The US economic growth rate has been falling rapidly for the past 65 years

Economists love to talk about the exponential growth of the economy and provide graphs of real GDP per capita over the past 150 years. In economics, it is common to measure GDP by purchasing power parity (PPP), which allows you to compare countries. Nominal GDP, converted at the exchange rate, changes very quickly. For example, the euro was less than $1 at the beginning, then $1.60, and now about $1.10. If you convert the French economy into dollars at the exchange rate, then the GDP experienced colossal changes of tens of percent, going through the deepest recessions. Therefore, PPP is the standard of comparison.

For the United States, real GDP is measured in real dollars, and economic growth is best measured in GDP per capita, since in the second half of the 20th century, the US population grew by about 2% per year, and after 2000, the growth rate fell to 1-1.5%. Real GDP growth also slowed down. But the growth rate of GDP per capita did not fall that much. However, since 1960, there has been a decline in the growth rate of GDP per capita, since the annual growth is almost constant. Figure 1 shows a graph of annual growth of GDP per capita compared to the previous year. As you can see, the linear regression shows approximate constancy of annual increment in $. Figure 2 shows the growth rate calculated as the ratio of annual growth to the level of GDP per capita. Since GDP growth (Maddison database) is positive over the past 62 years – from $18,705 in 1960 to $58,487 in 2022, the growth rate decreases from 2.5% per year in the 1960s to 1.2% per year in the 2020s. That is, the growth rate has fallen more than twice in 62 years. This is associated with the main economic problems of the US population. It seems that the growth rate should be high and all the problems of the future will be resolved, but growth slows down. The problems are not solved. Young people can’t buy real estate, etc.

The decline in the growth rate of real GDP per capita is an economic law! I have written about it a lot in this blog since 2003. This is what is happening in reality.

In the following posts I will give terrible examples of decline in other “developed” countries: UK, France, Spain …

Fig. 1. Annual growth of GDP per capita in the USA 1960-2023

Fig. 2. Annual growth rate of GDP per capita in the USA 1960-2023.