How much has GDP really increased since 1970 ? - Politics Forum.org | PoFo

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#15056822
I've been thinking about this. Is the U.S. really a richer country today than it was in 1970 ?
How much richer?

I know the official GDP amount is much higher today than it was back then, but that may be mostly accounted for by inflation.

So although this is a very inexact and imperfect estimate, I believe we can get some proper idea of what level of inflation there's actually been by comparing the cost of cars and housing today with the cost of cars and housing back then.

Average cost of car in 1970:
3,542

Average cost of car today:
33,560

Average cost of housing in 1970:
23,600

Average cost of housing today:
188,900

So the average cost of a car has gone up by a factor of 9.5, and the average cost of housing has gone up by a factor of 8.

Now let's look at the GDP.
Per capita GDP in 1970 was 5,246.
Per capita GDP today is 57,466.
So that's an increase by a factor of 10.95

So what can we conclude from this quick little calculation?
Per capita GDP, adjusted for real purchasing power, has gone up by about 20 percent.

Now that alone isn't enough to indicate real wealth has gone up, but it does show there haven't been any gigantic changes in per capita GDP.

Overall GDP adjusted for official inflation is not the same thing as per capita GDP adjusted for purchasing power, the latter tells us how rich we are.

Economists and policymakers like to use "real GDP" but there are two problems with that. First, the population of the country has increased by more than 57% since 1970. More people, more GDP. Second, the "official inflation" numbers in all likelihood do not accurately reflect the actual increase in costs of expensive things like cars and housing well. To arrive at their inflation numbers, government economists use a basket full of other things, like bread and milk, that make up only a small fraction of consumer spending. Measuring how much inflation there's been is actually an extremely difficult thing to do, because there's no exact objective definition other than arbitrary price measurement points we make for it.

As yet another example, let's look at gold. Price per ounce in 1970 was $38.90
Price as of January 2017 was $1210.45
If the cost of gold had remained unchanged, that would mean an inflation rate of 3111% since then.
I'm not saying this to say that a dollar is worth 31 times less than it was in 1970, but it does help show official inflation numbers are far from being accurate.
If we had a 4% inflation rate per year for 47 years, the dollar would only be worth 6.3 times less.
#15057069
You're doing cocktail napkin estimates, not economic analysis.

You are always going to get different estimates from different people because they think some things are more important than others.

One of the confounding variables is income inequality. The rich keep stealing from everyone else.

Image

Another monkey wrench in the works is that Republicans changed us, in the 80s, from being the world's largest creditor to being the world's largest debtor. Not something they like to talk about...

What that means is that there is a growing portion of the economy is just paper churning. That means the finance sector sucks down a growing percentage of the economy, taking money away from sectors of the economy that produce things. Call it the vampire economy, it's what caused the big crash a decade ago.
#15058065
late wrote:You're doing cocktail napkin estimates, not economic analysis.

Yes, quite true. It was a basic rough calculation to give us an estimate.

But I believe such an approach is still quite useful.


late wrote:One of the confounding variables is income inequality. The rich keep stealing from everyone else.

Well that's an interesting way of putting it...

How much do you think massive levels of immigration had to do with that rising level of inequality?


late wrote:Another monkey wrench in the works is that Republicans changed us, in the 80s, from being the world's largest creditor to being the world's largest debtor.

Don't you think Free Trade may have had more than a little something to do with that?
#15058319
Puffer Fish wrote:
1) Yes, quite true. It was a basic rough calculation to give us an estimate.

But I believe such an approach is still quite useful.



2) How much do you think massive levels of immigration had to do with that rising level of inequality?



3) Don't you think Free Trade may have had more than a little something to do with that?



1) Not as much as you seem to think.

2) Not much. I've posted charts several times that show where the money is going.

3) Sigh. We got wealthy after WW2 because of international trade. We also got complacent and didn't keep up with the other countries. We have been the top dog, this is mostly what we have done to ourselves. Actually, mostly what we haven't done.
#15058339
Puffer Fish wrote:Well that's an interesting way of putting it...

It has the virtue of being accurate.
How much do you think massive levels of immigration had to do with that rising level of inequality?

Not much. Australia and Canada have had higher levels of immigration than the USA, but have remained more equal. Immigration does tend shift income away from workers and towards landowners, as the Law of Rent implies, and Henry George explained in "Progress and Poverty" 140 years ago, but in the USA over the last 40 years, political factors have been more important.
Don't you think Free Trade may have had more than a little something to do with that?

Yes, in the sense that "Free Trade" agreements are not about free trade at all, but more a way of enabling wealthy investors to extend their legal privileges beyond the borders of their own countries and extract ownership of people's rights in other (especially poor) countries. The result is that workers in rich countries have to compete with workers in poor countries, while the privileged are legally entitled to extract wealth from the productive without the inconvenience of having to compete among, or make any kind of productive contribution, themselves.
#15058533
Truth To Power wrote:Not much. Australia and Canada have had higher levels of immigration than the USA, but have remained more equal.

They also still have far less diversity than the USA and are whiter.

I'm curious, if they had started off more like the USA to begin with, what would they be like now?

Or looking at it from a different perspective, what is the before and after change we've seen in Australia and Canada compared to the before and after change we've seen in the USA?
#15058535
Truth To Power wrote:Yes, in the sense that "Free Trade" agreements are not about free trade at all, but more a way of enabling wealthy investors to extend their legal privileges beyond the borders of their own countries and extract ownership of people's rights in other (especially poor) countries. The result is that workers in rich countries have to compete with workers in poor countries, while the privileged are legally entitled to extract wealth from the productive without the inconvenience of having to compete among, or make any kind of productive contribution, themselves.

I meant that it's hard for workers in one country to compete with workers in another country that has much lower living standards and much lower costs of living.

Trade between two countries that have similar standards of living and labor standards is good, generally, but trade between a rich and poor country can be potentially problematic.
#15058611
Puffer Fish wrote:They also still have far less diversity than the USA and are whiter.

They both have substantial diversity, but it is true they don't have the specific non-white black and latino populations the USA has. But inequality being driven by race is not the same as inequality being driven by immigration.
Or looking at it from a different perspective, what is the before and after change we've seen in Australia and Canada compared to the before and after change we've seen in the USA?

The point is, immigration per se is not driving inequality in the USA because it hasn't in Australia and Canada. Maybe it's partly race (including the quality of immigrants), partly post-1980 changes in policy that has driven it in the USA.
#15071939
Truth To Power wrote:They both have substantial diversity ...

Of course, "substantial diversity" is a very relative concept, as should be obvious when comparing somewhere like Europe to the US.

Truth To Power wrote:But inequality being driven by race is not the same as inequality being driven by immigration.

That is true. But I am sure most of us can agree there is some degree of overlap.

Truth To Power wrote:The point is, immigration per se is not driving inequality in the USA because it hasn't in Australia and Canada.

What??
Have you actually checked into recent inequality trends in Australia and Canada (over the last 30 years).

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