Friend of BI James Pethokoukis just put up this chart of GDPs per capita around the world.
He sees it as evidence of the supremacy of Regan’s supply side revolution…
Something happened in the 1980s. Other advanced economies were closing in on America in terms of real per capita GDP. Then the gap began to widen. Less regulation. Lower taxes. More markets. More growth. More prosperity.
Other nations went this route, too. But few did it like the U.S. of A.
But in looking at this chart, we couldn’t make out what Pethokoukis is claiming: Did the gap really widen in 1980? It’s really hard to tell on this chart.
So we tweaked it two ways.
First, we set all the economies equal to each other in 1960.
Wait, what’s tha!: Japan has grown the most since 1960. OK, part of that is due to the uber-strong yen and the translation back into dollars.
But then, next is… France. And then Germany!
OK, but what if we set them all equal to each other right at 1980, when the Reagan revolution began.
It turns out that Great Britain, Japan, and Australia have all grown faster than the US on a per capita basis. And Germany is very close. Bottom line: Anyway you slice it doesn’t it look like anything special happened starting in 1980.
One more point along these lines.
Back in 2006, Eddy Elfenbein did a brilliant post pointing out that since 1951, the economy has basically grown at a steady 3.1%/year annual clip, year and year out.
This chart shows actual GDP growth (yellow) vs. a dummy 3.1% trendline.
Now Eddy’s next chart divides the GDP rate by the black trend line.
What do you see there? Basically the economy dipped way below trend in the early part of the Reagan administration (81-82) then reverted to the mean. It never really showed anything unusual that wasn’t just part of normal economic undulations.
It’s not a slam on Reagan or the 80s or anything. It just wasn’t that special.
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