Global Growth Since 1970

[Toro]

There has been some debate on this forum about economic growth rates. I could find this out on the Internet, but frankly, it was just easier to do it myself.

This is OECD data

http://www.oecd.org/document/28/0,2340,en_...1_1_1_1,00.html

Use tables 1b for the GDP data, and for foreign exchange rates use table C1. The data is after inflation and currency fluctuations, adjusted for purchasing power parity. Growth rates are in US dollars. The OECD data starts in 1970 and ends in 2003.

These are the growth rates

1970-2003

Australia 1.5%

Canada 2.3%

France 2.4%

Germany 4.6%

Italy -0.8%

Japan 6.6%

Spain 0.8%

Sweden 0.6%

UK 1.1%

USA 3.1%

1970-1980

Australia 3.2%

Canada 3.0%

France 6.2%

Germany 10.2%

Italy 0.4%

Japan 9.4%

Spain 3.4%

Sweden 4.0%

UK 1.6%

USA 3.3%

1980-1990

Australia -0.8%

Canada 2.8%

France 0.0%

Germany 3.5%

Italy -1.1%

Japan 8.7%

Spain -0.6%

Sweden -1.2%

UK -0.1%

USA 3.2%

1990-2000

Australia 0.5%

Canada 0.5%

France -0.6%

Germany -0.6%

Italy -4.0%

Japan 4.4%

Spain -3.0%

Sweden -2.4%

UK 0.8%

USA 3.3%

1995-2003

Australia 2.1%

Canada 3.2%

France 0.4%

Germany -1.0%

Italy 0.8%

Japan -1.7%

Spain 1.4%

Sweden 1.0%

UK 3.2%

USA 3.3%

[BHS]

Good work Toro.

[Toro]

Good work Toro.

<{POST_SNAPBACK}>

Why thank you BHS. I'll get around to posting the expansion of government spending which at least partly caused those huge growth rates in Europe in the 1970s.

[August1991]

Toro, you should have taken the per capita data (if you go further down the OECD spreadsheet, you'll find them - the OECD has put everything in 2000 US $ at PPP, if memory serves), and used the trough years 1982 and 1992 for comparison. By picking different years, it is easy to present the data you want.

Bear in mind too that there was a large arrival of baby-boomers and women on the labour market in the 1970s which tended to boost GDP. It would be better to look at changes in average real earnings.

This is tantamount to examining productivity measures, always difficult.

[Guest eureka]

How does that translate into real growth? Bearing in mind what August has posted and the changes in populations.

I posted on another thread some time ago, the figures for evrey country from 1960 to 1980; and from 1980 to 2000.Unfortunately, my Bookmark seems to have disappeared but the link is still on that other thread, whatever it was. It had to do with Globalization.

The figures I gave on the thread you have moved from are taken from the World Fact Book.

[Guest eureka]

Declining growth

Found it! Notice the decline in more than economic growth.

[Toro]

Toro, you should have taken the per capita data (if you go further down the OECD spreadsheet, you'll find them - the OECD has put everything in 2000 US $ at PPP, if memory serves), and used the trough years 1982 and 1992 for comparison.  By picking different years, it is easy to present the data you want.

Bear in mind too that there was a large arrival of baby-boomers and women on the labour market in the 1970s which tended to boost GDP.  It would be better to look at changes in average real earnings.

This is tantamount to examining productivity measures, always difficult.

<{POST_SNAPBACK}>

August.

You make good points

Per capita is a more accurate way of looking at how the individual faired.

If you download the spreadsheet, you will see that the figures are in domestic currencies.

I picked those dates because 1970 is when the data started, its a nice round number and that was the comparison the OECD uses in other pages. I also looked at various time periods and the results weren't dissimilair

Eureka

That looks like an interesting paper. I will read through it later. I note that it says "Diminishing Growth", not "Declining Growth." Of that, I will not argue that the 1980s onward saw diminishing growth. You can see that in the statistics I posted, especially in Europe. But we must understand the reasons why. We'll discuss them later since I have to get to work now.

