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PaperclipPerfector  9mo ago (text post)   2471 thread views

Small-Scale Question Sunday for August 13, 2023

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One thing I have noticed when looking up GDP per capita statistics is that many countries seem to have a peak and then decline between 2008-2011. This gives the effect of flat GDP per capita for the last decade or so in many places.

My question is, is this an artefact of the strength/weakness of the dollar relative to the country's currency? For example, the World Bank lists the UK's 2022 GDP per capita as $45,850, the same as it was in 2006. Yet, measuring in GBP (inflation adjusted) seems to show actual (albeit uneven) economic growth between 2006 and today, from £30,800 to £32,900. Certainly not strong growth, but growth nonetheless.

Basically, is measuring GDP per capita in dollars really the most objective way to measure economic growth?

All rich countries had a recession in 2008-2011, because of the global financial crisis. The UK and, for different reasons, the sunnier EU countries, show the pattern you mention of never really recovering from it, but most other places don't. If you look at the US, Germany, Poland, or any rich Asian country, then the 2008 recession looks like a blip with growth returning to trend. (A painfully slowly-growing trend in Japan, but not the kind of stagnation you see in the UK or Spain) For example, see this graph

My question is, is this an artefact of the strength/weakness of the dollar relative to the country's currency?

Yes.

Basically, is measuring GDP per capita in dollars really the most objective way to measure economic growth?

No. Purchasing Power Parity is better. Not perfect, but better. It's less volatile year-to-year and it has a higher correlation to other measurable things such as life expectancy.

I mean, the peak and decline is probably an artifact of the global recession.

Purchasing Power Parity is better IMO, constant USD 2017 might be a good option. The World bank usually has that. In this case it's basically the same as what you said: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?locations=GB

It's a bit of an approximation (just what specifically makes up the 'basket of goods' that prices are compared for is open to manipulation) but all economic statistics are a kind of nonsense.

There was also the GFC in that period.

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