Posts Tagged ‘GDP’
“The whole of the global economy is based on supplying the cravings of two percent of the world’s population”*…
Perhaps that’s an oversimplification; but as a new McKinsey Global Institute study suggests, perhaps not by much…
We have borrowed a page from the corporate world—namely, the balance sheet—to take stock of the underlying health and resilience of the global economy as it begins to rebound from the COVID-19 pandemic. This view from the balance sheet complements more typical approaches based on GDP, capital investment levels, and other measures of economic flows that reflect changes in economic value… [and] provides an in-depth look at the global economy after two decades of financial turbulence and more than ten years of heavy central bank intervention, punctuated by the pandemic.
Across ten countries that account for about 60 percent of global GDP—Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States—the historic link between the growth of net worth and the growth of GDP no longer holds. While economic growth has been tepid over the past two decades in advanced economies, balance sheets and net worth that have long tracked it have tripled in size. This divergence emerged as asset prices rose—but not as a result of 21st-century trends like the growing digitization of the economy.
Rather, in an economy increasingly propelled by intangible assets like software and other intellectual property, a glut of savings has struggled to find investments offering sufficient economic returns and lasting value to investors. These savings have found their way instead into real estate, which in 2020 accounted for two-thirds of net worth. Other fixed assets that can drive economic growth made up only about 20 percent the total. Moreover, asset values are now nearly 50 percent higher than the long-run average relative to income. And for every $1 in net new investment over the past 20 years, overall liabilities have grown by almost $4, of which about $2 is debt…
“The rise and rise of the global balance sheet: How productively are we using our wealth?,” from @McKinsey_MGI
(Image above: source)
* Bill Bryson
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As we recalculate: we might spare a thought for composer, musician, director, and producer Frank “anything played wrong twice in a row is the beginning of an arrangement” Zappa; he died (of pancreatic cancer) on this date in 1993 at age 52.
“Politics is the entertainment branch of industry”
“The bottom line is always money”
“The loudest of doomsayers, so often, carry the weightiest of sin”*…
A quick look at how some of the grimmest prognoses for the pandemic’s effect have turned out…
When misfortunes multiplied during the coronavirus pandemic, observers seized on a four-letter word signaling end of days for the largest state with one-eighth the U.S. population and 14% of its gross domestic product. “California doom: Staggering $54 billion deficit looms,” the Associated Press concluded a year ago in May. “California Is Doomed,” declared Business Insider two months earlier. “Is California doomed to keep burning?” queried the New Republic in October. California is “Doomed” because of rising sea levels, according to an April EcoNews Report. Bulletins of people leaving the world’s fifth-biggest economy for lower-cost states because of high taxes and too much regulation stifling business continue unabated.
No one anticipated the latest data readout showing the Golden State has no peers among developed economies for expanding GDP, creating jobs, raising household income, manufacturing growth, investment in innovation, producing clean energy and unprecedented wealth through its stocks and bonds. All of which underlines Governor Gavin Newsom’s announcement last month of the biggest state tax rebate in American history.
By adding 1.3 million people to its non-farm payrolls since April last year — equal to the entire workforce of Nevada — California easily surpassed also-rans Texas and New York. At the same time, California household income increased $164 billion, almost as much as Texas, Florida and Pennsylvania combined, according to data compiled by Bloomberg. No wonder California’s operating budget surplus, fueled by its surging economy and capital gains taxes, swelled to a record $75 billion.
If anything, Covid-19 accelerated California’s record productivity. Quarterly revenue per employee of the publicly traded companies based in the state climbed to an all-time high of $1.5 million in May, 63% greater than its similar milestone a decade ago, according to data compiled by Bloomberg. The rest of the U.S. was nothing special, with productivity among those members of the Russell 3000 Index, which is made up of both large and small companies, little changed during the past 10 years.
While pundits have long insisted California policies are bad for business, reality belies them. In a sign of investor demand, the weight of California companies in the benchmark S&P 500 Index increased 3 percentage points since a year ago, the most among all states, according to data compiled by Bloomberg. Faith in California credit was similarly superlative, with the weight of corporate bonds sold by companies based in the state rising the most among all states, to 12.5 percentage points from 11.7 percentage points, according to the Bloomberg Barclays U.S. Corporate Bond Index. Translation: Investors had the greatest confidence in California companies during the pandemic.
The most trusted measure of economic strength says California is the world-beater among democracies. The state’s gross domestic product increased 21% during the past five years, dwarfing No. 2 New York (14%) and No. 3 Texas (12%), according to data compiled by Bloomberg. The gains added $530 billion to the Golden State, 30% more than the increase for New York and Texas combined and equivalent to the entire economy of Sweden. Among the five largest economies, California outperforms the U.S., Japan and Germany with a growth rate exceeded only by China.
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Even with the economic disruptions caused by the pandemic, California cemented its position as the No. 1 state for global trade, with its Los Angeles and Long Beach ports seeing growth that led all U.S. rivals for the first time in nine years in 2020. Much has been made of the state reporting its first yearly loss in population, or 182,000 last year. Had it not been for the Trump administration preventing new visas, depriving as many as 150,000 people from moving to California from other countries annually, the 2020 outcome would have been more favorable.
Even so, Republicans, opposed to Newsom’s policies favoring immigration, criminal justice reform and greater benefits for housing, health and child care, want voters to decide whether he should be replaced in a potential recall election later this year. Former San Diego Mayor Kevin Faulconer, a Republican who is among those running to succeed him, said Newsom, a Democrat, hurt the state’s small businesses.