[BHS]

I too have bookmarked this paper now for future reference.

[Toro]

Since 1980 is used as a reference point

1980-2003

Australia 0.8%

Canada 2.0%

France 0.8%

Germany 2.2%

Italy -1.2%

Japan 5.4%

Spain -0.3%

Sweden -0.8%

UK 0.9%

USA 3.1%

Notice that the EU countries have generally done worse than the Anglo-American ones, the latter being more willing to embrace a more free enterprise model. The exceptions in Europe are Germany, but they saw slow growth since 1990 and negative growth since 1995, and the UK, which saw slow growth overall but accelerating growth since 1995. Japan saw phenomenal growth, but it is now a sclerotic economy and has seen negative growth since 1995.

[Toro]

So, globalization has been a failure compared to other time periods, eh?

I ran the numbers from the US Bureau of Economic Analysis

http://www.bea.doc.gov/bea/dn/nipaweb/TableView.asp#Mid

US growth rates, annualized

1930-39 0.9%

1940-49 5.6%

1950-59 4.1%

1960-69 4.4%

1970-79 3.2%

1980-89 3.0%

1990-99 3.1%

2000-04 2.6%

Looking at different time periods though, we see a little different picture

1935-44 9.9%

1945-54 1.3%

1955-64 3.8%

1965-74 3.7%

1975-84 3.0%

1985-94 3.0%

1995-04 3.2%

Not much of a difference between the so-called pre- and post-globalization eras, at least not for the United States.

I have argued that one of the reasons why growth was higher earlier in the century is because of increased consumption due to pent-up demand after the Depression and World War II. Here's what consumption looked like since the Depression

1929-35 -1.2%

1935-44 3.9%

1945-54 4.3%

1955-64 3.9%

1965-74 4.1%

1975-84 3.2%

1985-94 3.2%

1995-04 3.7%

Or, looking at through the prism of 1980 as being a demarcation

1930-39 1.0%

1940-49 4.0%

1950-59 3.7%

1960-69 4.4%

1970-79 3.5%

1980-89 3.3%

1990-99 3.3%

2000-04 3.3%

Pent-up demand after the Depression and WWII lasted well into the 1970s. Such long-waves of demand are not uncommon if you study economic history. Its also hard to argue that globalization is a negative factor for consumption when globalization increases choice and lowers costs.

Consumption BTW, has averaged between 60-70% of GDP and is by far the most important factor in the economy.

As any macro econ 101 student learns, GDP = C + I + G + NX

So let's look at investment and government spending

Investment

1930-39 -1.6%

1940-49 7.6%

1950-59 5.2%

1960-69 5.5%

1970-79 4.7%

1980-89 2.5%

1990-99 5.9%

2000-04 2.0%

or

1935-74 6.0%

1975-04 4.2%

Investment slowed. But how can that be when investors are supposed to be the big benefactors of globalization?

Government spending

1930-39 5.0% (War, New Deal)

1940-49 7.5% (War)

1950-59 5.8% (GOP President)

1960-69 3.8% (Democrat)

1970-79 0.5% (Nixon/Carter, decleration from Vietnam war spending)

1980-89 3.1% (Reagan/Bush)

1990-99 1.3% (Slick Willie, Dem)

2000-04 3.0% (W, GOP)

So much for the GOP being the stewards of the purse strings. Spending has accelerated faster under Republican administrations since WWII than Democrat.

Or

1946-74 3.4%

1975-04 2.3%

So the conclusion that we draw from the US economy anyways is that its hard to say that "globalization" has lead to a slowdown in the economy. It has more to do with consumption slowdown after the long-wave of pent-up demand from the Depression and the war faded, and, less important, slower government spending.

[Guest eureka]

Those figures do not change what I presented. The figures for the two time periods showed the growth in real GDP and they show, as I said, a lower rate between 1980 - 2000 than from 1960-1980.

