1 per cent and plus 1 per cent.
We know a lot as to why the emerging countries should be expected to grow faster than developed ones. That is driven partly by demography and partly by technological catch-up. We can project forward and see that while the pace of growth is likely to slow in China and eventually in India, the emerging world will continue to outpace the developed one. The bigger puzzle is why some parts of the developed world should be growing faster than other parts. We have the same technology. We have pretty much the same level of education. We have broadly similar financial institutions and corporate structures. And we are all democracies, albeit imperfect ones.
Part of the explanation lies in demography. By and large, and it is a huge oversimplification, the English-speaking world has higher birth rates than continental Europe and Japan. Estimates for the total fertility rate, the average number of children a woman is expected to have in her lifetime, in the United States is around 2, the same as Ireland, in the UK it is 1.9, and in Australia 1.8. By contrast, in Germany, Italy and Japan it is 1.4. On the Continent only France, with a rate of 2.1, breaks this pattern. Naturally migration can either offset or reinforce local fertility, but reinforcing the trend is more common. Within Europe, people tend to migrate north, further reducing the size of workforces around the Mediterranean. Growth creates jobs and people go where the work is.
But demography cannot account for all of the divergence. In any case, you have to ask why do people choose to have smaller families in, say, Japan or Germany than in the UK or US.
Another part of the explanation must be the magnet of the English language and Anglophone social attitudes. Young people want to study in English, and US and British universities dominate the league tables of the top global institutions. Maybe there are different, often subtle distinctions in work practices in the English-speaking countries that make them attractive. There is certainly an age thing: Britons retire to France or Spain, but young French and Spaniards come to Britain to study and work. For Europeans the UK is a sort of half-way-house towards the US, the place on their doorstep that displays some of the characteristics of society across the Atlantic.
These longer-term trends have been reinforced by policy. Thus the UK got its labour market reforms in early. We did ours in the 1980s and early 1990s, whereas Germany waited till the early 2000s, and France and Italy have barely begun. I suppose in cyclical terms, as opposed to structural, the English-speaking countries have been able to boost their economies because they had control over monetary and fiscal policy. The one English-speaking country in the eurozone, Ireland, has performed much worse. GDP there is now recovering but consumption remains way down on the peak.
And that brings us back to shopping. Americans like spending money, and so too do we. Even during the squeeze on incomes, consumption in the UK in real terms was either stable or rising. It is rising fast now, driven as much by falling prices as by rising incomes. You could say that we are irresponsible in that if we have money we will spend it and if we don't have it we will borrow. The facts don't quite support that, for if you allow for the amount Britons save for pensions or put into houses, our savings rates are not so much lower than on the Continent.
Still, there is a moral here. We will hit the shops in the coming weeks, just as Americans will on Friday. I am not sure whether it is irresponsibility or optimism, but that attitude has certainly helped dig us out of recession. But it has led to an unbalanced recovery, more so here than in the US, and both countries will have to do something about that in the years ahead.Reuse content