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Chapter 18 Long-Term Economic Growth

Print Edition at 70% with .01 margins

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   I. How the Government Dealt With Past Recessions from the  The New York Times  
II. Analyzing recent economic growth
     A. Measurement will be in nominal, real, and per capita amounts. 
     B. Real per capita Gross Domestic Product, Disposal Personal Income, 
         Total Private Wages, Manufacturing Wages and spending on Social Security,
          Medicare, and Medicaid will be studied.   
     C. Rapid growth policies have costs to society  1. Pollution  2. Harried lifestyle 3. Neglected worker safety 4. Increased litigation
D. Interesting Sites
     
1. Industrial Revolution and the Standard of Living  by Clark Nardinelli    2. The First Measured Century   Ben Wattenberg's classic is a must for those interested
            in the economic history of the 20th century.
          3. The Escape from Hunger and Premature Death, 1700-2100Ē  by Robert William Fogel. Cambridge University Press, 2004.  4. annual report on income, poverty and health insurance Census Bureauís 

Real Per Capita Growth in GDP and DPI 1929-2010
Some of the data on these charts is projected by the 20011 Economic Report of the President

 

 

 

 

 

 

 

 

 

 

 

 

1962 1970 1980 1990 2000 2010p
Populations (millions) 187 205 228 250 282 310
GDP Current Dollars (billions) Table B1 $586 1,038 2,788 5,800 9,951 14,660
GDP Per Capita -Current Dollars1 $3,134 5,063 12,228 23,200 35,287 47,290
GDP Chained 2005 (Billions) $3,072 4,270 5,839 8,034 11,226 13,249
% Increase in Real GDP Chain 2005 $1   39.0% 37.0% 37.6% 40.0% 18.0%
DPI - Current Dollars (billions) B30 $405 736 2,003 4,254 7,327 11,378
DPI Per Capita -Chained 2005 B31 $11,413 15,158 18,863 23,568 28,889 33,019
Median Money family income 
Chained 2009 dollars 1999, 2009 B33
        $62,860 60,088
DPI Absolute Increase in Real Per Capita1    $3,745 3,705 4,705 5,321 4,130
Editors Calculations: During the last decade, median family income went down by $2,772 but DPI/person went up $4,130 in less valuable 2005 chained dollars. For a family of four, we are missing 4X$4,130 + 27,72 = $19,992. It went to the top1%.
 2. View Bradford DeLong's( USC Berkley) dynamic presentation of. GDP growth since 1900. 

 Private and Manufacturing Actual and Real Hourly Wages 1960 -2010

1970 1980 1990 2000 2010
Total Private Hourly, actual dollars $3.40 $6.85 $10.20 $14.02 $19.04
Manufacturing, actual dollars 3.23 7.15 10.78 14.32 18.57
Total Private, 1982-84 dollars 8.72 8.26 7.91 8.30 8.90
Manufacturing, 1982-84 dollars 8.28 8.62 836 8.48 8.68
Difference between Private-Manufacturing, 1982-84 dollars +$.44 -.36 -.46 -.18 +.22

Experts Say Growth Medicare Spending Is Out Of Control
Data from Bureau of Economic Analysis


II. Determinants of growth  
      A. Quantity and quality of natural and human resources
      B. Quantity and quality of capital goods
      C. Development and application of technology
      D. Efficiency of economic system
          1. Maintaining reasonable, consistent growth in 
             Aggregate Demand (not having recessions or excessive inflation) 
          2. Efficient allocation and use of economic resources
      E. The latest edition of Economics by McConnell and
          Brue provide this data on U.S. Growth Competitiveness.
      F. The latest edition of Economics by McConnell and Brue provide this data on U.S. education.
            Social Security Medicare Medicaid
1970 29.61 6.8 2.7
2003 470.6 274.2 160.7
 Billions of Dollars

The Real Story--Spending As A Percentage Of Gross Domestic Product

  Defense International
(Foreign Aid)
Social Security Medicare Medicaid  

 

1970 8.1 0.04 2.9 0.7 0.3
1980 4.9 0.5 4.3 1.2 0.5
1990 5.2 0.3 4.3 1.9 0.7
2000 3.0 0.2 4.2 2.2 1.2
2003 3.7 0.3 4.3 2.5 1.5
Percent Point Change 3.7-8.1  = -4.4 0.3-0.4=-0.1 4.3 - 2.9 = 1.4 2.5-0.7 =1.8 1.6-0.3 = 1.2
Combined Change

-4.4 + (-0.1)= -4.5

1.4 + 1.8 + 1.2 = 4.4

Note that social security has not gone up because retirement age was delayed in the early 1980's and the same thing will happen to Medicare. 
Medicaid is the price we pay for not having socialized medicine.

 

 

In the early 1960's, they were predicting Russia was passing US

USSR Growth History

Then in the 80's it was Japan.

Then it was the European Union. "Although customs duties disappeared in 1968, trade is not flowing freely across EU borders. The main obstacles are differences in national regulations. The Single European Act of 1986 launches a vast six-year program to sort these out. The Act also gives the European Parliament more say and strengthens EU powers in environmental protection".  

Now its China!

