Use Per Capita Growth, Not GDP Growth

The Washington Post reported today on the economic slowdown hitting Europe. The article makes the interesting point that, while the Federal Reserve Board lowered interest rates when the economy started to run into trouble, the European Central Bank has responded by raising interest rates. The article includes comparisons of growth rate projections for the United States, Italy, Germany, Spain and France. It is worth noting in such comparisons that the populations of Italy and Germany are both shrinking and the population of Spain is virtually flat. France's population is growing at a rate of about 0.4 percent annually. By contrast, the population of the United States is growing at the rate of 0.9 percent annually. This means that to maintain the same rate of improvement in living standards, annual GDP growth in the United States has to be about a percentage higher than in Italy, Germany, and Spain, and a half percentage point higher than in France.

--Dean Baker