We sometimes forget that the bad economic policy choices of U.S. politicians often pale in comparison to those of their counterparts in other countries. The result is that, despite the government’s best efforts, Americans are growing more prosperous at a faster rate than their peers elsewhere. The divergence is happening so rapidly, the U.K.’s Institute of Economic Affairs (IEA) recently pointed out, that Britons (among others) lose track of how quickly they’re falling behind Americans’ wealth and living standards. A return to free-market principles could help to once again even the score.

“A majority of Brits wrongly believe that the average person in the U.K. is as rich, or richer, than those in Switzerland, the United States, Singapore, Germany, Australia, and much of Western Europe,” according to a recent paper by IEA’s Matthew Lesh and Michael Turner. “There is an even more extreme disconnect when participants are asked to rank the U.K. relative to the 50 states that make up the United States.”

In terms of GDP per capita, which is a standard measure of comparative wealth, Britons tend to rank themselves between the residents of New Jersey and Connecticut. In reality, though, “the U.K. ranks last, behind every single U.S. state.” IEA pollsters described Britons’ reaction to learning that they’re poorer than the residents of even Mississippi, the least prosperous U.S. state, as “shock, embarrassment, anger, and a visceral sense that something had gone fundamentally wrong.”

Britons should be forgiven for their bafflement, however, given how quickly the gap between Americans and Britons has widened. Nor are they alone. Drawing on World Bank data, EconoFact points out that “in the period 2008-2023, EU GDP grew by 13.5 per cent (from $16.37 trillion to $18.59 trillion) while U.S. GDP rose by 87 per cent (from $14.77 to $27.72 trillion). The U.K.’s GDP increased by 15.4 per cent.”

That is, Britons and their former compatriots in the European Union are growing more prosperous, but at a much slower rate than Americans. This hasn’t put Americans at the economic summit as of yet — places like Switzerland and Singapore still offer their residents higher per capita GDP than does the U.S. But after 15 years of a widening gap, EU GDP went from 110 per cent of that of the U.S. to 67 per cent. That means a smaller share per person, and people in places like the U.K. falling behind the per capita wealth of even the residents of the poorest U.S. state.

Last year, Aadya Bahl of the London School of Economics noted that “Americans enjoy a much higher standard of living compared to the British. When considering real GDP per capita, a key measure of living standards, the gap between the U.K. and the U.S. has not only persisted but widened significantly in recent years.” She added that “Britain’s economy has also become less dynamic,” with fewer business startups and less job mobility.

Canada, it should be noted, is doing a bit better than the mother country. The World Bank puts per capita GDP at US$54,340 compared to US$53,246 for the U.K. But U.S. per capita GDP is US$84,534 with a growing gap. As The Economist reported two years ago, “Were Canada’s ten provinces and three territories an American state, they would have gone from being slightly richer than Montana, America’s ninth-poorest state, to being a bit worse off than Alabama, the fourth-poorest” between 2019 and 2024.

Regarding the widening gap between America and its allies and trading partners across the Atlantic, the Cato Institute’s Adam Michel wrote in January that “One structural reason Europe is falling behind is regulatory accumulation, which acts as a brake on innovation and competitiveness.” He noted that, from 2019 to 2024, the EU enacted over 13,000 legislative acts, while the U.S. implemented around 3,500 at the federal level. That’s a crude measure, but the European Commission itself recognizes that the EU needs to create a friendlier environment for startup businesses and make it easier “for companies to operate across the EU by simplifying rules and laws.”

Britons have similar insights, telling IEA pollsters they believe “the US succeeds because of higher wages, more opportunities, a stronger work ethic, a culture of entrepreneurship, and better leadership and ambition.” Asked to identify what holds back growth, respondents identified a variety of barriers, including high taxes (75 per cent), trade barriers (74 per cent), too much red tape (74 per cent), welfare discouraging work (65 per cent), employment laws (64 per cent), and strict planning laws (55 per cent).

But, while British respondents identified taxes and regulations as problems and named some market-oriented solutions, the IEA’s Matthew Lesh and Michael Turner commented that “participants’ default model for fixing the economy is state-led. When asked what would most likely improve things, participants instinctively turn to government for action: government spending, government investing in skills, government building houses, and government creating jobs.” The authors thought the taste for state intervention was more of an automatic go-to than a well-considered ideological choice.

But if an activist state is what has made Britons and Europeans poorer relative to Americans, then more state activism is likely to make the problem even worse. A broad though not universal cultural preference for government intervention may encourage exactly those policies that hold Britons back, even as Americans become wealthier.

The good news in terms of breaking from the mistakes of the past, according to Lesh and Turner, is that large majorities support cutting taxes on workers and businesses, while smaller majorities favour easing planning restrictions and reducing regulation. Britons are also “strongly supportive of small businesses and entrepreneurs, and acknowledge that the private sector is more effective than government.”

There’s an important point in here for Canadians, too, at a time when research shows that more Canadians are starting businesses in the U.S. than in their own country. Why? Well, 41 per cent of corporate CEOs tell the Business Council of Canada that regulatory burdens are their leading concern. As economist Charles Lammam commented last month at The Hub, “even Canada’s most promising entrepreneurs are being pulled south by stronger ecosystems, lighter regulatory burdens, and deeper pools of growth capital.”

Which is to say that, while American politicians often seem dedicated to burdening their countrymen with trade barriers, red tape, and high taxes, the U.S. still excels relative to the competition. The U.S. government’s comparatively light touch lets Americans create wealth at a faster pace than people in other countries. We should all take to heart the lesson that the freer the market, the more we prosper.

National Post