III. The Job Outlook based on education 
       A. and jobs from 2004-14 Job outlook by education Olivia Crosby and Roger Moncarz
        
1. donít have a bachelorís degree  
Nutshell   Snippet   How to best view PDF files PDF             
     
      2. college graduates 
Nutshell   Snippet   How to best view PDF files PDF

           3. Summary of the BLS 2004-2114 Job outlook by education for college graduates
              a, "Between 2004 and 2014, BLS projects 55 million job openings for workers who are entering an occupation for the first time. 
                    Of these, at least 13.9 million [25.3%]are expected to be filled by college-educated workers."
               b. The Department of Labor continues in its efforts to explain or not explain the over supply of college graduates. 
                   Their latest attempt to divide college graduates into two categories.  "In these 'pure college' occupations, 
                   at least 60 percent of current workers aged 25-44 have a bachelorís or higher degree, fewer than 20 percent 
                   have a high school diploma or less education, and fewer than 20 percent have taken college courses but do not 
                   have a bachelorís degree." BLS projects that pure-college occupations will provide about 6.9 million..." [about 12.5% of the total openings].
                c. "Over the 2004-14 decade, about 15.6 million openings are projected to be in occupations in which the number of college educated 
                      workers is significantó20 percent or more but which also employ a significant number of workers with other levels of education." 
                      Of this "Mixed education" occupations group, the  "...BLS
                      expects 7 million to be filled by college graduates..."[about 12.5%of the total opening][ note 12.5 +12.5 = 25]
                d. The August 20&27 issue of Business Week states on page 45 that the BLS reports that 34% of adult workers in the U.S. 
                    now have a college degree.  This means that about one-quarter of the college  graduates (34% -25%)/34% will be in occupations 
                    where less than 20% of the workers have a college degree.

 
      B. Occupation Employment Projections to 2014  by Daniel E. Hecker visit  Abstract | Excerpt | Full text in PDF (205K) 
        C. 2008 to 2018 Job Outlook updates the data.

 

 

IV. Is slow economic growth a problem for the United States
      A. Recent growth trends of western industrial countries (% change)
      B. In 1870 the U.S. standard of living was 15% below that of the 
           United Kingdom. Over the next 120 years a higher growth rate 
           of only 1/2 of one percent in the U.S. (1.86% to 1.34%) resulted
           in the U.S. having a standard of living 50% higher than that of the 
           United Kingdom.
      C. When this data was published in the early 1990's, people reacted
            the following conflicting thoughts.
           1. Some believed people were not sacrificing for the future.
               a. Saving and investment were low
               b. Labor force was poorly prepared, especially the bottom quarter.
               c. Research and development funds were small and poorly applied.
           2. Others felt recent slow growth is a short-term complicated problem.
               a. A large number of baby boomers and women were new to the 
                   labor force and would need time to develop appropriate skills.
              b. Benefits of "Green movement" (to improve world-wide ecology)
                  are difficult to measure and are excluded from GDP.
              c. Little credit is being given to the economic system which provided 
                  the wealth necessary to increase longevity.
              d. Service productivity, which is difficult to measure, is substantially
                  understated.
              e. There has been a substantial increase in residual construction and
                  capital gains from stock investments which do not count as savings.
              f. Military R & D helped win the cold war, and when transferred to
                  the
private sector, will increase growth.
      D. Beginning in 1995 the United States experienced a substantial increase 
           in productivity while Japan and Europe experienced a drop in 
           productivity. McConnell and Brue provide the productivity chart. 
          Participation rate from the Big Picture Economics Blog.  

 

           Measurement

Output Growth

Inflation

Country

1950-70

1970-91

1950-70

1970-91

United States

2.8

2.1

2.4

6.2

Japan

9.2

4.4

4.9

5.5

West Germany

6.3

2.5

2.2

3.8

Canada

4.9

3.5

2.5

6.9

United Kingdom

3.6

2.4

3.7

10.0

France

5.3

2.7

4.9

7.8

Italy

5.7

3.0

3.5

11.7

Average

5.4

2.9

3.5

7.4

 

 

 

 

 

 


Current Data Civilian Labor Force Participation Rate (%)

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         1. By 2001 Alan Greenspan, chair of the Federal Reserve, worried that the high productivity and paying off the federal
            debt too fast could have unforeseen economic repercussions. 
         2. Interesting, as indicted at the beginning of this chapter, recent productivity increases didn't translate into increased economic growth.   
         3. By 2006, some studies were indicating that recent growth rates may have been overstated.
         4. The lost decade shows how growth has been slow for a while. Comments are very interesting. 08/20/09

IV. Cycles: Some empirical issues show that long term can be a long time.
 V. The world is Flat and growth prospects are limited.
       A.  Tradable Jobs 8/1/11 from http://www.economicpopulist.org/
        ... "f the 27.3 million jobs added from this time period, 97.7% of them were non-tradable.  
            What do the authors mean by tradable jobs? Jobs that can be offshore outsourced." ... 
           "As an example, health care must be domestically sourced because sick people are here. 
            Computer architecture, on the other hand, can be offshore outsourced and the results
             moved around the globe to a manufacturing center."
       B 


 

VI Trade Ruler: is a digital game using trade to increase growth.

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