I hardly think there was a long period of pent up demand following the Depression, either. Nor after the War. The Depression would have reduced the ability to spend of many people, but not all. Most in the Depression actually were better off. Those with steady work were able to satisfy their wants at deflated prices.

Growth , "unreal" growth, from the late 70's well into the 80's was skewed upwards by serious inflation,

Other mini periods can also be easily explained. The overall real growth was indeed lower. It was lower for most of the world and negative for the poorer areas.

[Toro]

Those figures do not  change what I presented. The figures for the two time periods showed the growth in real GDP and they show, as I said, a lower rate between 1980 - 2000 than from 1960-1980.

But you're saying its because of globalization. I'm saying its not.

I hardly think there was a long period of pent up demand following the Depression, either.

Then you might want to read up on your economic history. I studied under one of Canada's better known economic historians who first brought this fact to my attention.

Nor after the War. The Depression would have reduced the ability to spend of many people, but not all. Most in the Depression actually were better off. Those with steady work were able to satisfy their wants at deflated prices.

That is factually incorrect. Real aggregate wealth fell during the Depression. Stocks plummetted by up to 90% around the globe and real estate dropped by around 25%. Plus, unemployment in some areas was running 20-25%. In those statistics I quoted earlier, real consumption fell by 1.2% per year for five years, or around 7% in total, and thus in aggregate, the real spending - after deflation - fell. People were worse off by virtually any measure.

You also miss the point about pent-up demand. You had declining demand for much of the 1930s, then you had war, which required sacrifice. Items such as gasoline, sugar and rubber for example, were all rationed. Then as war spending fell off, the economy contracted a bit in 1946 and 1947. So from 1929-1947, you had the population making sacrifices. Then, demand began to take off. And part of that was also because of the baby boom. With the Depression a distant memory and the sacrifices of war over, people got on with their lives and began making babies. Consumption had been surpressed for a generation and took off.

[Guest eureka]

I actually read something not too long ago about the numbers of people who benefited from the Depression. All that you say is true except that the negatives in the total economic picture were not so dire. I don't know where it was, so I will not give you a refernce. I think the relatively small decline in consumption attests to that.

For a considerable part of the period of "sacrifice," government took up much of the slack. Consumption just shifted.

I won't get into prominent economists at this point, but I know of one who does not totally disagree with me.

To the point of whether "Globalization" has caused the decline since 1980, I am sure there are other factors. However, in my book they mostly come under that heading since they are generally adjuncts of the doctrine that is masquerading under that title.

Free trade, for one is a myth, Trade is controlled in favour of economic powers. Internally in those countries that are "beneficiaries", the benefits are limited and not shared by those who have lost jobs or have reduced income as a direct consequence of the shifts of capital and production.

And incomes were in decline for much of that same 1980/2000 period. They are little higher in real terms now.

[Toro]

Interesting tidbit I read this evening.

From Grant's Interest Rate Observer, Vo. 23, No. 14, pp 8-9, in an article about the level of bond yields

"[Van R. Hoisington] conducted a survey of secular forces going back to 1871, and concludes that periods of free trade and open economies are times of low inflation and low nominal yields.

"The 'open', or global market lasted from 1871 through 1945, and then became 'closed' or restricted from 1946 through 1989...This closed period was a result of nearly half the world's population residing [in China] and [The Soviet Union]. The [fall of communism] reversed the 'closed' period to another 'open' period in the world economy,...

"From a comparison of both periods, Hoisington observes that...Real growth was greater from 1871 through 1945."

[Shady]

How about comparing unemployment rates?

[Toro]

According to Morgan Stanley, between 1995 and 2002, the United States accounted for 98% of global growth at market exchange rates. In 1995, the combined GDP of Japan and Germany equaled the global share of GDP of the United States at 25%. Today, the US is 28% while Japan and Germany combined are 17%.

Shady

I'll get to that eventually...