The graph shows the GDP of the Eurozone and the United States, with both having their peak level prior to the great recession set to 100. The peak occurred in 2007 Q4 for the US, and in 2008 Q1 for the Eurozone. The data run through Q4 2012.
Whereas US GDP has surpassed the previous peak and continues to rise, albeit sluggishly, Eurozone GDP has not passed the previous peak, and has been slowly falling since early 2011.
That graph makes a good argument for Keynesian stimulus, and also a good argument that budget austerity during recessions is counter-productive (negative multiplier from budget cuts slows economy, reduces tax revenues, increased deficits, leading to more budget cuts, in a nasty vicious circle).
ReplyDeleteAs Paul Krugman said about Japan, things in the Eurozone don't look quite so bad when you take into account changes in the working-age population.
ReplyDeleteIn the past, political elites could rely on population growth to overwhelm bad policy...eventually. Population growth was the rising tide that lifts all boats. The USA's working-age population is still rising, but the Eurozone's is starting to ebb.
That's not to say that Eurozone policy has helped. Quite the reverse. It has created an undertow that drags down the economy there.
In bad Tolkienish: on the shores of the old continent at the dawn of the third millennium, economic vitality is draining away. The tide ebbs, and the undertow sucks.
hmm, what about discount in between WTI and BRENT as source of difference ?
ReplyDeletehttp://www.resilience.org/stories/2013-03-10/oil-s-average-price-posts-new-records-and-they-re-telling-us-it-s-abundant
On a per-capita basis, I think the performance is about the same, and the US has likely not surpassed its per-capita peak.
ReplyDeleteUS produces around 80% of the primary energy it consumes. The remaining 20% should be imported.
ReplyDeleteEurozone countries produce around 35% of the energy they consume. The remaining 65% should be imported.
We live in times of primary energy scarcity.
And then the graph.
To me it makes sense.
Stuart, can you let us know where this growth in the US came from? That is, is this new GDP growth based on some unusual paper growth (stocks, finances, etc.) or something real like oil and gas exports? Thanks.
ReplyDeleteI was reading an old Fred Reed column about Europe, and I'm curious about something.
ReplyDeleteIf they have less economic growth than we do, why is it they never seem to suffer from it?
I mean I'm not sure I've ever read or seen an article or a graph that said the European economy was doing better than ours, at least for an extended period.
Yet they seem to live better than the majority of our people do. Why is that? When is this economic growth going to have our overpaid union workers live as well, take long vacations abroad, and make as much money as German ones.
Is it as simple as the amount of money we spend on the military? Higher social spending by the Europeans? What is it?
I just want to say that I've lived for a while, seen countless graphs like this, and they pretty much never seem to explain much of anything.
Unless you make it to Eastern Europe, I'm not sure you will see anything as desperate as a trailer park in Kansas or an Indian Reservation in the West.
What does this graph mean? My guess is 10 years from now, Europe will be doing about as well as they ever have.
I'm not so sure about us.
You have a very typically American rosy-eyed view of Europe. You can easily find desperation just as bad as any Kansas trailer park in the rechid concrete neighborhoods of southern Italy, the gypsy camps of Ireland, the rotted, run-down towns of northern England. It isn't all like what you've seen on holiday.
DeleteSunbeam - I don't remember the exact figures off hand, but my recollection is that a significant part of the difference between US and European GDP/capita is that people in the US work longer hours. Productivity/hour is not that different, but in the US we elect to work longer hours and have more stuff but less leisure.
ReplyDeleteResponding to Sunbeam, I agree that the on-the-ground experience in Europe never seems as bad as graphs would indicate.
ReplyDeleteI think the variable not being accounted for is a sturdy social safety net in Europe (even if it is get weakened somewhat). So nobody in Western Europe lives as poorly as an Indian reservation or a trailer park in the US.
Even if unemployed EU citizens have health care, education, and usually housing covered, so the desperate poverty so common in the US is quite rare in EU.
Any morning a visitor to Denver can see hundreds of homeless people dragging their belongings down the street as they head for the free food churches and charities give out. From my many visits to EU I have never seen a comparable event, yet every single US city has hundreds or thousands of homeless penniless people. A graph of GNP or economic activity does not capture the extreme inequality in the US>