Although few Americans are satisfied with the state of nation’s economy more than five years after (we’re told) recovery from the Great Recession began, it’s a commonplace to take comfort in one belief that it’s still the world’s best. This seems especially true when the U.S. growth is compared with that of other high-income countries – mainly because even in today’s troubled times, big improvements remain easier for poorer economies to produce because they start from relatively low bases.
But viewed through another lens, America’s performance looks much less impressive, even compared with the barely growing Eurozone and Japan – the lens of gross domestic product (GDP) per capita. This gauge, for those of you who aren’t Latin whizzes, measures how much wealth an economy generates compared with its population. That’s why many analysts regard increases or decreases in GDP per capita as the best yardstick for overall economic progress. They strip out growth that’s generated simply because of expanding populations, while revealing how much wealth in principle a country possesses to share among its citizens, and how much it needs to generate to enhance or maintain their prosperity.
I needed to go to two different sources for per capita GDP data, but I’m comfortable with the results. The World Bank compiles these figures without factoring in inflation, while I obtained price adjusted numbers from TheGlobalEconomy.com, which looks to be used by an impressive number of colleges and universities around the world. And no matter whether you factor in inflation or not, the United States is anything but number one in economic growth per head nowadays among its peers.
The year 2007 seemed like a good starting point, since that’s when the U.S. and world economies started heading into recession. From that year, through 2013 (the latest available figures), American per capita GDP rose by 10.36 percent before adjusting for inflation. As a result, it trailed not only Germany (where this indicator increased by 10.79 percent), but even Japan, whose economy is widely thought to be barely breathing, but whose per capita GDP increased by 13.31 percent.
In fact, Japan’s performance spotlights the importance of looking at population. Although it has actually suffered three recessions since 2009, its population has been shrinking – and by a fast enough rate to keep production per person improving.
Taking prices into account reshuffles the per capita GDP growth standings, but the United States still doesn’t come out as Number One. In real terms, its output per head increased only 0.95 percent from 2007 to 2013. That beat Japan’s 0.67 percent. But it was left in the dust by Germany’s 6.34 percent.
The USA still leads these two competitors in per capita GDP on a static basis, whether taking inflation into account or not. But snapshots are always less informative than trends over time. And not only is real U.S. per capita GDP failing to outperform internationally. It’s unimpressive by America’s own recent standards.
From the technical start of the current recovery, in 2009, through 2013, the nation’s inflation-adjusted output per head advanced by 6.08 percent. During the previous expansion, which was two years longer, the figure grew by 10.95 percent – which comes out to a faster annual rate of increase. And faster still was real per capita GDP’s rise during the 10-year 1990s expansion – 23.35 percent.
So the next time you hear a politician or a Wall Street analyst or anyone else bragging about America’s economy being the world’s strongest, ask them about per capita GDP trends. If you get a blank stare, you now know that, in many important respects, they’re blowing smoke.