McDonald's and the world of burgernomics

FEW things in the world economy are as standard as a Big Mac. Identical ingredients mean that they taste the same in Peking as they do in London or New York, and so it was that Burgernomics was born, writes Will Bennett.

Every year, the Economist, a magazine not renowned for its lightness of content, publishes the Big Mac index. It is a lighthearted way of making a serious point about international currency values.

It is also recognition of the global influence of McDonald's, which now produces the Big Mac hamburger in 68 countries via 14,000 fast-food outlets.

The most recent Big Mac index was published in the Economist in April, the theory being that if there is purchasing power parity a dollar should buy the same everywhere. The cheapest Big Mac was in China, where it cost dollars 1.03, while the most expensive was in Switzerland, where the price was dollars 3.96. Customers paid dollars 2.30 in the US, dollars 2.65 in Britain, dollars 3.17 in France and dollars 1.66 in Russia.

The Economist concluded that the Chinese yuan was the most undervalued currency against the dollar, although it admitted that burgernomics is flawed. Different levels of farm support, tax and profit contribute to the variations. It concluded: 'The Swiss franc is overvalued against the dollar by a hefty 72 per cent. On the same basis the (Japanese) yen is overvalued by 64 per cent, the Deutschmark by a modest 17 per cent.' The pound was 15 per cent overvalued.

Nick Wiseman, a statistician with the Economist, said: 'We are often asked why we don't use the price of the Economist or of prostitutes instead. The former is printed in various places and the price is not uniform while the cost of the latter may depend on local custom.'