‘Economic growth,” as one reference puts it, “is an increase in the production of economic goods and services, compared from one period of time to another.” Even before the novel coronavirus cratered U.S. GDP, many worried about the future of economic growth in America.
But whether the data corroborate these fears depends on how you measure economic growth. Media headlines tend to focus on rates of growth. From this vantage point, it’s not hard to see cause for worry. According to data from the Organization for Economic Cooperation and Development (OECD), between 2016 and 2019, real GDP per capita in the U.S. grew at an average annual rate of only 1.9 percent. In China, by contrast, it grew at a rate of 6.0 percent
Yet rates of growth may not necessarily answer the questions you want answered. If you want to answer questions about how economic wellbeing for individuals in a country has evolved, the actual change in the value of real GDP per capita may tell you more than the rate of its change. Why? Individuals buy goods and services with dollars and cents — not the rates of change that economists, politicians, and pundits tend to focus on when it comes to growth. You would not want to trade annual raises with your co-worker if his $5,000 raise grew his $50,000 salary by a rate of 10 percent while your $10,000 annual raise grew your $200,000 salary by 5 percent. The purpose of the income you earn, after all, is to have money to exchange for goods and services. And you can buy more of whatever you want with $10,000 than with $5,000.
By this metric, between 2016 and 2019, economic growth in the U.S. was the best in its class. The chart above shows the data for the U.S. alongside two sets of other countries. One consists of the world’s second-largest economy and America’s strategic competitor, China. The other consists of America’s traditionally peer economies. This includes the G7 (Canada, France, Japan, Germany, Italy, and the United Kingdom) as well as the Scandinavian countries often cited as models of social policy. The U.S. surpasses all of its peers in this group by no small margin. It bests the silver medalist in this category, Finland, by $1,100. That is almost as big as the $1,160 that separates the runner-up from the peer country that comes in dead last, Sweden.
To be fair, the appropriate measure of economic growth depends on the question you are trying to answer. Real GDP per capita is not always even the relevant underlying measurement. If you want to use economic growth as a proxy for trends in geopolitical heft, for instance, it may not necessarily make sense to make the adjustments for variation in local prices and population that turn raw GDP numbers into data on real GDP per capita.
But many expect the data on economic growth to answer questions of how trends in living standards and the quality of life in one country compare to others. And when it comes to answering those questions, the focus on rates of growth may lead to impressions that mislead as much as they inform.
The coronavirus has bequeathed the U.S. no shortage of economic problems. Many, including former vice president Joe Biden, have suggested that a return to the pre-coronavirus economy should not be a goal of U.S. policymakers. They have priorities other than economic growth that might explain why they would want to avoid a return to the pre-coronavirus economy. But economic growth, properly measured, is not one of them. America’s economic growth between 2016 and 2019 put it head-and-shoulders above its peers.