Growth Is Relative

Today, we measure the health and success of national economies (as well as regional economies) by the growth of their GDP. The thinking is that the more a country is able to grow its GDP, the better that country must be doing at individual factors, such as trade, employment, and industrialization. However, it’s important to note that growth is only one piece of an enormous economic pie. GDP growth is a relative factor to many different things; it’s just one that is more easily digestible to analyze. Here’s some information on the relativity of growth…

Certain countries require more growth

Different countries require different levels of economic growth. Certain countries will prefer to expand quickly with their GDP, while others might have a hard time becoming sustainable if they grow quicker than their infrastructure will allow. For example, a 3-4% growth rate in the United States is an acceptable level of growth that is sustainable for our industry and population. However, China is a country where this would be a dramatic slowdown that brings about economic uncertainty across the globe (as we’ve discussed on this blog before). China requires a current growth rate of between 6.5-8% to keep up its required functionality. This is an example of relativity between countries.

Growth across time was radically different

In different periods of time, the percentage of GDP per person varied wildly. In 5000 BC, the GDP would have been around $130 in current dollars for each of the 5 million people on this planet (yes, it is possible to measure such a thing). In 1000 BC, that number would have been $160 for each of the 50 million people. At the time, this was a period of incredible expansion. However, for contrast, this number nearly doubled from $4640 per person to $8175 per person from the years 1975 to 2000. That type of growth would have been unprecedented even 100 years ago. As a matter of fact, the growth in that 25 years was more than all of previous history, and past 50 years contained more economic growth than all previous years combined!