That’s not what the data shows. The 373 California-based companies in the Russell 2000 Index, which includes small-cap companies across the U.S., appreciated 39% the past two years and 85% since 2016, beating the benchmark’s 34% and 67%, respectively. The same California companies reported revenue growth of 56% the past five years, dwarfing the benchmark’s 34%, according to data compiled by Bloomberg. More important, California companies invested 16% of their revenues in R&D, or their future, when the rest of the U.S. put aside just 1%.
Investing in the future is California’s way, the opposite of doom.
The Golden State has no peers when it comes to expanding GDP, raising household income, investing in innovation, and a host of other key metrics: “California Defies Doom With No. 1 U.S. Economy.” From Matthew Winkler (@Matthew_Winkler).
Someone ought to publish a book about the doomsayers who keep publishing books about the end of publishing
Evgeny Morozov
* Ta-Nehisi Coates
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As we check the facts, we might recall that it was on this date in 1978 that the Rainbow Flag was flown for the first time during the San Francisco Gay Freedom Day Parade. Created by Gilbert Baker, it has become a sign of LGBTQ pride worldwide.
“Our situation is unique in the annals of life, yet inscribed for all time in the logic of history”*…
A scan of the history of gross world product (GWP) at multi-millennium time scale generates fundamental questions about the human past and prospect. What is the probability distribution for negative shocks ranging from mild recessions to the pandemics? Were the agricultural and industrial revolutions one-offs or did they manifest dynamics still ongoing? Is the pattern of growth best seen as exponential, if with occasional step changes in the rate, or as super exponential? If the latter, how do we interpret the typical corollary,that output will become infinite in finite time? In a modest step toward answering such ambitious questions, this paper introduces the first internally consistent statistical model of world economic history…
[Looking back to 10,000 BCE, the author concludes that] the world economic system over the long term tends not to the steady growth seen in industrial countries in the last century or so, but to instability. The credible range of future paths seems wide.
Oh, so very wide… David Roodman (@davidroodman) goes big: “Modeling the Human Trajectory” (pdf).
(Image above: source)
* François Meyer, 1974. La surchauffe de la croissance: Essai sur la dynamique de l’évolution
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As we take the long view, we might recall that it is on this date each year that the roughly 300 residents of a small village participate in a drawing that determines who will be sacrificed to insure a good harvest… in Shirley Jackson’s short story, “The Lottery.”
Originally published in the June 26, 1948, issue of The New Yorker, it evoked strong initial negative response; subscriptions were cancelled; much hate mail received throughout the summer; and the Union of South Africa banned the story. It is now considered a classic of short fiction (and among the most famous American short stories); it spawned several radio, television, and film adaptations, and inspired voluminous analysis, both literary and sociological.
“The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP”*…
Is the world becoming increasingly prosperous? It would be hard to answer “yes” right now, at least so far as the leading high-income economies are concerned. Yet the longstanding bellwether of economic progress – inflation-adjusted GDP – has been growing across most of the OECD since 2010, suggesting that everything is fine.
Some 80 years after GDP was introduced, nearly everyone (apart from the indicator’s stewards) has concluded that it is no longer a useful measure of economic progress. But there is no consensus yet on a possible replacement. Reaching agreement on an alternative will require a new concept of prosperity and a new way to measure whether living standards are improving…
Over eight decades after its introduction, there is a widespread consensus that GDP is no longer a useful measure of economic progress. Its successor will need to be compelling and tell a persuasive story, consistent with experience, of what is happening in our economies. Diane Coyle offers some leads on possible successors: “What Will Succeed GDP?”
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As we grope for good gauges, we might recall that it was on this date in 1848 that a political pamphlet by the German philosophers Karl Marx and Friedrich Engels, The Communist Manifesto, was published. Commissioned by the Communist League and written in German, it appeared as the Revolutions of 1848 began to erupt. Subsequently, of course, Marx elaborated on his argument (with Engel’s help, after Marx’s death) in Das Kapital.
Cover of the first edition
Shop ’til you drop…
Americans are saving more… which means that they are spending less. Earlier this year average household debt was 134% of average household disposable income. If increased savings lowers that to, say, 100% (by way of comparison, the figure was in the 70% range in the Eighties), and the savings rate (which was essentially zero just before the bubble burst) returns to its historic (70-year) average of 9%, it will pull something like $4 trillion out of annual consumption… that’s to say it would reduce consumption by over 20%. And since consumption has been running over 70% of our roughly $13 Trillion GDP, that could make a dent in the trajectory of our consumer-driven society. A pretty big dent.*
How might it accrue? Well, there’s the impact on corporate earnings and employment (in an industrial/service base already at pretty serious overcapacity… and then there are the Dead Malls.
* for more on this phenomenon and what it might mean, this post in Jon Taplin’s blog is a good place to start… and for a peek at what could become of malls needy of a new purpose, see this post in The Infrastructuralist.
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As we cinch up our belts, we might think back to one of the driving forces that created the milieu in which malls were born and flourished: on this date in 1956 President Dwight D. Eisenhower signed the Federal-Aid Highway Act, landmark legislation that funded a 40,000-mile system of interstate roads that ultimately reached every American city with a population of more than 100,000. Today, almost 90% of the interstate system crosses rural areas, putting most citizens and businesses within driving distance of one another. Although Eisenhower’s rationale was martial (creating a road system on which convoys could travel more easily), the rewards were largely civilian. From the growth of trucking to the rise of suburbs, the interstate highway system re-shaped American landscapes and lives… and played a major role in creating the pre-conditions for the growth of the mall.
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