Date: 2024-06-30 Page is: DBtxt003.php L0900-MM-Real-US-GDP-1790-2012
MANAGEMENT METRICS
US ECONOMY ... REAL US GDP GROWTH
Spectacular GDP growth since WWII
US ECONOMY ... REAL US GDP GROWTH
Spectacular GDP growth since WWII
Peter Burgess COMMENTARY
The period since the military buildup at the beginning of WWII, there has seen amazing GDP growth and especially in the United States.
At the end of WWII there was a global concern that the process of demobilization might return the world to the depression of the 1930s.
Quite quickly post-war with very Keynesian style policies the United States achieved remarkable economic growth which has kept going until the present time. There have been periodic downturns. Most of these have not lasted very long, but the Arab Oil boycott in 1972 was serious and I have argued it represented the biggest change in global economics ever, and still has important repercussions even today.
Other blips included a period of hyperinflation during the late 1970s, the dot.com bubble around 2000, and the financial crash of 2008 ... and then the Covid pandemic problem of 2020 which is not on this graph.
The massive increase in GDP is impressive, but less impressive is that most people in the United States have experienced a much less impressive improvement in their economic condition and quality of life. There are many reasons for this.
One of the biggest reasons that the GDP metrics shows this impressive economic performance is that it is very badly constructed. This problem originates from way before I studied economics at Cambridge in the late 1950s. Kuznets who worked on GDP in its early days of GDP development as an economic metric argued for it to be upgraded or replaced well before I was a student some 60+ years ago. So why is it still in use?
My theory is that there are too many people in positions of power that are very happy that it is such a sloppy measure and want to keep it that way. The fact that the GDP number goes up even when it is because of activity related to a disaster is unhelpful, to say the least. In addition to my university training in engineering and economics I also trained as a Chartered Accountant where there are both revenues and costs ... debits and credits. Simply put, mostly GDP is calculated by adding together both the debits and the credits which is about as near a pure oxymoron that one get get.
Better metrics have been designed ... but they are not widely used yet. Hopefully this will change sooner rather than later, but don't hold your breath.
Peter Burgess
• From 1790 to 1929 a substantial amount of progress ... but from a low starting point.
• 1929 was the start of the Great Depression, which lastd several years
• There was rapid GDP growth during the years of WWII.
• GDP growth continued in the USA from 1945 until the present time.
• The oil shock in 1973 halted GDP growth briefly.
• There was another blip in GDP growth with the Gulf War of 1991
• And another with the dot.com bust around 2000-2001.
• In 2008 there was an even bigger bust with the Financial Crisis of 2008.
What this does not show ...
• US GDP growth has been impressive over time ... but not correlated well with quality of life for the majority of Americans during the past 40 years.
• This time series ends in 2012. The economic disruption of 2020 brought on by the Covid-19 pandemic is not part of this graph.