Global Growth is Still Alive

As Ronald Reagan pointed out as long ago as 1964: “Well, the trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so.” (October 27, 1964) [A Time for Choosing, The Speech]

Nothing has changed.

As the liberal media attempts to explain geopolitical events, and notably so-called civil protests in Thailand, Turkey, Ukraine, and Venezuela, we return back to incorrect causal diagnoses and relationships.

Apparently “stalled economies” are behind “fracturing countries,” and the “fundamental cause of all this unrest -- in such a variety of societies -- is likely slower global economic growth.” The “unrest is a downstream consequence of the recession of 2008 and 2009, which flipped the global economy into a persistent low-growth state.” Of course, “some scholars argue that low growth is the global economy’s new normal.”

If only it were so.

According to the IMF, real annual global GDP growth is on an increasing trend since 1980. In the 80s and 90s, global GDP growth averaged 3.2 and 3.1 percent per year, respectively. During the 2000s, it increased to 3.7 percent per year. Since 2011, it has averaged 3.4 percent per annum. Between 2015 and 2019, the IMF is projecting average annual global GDP growth of over 3.9 percent per year, or more than one-fifth higher than during the 1980s. The growth rate in 2010 was 5.18 percent, the third highest year over the past 35, barely behind only 2006 (5.25) and 2007 (5.35). How is this consistent with the doomsday claims above? It doesn't appear to be.

Different sources can yield different economic data. What happens when we look at the World Bank dataset for global GDP growth? The 80s averaged 3.1 percent per year, the 90s were at 2.7 percent, the 00s at 2.6 percent, and since 2010 the average has been 3.1 percent. Indeed, 2010 growth was at 4.1 percent, the sixth highest since 1980. Again, inconsistent with claims that “the recession of 2008 and 2009 ... flipped the global economy into a persistent low-growth state.” There are no significant trends in either the IMF or World Bank global annual GDP growth datasets since 1980, 1990, or 2000.

It isn't the global economy that is suffering and in some “low-growth state,” it is just the advanced economies, especially the G7. In the 1980s, the G7 averaged 3.0 percent annual growth according to the IMF. This dropped to 2.6 percent in the 1990s, and down to only 1.4 percent in the 2000s. Since 2010, the average is just 1.9 percent. The same trend, and nearly identical data, is seen for the advanced economies.

The emerging market and developing economies -- which now comprise 51 percent of the global economy (the G7 is down to only 37 percent) -- are headed in the other direction. In the 80s, these emerging nations had real annual GDP growth rates averaging 3.5 percent. This increased to 3.7 percent in the 90s, and up to 6.1 percent in the 00s. Since 2010, the average has been undiminished at 5.9 percent.

As for Thailand, Turkey, Ukraine, and Venezuela, the story here is mixed. Average annual real GDP growth rates by decade are shown in the table below.

For both Thailand and Turkey, GDP growth after 2008/2009 has been better than the 2000s average, and economic projections for these two nations over the next five years include annual growth rates between 3.1 to 3.5 percent for Turkey, and 3.8 to 4.8 percent for Thailand. Hardly a cause for unrest, especially since general government debt in these two nations is low (gross/net debt at 36/27 percent for Turkey, and gross debt at 45 percent [no net debt available] for Thailand) and holding steady, general government expenditures are well below those in the West, and neither unemployment nor inflation are of concern.

Ukraine's economy requires more than a superficial view to assess. Real GDP growth rates are generally of little value to the average citizen. People care about per capita GDP (i.e., the size of their slice of the pie, rather than the size of the pie itself). And Ukraine's population has been dropping like a rock since the early 1990s. Over the past 20 years, Ukraine's population has declined by 13%. Thus, real GDP data must be considered in this context. With a population dropping that fast, even real GDP growth rates of near zero percent represent still significant increases in per capita GDP.

Between 2009 and 2013, Ukraine's per capita GDP increased by 18.5 percent, well ahead of the G7 and advanced economy averages at 12.5 percent. The increase from 2012 to 2013 was just under two percent. Its unemployment rate declined from 7.5 to 7.4 percent over the past two years, nearly down to historic lows since its independence and far below the double-digit values common in the 1990s and early 2000s. With net and gross debt at 39 and 41 percent and not increasing since 2010, Ukraine's government finances were not in critical condition. For context, net/gross debt in the G7 and advanced economies is two- to three-fold higher than Ukraine at present, and they have increased substantially since 2010.

The unrest in Ukraine wasn't started by a real floundering economy. It was initiated mostly by Russia, using false economic claims by a range of actors on both sides (which have been perpetuated in the western media) as a partial pretext.

On the other hand, Venezuela is a true economic victim and its unrest is a result of this. The nation has skyrocketing inflation and unemployment, and negative real GDP growth. But to lump its economic mess and sociopolitical upheaval along with that of these other nations is inaccurate.

Global growth is still alive, except it is primarily in the emerging market and developing economies that now dominate the global economy. Meanwhile, the G7 and its advanced economy colleagues are weighed down by excessive government expenditures (especially on unproductive social programs), bureaucratic incompetence, and growing corruption/corporatism.