Growth in gross domestic product after adjustment for inflation (real GDP) is the most frequently reported and discussed economic measure. More important, however, is how people on average are doing from an economic standpoint. This means measuring output per person, or real per-capita GDP, and its growth rate.
How does the United States rank among other countries on this growth measure?
In “Japan vs. the U.S. in Per Capita GDP ,” we observed that, for the 15 completed years of the 21st century, there is not much difference between average growth in real per-capita GDP between the United States and Japan—the latter often described as suffering from economic stagnation.
Now we expand our comparison to the 10 largest advanced economies in the world. Here they are, ranked by the average growth rate in real per-capita GDP in this century so far:
Note that the United States and Japan are together right in the middle of the pack, fifth and sixth, respectively, bracketed by Canada and the Netherlands. Three other countries achieved substantially higher real growth rates when measured per person, and three were substantially lower, including Italy, whose growth rate was negative. Among the 10 countries, the average growth rate was 0.73 percent per year, in between the United States and Japan.
The table also shows how much aggregate difference there is as the growth rate compounds for 15 years. At Australia’s leading 1.44 percent average growth rate, aggregate product per person increased by 24 percent in 15 years. The comparable number for the United States is 14 percent. France and Spain are half that at 7 percent and Italy is a 7 percent decrease.
The effects of differences in compound growth rates are always impressive if they continue over a long time.
We calculate what the aggregate increase in average economic well-being would be if the growth rate in real per-capita GDP could be sustained for a lifetime of 80 years. Australians would become, on average, three times better off during their lives; Canadians, Americans and Japanese about twice as well off. Spaniards would be 40 percent better off. In the long view of the millennia of human history, this is very impressive.
Of course, if the growth rate in real per-capita GDP could be 2 percent, these numbers would be much more impressive yet. Then, in an 80-year lifetime, the average economic standard of living would quintuple.
- “Japan vs. the U.S. in Per Capita GDP”: http://www.rstreet.org/2016/08/29/japan-versus-the-united-states-in-per-capita-gdp/
- “[Image]”: http://www.rstreet.org/2016/10/25/growth-in-per-capita-gdp-how-does-the-u-s-rank/large-econ/