Real Per Capita GDP Falls 1.2%

The Bureau of Economic Analysis reported Thursday that 3rd quarter real GDP* fell at an annual rate of 0.3%. But GDP is a meaningless figure if it’s not related to the size of our population. Since the U.S. population is steadily rising at an annual rate of about 1%, then the GDP pie has to be sliced into more pieces. If the pie isn’t growing faster than the population, then everyone gets a smaller piece. In other words, the effect on individual Americans is even more pronounced than raw GDP data would lead us to believe. In the 3rd quarter of 2008, real per capita GDP fell by 1.2% to $38,438 per person (adjusted for inflation and expressed in 2000 dollars). That’s a decline four times as bad as the government’s raw GDP data.

This is the third quarterly decline in real per capita GDP in the last four quarters. Only the second quarter of 2008 had a small gain of 1.8%, thanks to the fiscal stimulus package. Real per capita GDP is actually lower than it was in the 3rd quarter of 2007. And all experts agree that the 4th quarter of 2008 will be even worse.

The trade deficit continues to be a huge drag on real per capita GDP. Were it not for the trade deficit, 3rd quarter real per capita GDP would have been 6.0% greater at $40,733 per person. (Imports are a subtraction from GDP in the BEA’s calculation.) If the next president is looking for a way to turn the economy around, the trade deficit would be a great place to start.

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* – Annualized 3rd Quarter Actual GDP, expressed in current dollars, was $14.429 trillion, compared to $14.295 trillion in the 2nd quarter.  However, “real” GDP, which is adjusted for inflation and expressed in 2000 dollars, was $11.720 trillion, compared to $11.727 trillion in the 2nd quarter. 

 

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2 Responses to Real Per Capita GDP Falls 1.2%

  1. This is a general comment on the overall thesis.

    I was researching proponency of new economic theories at this time in history.

    Thanks for valuable, interesting perspectives.

    “Continued population growth beyond an optimum level inevitably yields rising unemployment and poverty” … but what is behind the continued population growth? Is it the root issue?

    Some would say that the philosophy and intent of those with the great influence on culture and trade is what is behind free-market fundamentalism, and its concordant persistent demand for growth of all types. If this were true, then one might hypothesize the main solution (the new direction for economic theory) should/must include leadership from that philosophy and intent to a transformationally-empowered new philosophy and intent: new leaders, new leadership.

    This is the approach I’ve espoused in essays on Aikido Activism and Integrated Aikido Entrepreneurship.

    In these essays I present long-term population graphs, drawing the conclusion that this recent population explosion is due to “adolescent capitalism” — the contemporary philosophy and intent of today’s leaders. As you note, present practices are problematic going forward. The main challenge is imagining what else can be done.

    I laud you on identifying growth (population growth especially), as an identifiable, major problem. And I laud you on imagining the solution must involve a rather radical rethink of civilization and its codes: economic theory.

    If you have a chance to consider my related analyses and proposals, I would be curious of your reflections thereon.

    Best, Reed

  2. Pete Murphy says:

    Reed, I must admit that I’m not well-versed in Aikido Activism. My initial reaction is that I’m not sure it’s a good idea to expect corporations to veer from their primary objective of making a profit. The pursuit of profitability is what drives productivity and without profitability they will cease to exist. But, undoubtedly, it is the pursuit of never-ending GROWTH in profits that lies at the root of our problems.

    Rather than expecting corporations to remake themselves in the interest of the common good, I think a better approach is for government to establish additional boundaries within which corporations are free to pursue profits. For example, in the first half of the last century the government found it necessary to establish boundaries to prevent the exploitation of workers. (Personally, I think that boundary needs to be revisited and strengthened.) In the 2nd half of the century, government found it necessary to prevent the exploitation of the environment. I believe government now needs to establish two additional boundaries: the U.S. (or any nation) must maintain a balance of trade to prevent its exploitation by others, and our population must be stabilized (essentially capped) at some sustainable level. Within those boundaries (and, of course, within anti-trust boundaries), corporations should be free to pursue their profits. They will quickly realize that their only opportunity for growth will come from gaining market share at another’s expense, intensifying competition. But anti-trust laws will limit even that growth. Eventually, all of society will have to accept that the role of capitalism is to simply provide us with the products we need and not provide an easy avenue to unearned wealth.

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