Financial Fact of the Day

It’s often overlooked, the way in which decent economic growth is cumulative:

The first is
simply that seven years have elapsed and in this period the value of US
economic activity, as measured by gross domestic product, has grown by 41
per cent. Global economic activity, boosted by the spectacular growth of
China and other emerging economies and flattered by the declining value of
the dollar, has expanded by 60 per cent.

Europe might be growing by 1-2% a year, the US by 3-4 % and in a year, this makes little difference but keep adding those differences year on year and pretty soon a large gap opens up.

Also worth noting that something is being done about poverty, as that global growth number indicates. Wealth is being created, the first and necessary step to reducing poverty.

3 responses

  1. Matthew Avatar
    Matthew

    Actually on a comparable basis to those two sets of figures GDP in Italy, France and the UK has grown by more than 80%, and in Germany by 62%.
    Remember they’re nominal (ie not adjusted for inflation) and in dollars (ie converted for the change in the exchange rate). This latter has boosted EU GDP relative to US GDP by something like 30% since 2000.

  2. Mark Wadsworth Avatar
    Mark Wadsworth

    Don’t forget the rule of 70 for compounding (very useful for mental arithmetic).
    If something increases at 10% compound, it doubles in 7 years. At 7% it doubles in 10 years, all the way down to something that increases at 1% compound takes 70 years to double.
    So there is a heck of a difference between 2% and 4% growth.

  3. This is why it is disgraceful that the Tories keep letting Brown away with saying that Britain’s growth at 2.5% is really good because it beats most of the G7 countires (ie the old EU countries & Japan). In fact it is really bad because it is far below the world average of 5%, let alone Russia 8-9, Chuina & Insia 10%.
    If we were not so parochial we would notice this. We would even notice that Ireland, by averaging 7%, has gone from being far poorer than us to far richer.

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