by George Dorgan
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Mainstream economists speak of two Japanese lost decades(s) between 1990 and 2009. Often the United States and the UK are seen as leader in growth. Some statistics might confirm this:
When we look on a more subtle criteria, namely GDP growth per capita, available at the world bank, we see a different picture.
China and then nothing, nothing, then India, Russia, Indonesia, Saudi-Arabia, Thailand and somewhere at the bottom our well know “developed” nations.
GDP per Capita (source world bank) - Click to enlarge
The developed countries with the strongest growth have ties to China: Australia exports commodities to China and profited on the price increase. Germany, Finland and Sweden export capital goods and engineering products. The Netherlands are one of the leaders on global trade. The U.S. provided the basis for the Chinese ascent , Americans spent and spent until 2008. The U.S. trade deficit financed the huge investments in China that are still keeping Chinese firms competitive despite rising salaries.
GDP per Capita (data source world bank), click on graph to expand
As also recognized by Paul Krugman, Japan has seen a stronger growth per capita than the U.S. or the UK. Seemingly the GDP growth in two latter countries was mainly driven by population growth and immigration.
(click to expand) Japanese GDP per capita and working age vs. US (source Paul Krugman)
Larry Summer’s recent idea to boost U.S. consumer spending will be counter-productive. Currently the U.S: economy is improving precisely because investments are finally increasing. Investments are driven by savings.
The Japanese savings rate was constantly falling during the two “lost decades”. Growth as created by government spending and investments.
For us the biggest Japanese issues were falling incomes after huge bubble in the late 1980s. Weaker incomes, however, were unavoidable because for many export goods, Japan had to compete with cheap China and South Korea. Weak population growth seems to be a common issue in all of these three countries.
Read also:
What drives the economy? Consumer spending or saving/investment?
Tags: GDP Growth per Capita,GDP per capita,U.S. Consumer Spending
