Splitting America three-ways

If you refounded North America, how many currencies would you go for?

If you refounded North America, how many currencies would you go for? Whatever the answer, you probably wouldn't insist on Vancuver and Seattle being different.

The whole thing is reminicisent of the debate around Europe. In May, a JP Morgan research note revealed that the Eurozone was more diverse than pretty much every other possible monetary union:

The x-axis is a measure of similarity between countries. It measures over 100 economic, social and political characteristics. Michael Cembalest, the report's author, then applied this measure to 11 hypothetical monetary unions, as well as to the major countries of the Eurozone (he excluded smaller countries like Cyprus and Malta, but the results aren't that different if they are included; nor does the inclusion of Greece affect the results all that much).

What he finds is that many monetary unions that came close to existing exhibit far more similarity than the Eurozone. This includes Latin America, the Gulf states, and Central America. He then pushed it further: reconstituting several former empires, including the USSR, Ottoman Empire, and the British Empire in Africa, would also result in unions with more similarity than the EU.

Now, three academics from the Democritus University of Thrace have performed a similar analysis on the US and Canada, and found that – economically, at least – the present borders make little sense. E. Chrysanthidou, P. Gogas, and T. Papadimitrioy apply Robert Mundell's theory of Optimal Currency Areas (OCA) to the hypothetical issue of a north American currency union.

An OCA is an area where the macroeconomic conditions between two or more regions are suitable for creating a monetary union. All such unions have potential benefits – eliminating currency risk means that conditions are much more favourable for trade within the union – but they also have potential downsides, as the eurozone is demonstrating presently. If the various involved regions are similar enough, the benefits are likely to outweigh the risks.

The theory, which stems from the 1960s, was originally based on an examination by Mundell of the US and Canada, but it took on a more practical bent with proposition of the European Monetary Area. Since then, it has been largely applied to Europe and similar cases of actually-existing, or at least widely proposed, currency unions.

The authors return to the source, and attempt to work out, using two different methods (Correspondence Analysis and Hierarchical Cluster Analysis), what the groupings between the fifty US states and ten Canadian provinces ought to be.

The conclusion is not two, but three different countries, one on each coast and one in the middle:

The authors describe the differences:

The first one includes regions mainly from the East that are industrialized, and characterized by high levels of economic activity as this is measured by the macroeconomic variables used in our analysis.

The second part includes regions mainly from western US and Canada with diverse levels of economic activity and prosperity.

Finally, a third group of regions can be identified. This group includes a geographically diverse set of regions as it spans from east to west. The common factor though that links these regions is the relatively low level of economic prosperity as it is measured in our study in terms of income, growth, imports, exports, etc.

It would be rather awkward, to be sure – but no less awkward than the current arbitrary line drawn along the 49th parallel.

The US-Canada border. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The strange death of boozy Britain: why are young people drinking less?

Ditching alcohol for work.

Whenever horrific tales of the drunken escapades of the youth are reported, one photo reliably gets wheeled out: "bench girl", a young woman lying passed out on a public bench above bottles of booze in Bristol. The image is in urgent need of updating: it is now a decade old. Britain has spent that time moving away from booze.

Individual alcohol consumption in Britain has declined sharply. In 2013, the average person over 15 consumed 9.4 litres of alcohol, 19 per cent less than 2004. As with drugs, the decline in use among the young is particularly notable: the proportion of young adults who are teetotal increased by 40 per cent between 2005 and 2013. But decreased drinking is not only apparent among the young fogeys: 80 per cent of adults are making some effort to drink less, according to a new study by consumer trends agency Future Foundation. No wonder that half of all nightclubs have closed in the last decade. Pubs are also closing down: there are 13 per cent fewer pubs in the UK than in 2002. 

People are too busy vying to get ahead at work to indulge in drinking. A combination of the recession, globalisation and technology has combined to make the work of work more competitive than ever: bad news for alcohol companies. “The cost-benefit analysis for people of going out and getting hammered starts to go out of favour,” says Will Seymour of Future Foundation.

Vincent Dignan is the founder of Magnific, a company that helps tech start-ups. He identifies ditching regular boozing as a turning point in his career. “I noticed a trend of other entrepreneurs drinking three, four or five times a week at different events, while their companies went nowhere,” he says. “I realised I couldn't be just another British guy getting pissed and being mildly hungover while trying to scale a website to a million visitors a month. I feel I have a very slight edge on everyone else. While they're sleeping in, I'm working.” Dignan now only drinks occasionally; he went three months without having a drop of alcohol earlier in the year.

But the decline in booze consumption isn’t only about people becoming more work-driven. There have never been more alternate ways to be entertained than resorting to the bottle. The rise of digital TV, BBC iPlayer and Netflix means most people means that most people have almost limitless about what to watch.

Some social lives have also partly migrated online. In many ways this is an unfortunate development, but one upshot has been to reduce alcohol intake. “You don’t need to drink to hang out online,” says Dr James Nicholls, the author of The Politics of Alcohol who now works for Alcohol Concern. 

The sheer cost of boozing also puts people off. Although minimum pricing on booze has not been introduced, a series of taxes have made alcohol more expensive, while a ban on below-cost selling was introduced last year. Across the 28 countries of the EU, only Ireland has higher alcohol and tobacco prices than the UK today; in 1998 prices in the UK were only the fourth most expensive in the EU.

Immigration has also contributed to weaning Britain off booze. The decrease in alcohol consumption “is linked partly to demographic trends: the fall is largest in areas with greater ethnic diversity,” Nicholls says. A third of adults in London, where 37 per cent of the population is foreign born, do not drink alcohol at all, easily the highest of any region in Britain.

The alcohol industry is nothing if not resilient. “By lobbying for lower duty rates, ramping up their marketing and developing new products the big producers are doing their best to make sure the last ten years turn out to be a blip rather than a long term change in culture,” Nicholls says.

But whatever alcohol companies do to fight back against the declining popularity of booze, deep changes in British culture have made booze less attractive. Forget the horrific tales of drunken escapades from Magaluf to the Bullingdon Club. The real story is of the strange death of boozy Britain. 

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.