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Dynamic chart: World’s ten largest economies, 1961 to 2017

AEIdeas

Watch the top ten largest economies in the world based on GDP, year-by-year from 1961 to 2017. A few interesting observations:

1. The global slowdown in the early 1980s.

2. China’s ranking in the world’s ten largest economies has sure bounced around a lot. It was the world’s fifth largest economy in 1962 and remained in the top ten economies until it dropped out in 1978 and 1979, before returning in 1980, dropping out again for a few years and returning to the top ten in 1982. In 1987, China fell out for a year, came back in 1988, dropped out again in 1989 before returning to the top ten for good in 1992. By 2000, China rose to the No. 6 position by passing Italy, then to No. 5 in 2005 when it surpassed France, to No. 4 in 2006 when it surpassed the UK, No. 3 in 2007 surpassing Germany, and finally rising to No. 2 in 2010 by surpassing Japan.

3. As of 2017, the US economy at $19.4 trillion was 58.4% larger than China’s GDP of $12.2 trillion.

Discussion (32 comments)

  1. Citizen Buddy says:

    Watch how China ascends rapidly towards the top at the end of the video.

    Thank you United States of America, for being the most heavenly partner in the 5000 year history of China.

    1. Ron H. says:

      That’s a good thing, right?

      1. Citizen Buddy says:

        Ron, to the ascender, it’s been heaven sent.

        1. Ron H. says:

          Looks to me like mutual ascension. Trade is good. Choice is good. Goods are good.

          1. Warren Platts says:

            Hey Ron, why do you vote with your dollars in support of Uighur concentration camps where over 1,000,000 people have been extra-judicially interred against their will, with entire villages being depopulated? Why do you support forced organ donations? Why do you support China’s takeover of the South China Sea? Why do you support a country that is rearming so that it can fight a war with your nominal country?

          2. Ron H. says:

            Hey warren, why do you continue to slime this blog with your incoherent and content-free, comments?

            Get some new material.

  2. PeakTrader says:

    China’s GDP is overstated when its growth-at-any-cost policy is offset by its enormous social costs and massive inefficiencies.

    1. Mark Perry says:

      How is that different from America’s growth-at-any-cost policies, and our enormous social costs and massive inefficiencies?

      1. PeakTrader says:

        America was a new frontier with vast natural resources. China is an old country with 1.3 billion people living in the eastern half, because the western half has been mostly uninhabitable in China’s history. The eastern half has become a sewer from very bad air, water, and soil
        pollution, deforestation, erosion, etc. – the Gobi Desert is expanding into Beijing. Government has allocated capital very inefficiently, unlike in the U.S. Industrial Revolution.

        1. PeakTrader says:

          Sorry, China, There Is No Short Cut To Economic Greatness
          Jan. 26, 2010

          “This is a government that will go to great length to maintain appearances to keep its ideology going. After all, it censors what its citizens may or may not read and imprisons the ones that write anti-government articles.

          China will do anything to grow its economy, as the alternatives will lead to political unrest…Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve (this explains the high savings rate in China) and hungry people don’t complain, they riot.

          The Chinese government controls the banks, thus it can make them lend, and it can force state-owned enterprises (a third of the economy) to borrow and to spend. Also, since the rule of law and human and property rights are nascent in its economic and political system, China can spend infrastructure project money very fast – if a school is in the way of a road the government wants to build, it becomes a casualty for the greater good.

          China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc. But government is horrible at allocating large amounts of capital, especially at the speed it was done in China. Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.

          The inefficiencies are also evident in industrial overcapacity. According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the US, Japan, and India combined. Also, Chinese idle production of steel is greater than the production capacity of Japan and South Korea combined. Similarly disturbing statistics are true for many other industrial commodities.

          …late-stage-growth obesity, inefficiencies that are a byproduct of high growth rates sustained for a long period of time. Though Chinese growth in the past was high, in its late stages the quality of growth has been low.”

  3. Citizen Buddy says:

    This dynamic chart is really good and thank you to Mark for bringing this to our attention.

    It could be that in ten more years, India moves into the top three…

    if it can continue to vigorously shake off socialism which is embedded in its constitution.

  4. Warren Platts says:

    The graphic does not take into account purchasing power parity (PPP). On a PPP basis, China has surpassed the USA since 2014.

    “note: because China’s exchange rate is determined by fiat rather than by market forces, the official exchange rate measure of GDP is not an accurate measure of China’s output; GDP at the official exchange rate substantially understates the actual level of China’s output vis-a-vis the rest of the world; in China’s situation, GDP at purchasing power parity provides the best measure for comparing output across countries.”

    https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

    1. PeakTrader says:

      Purchasing Power Parity (PPP) is a poor measure of living standards. Many Chinese cannot afford many tradable goods, like Americans. And, they shop at Wu-Mart, because Walmart is too expensive. Many goods that are abundant and available for Americans aren’t available and affordable for most Chinese. And, Chinese spend a third of their income on food and 15% on housing, while Americans spend roughly 15% on food and a third on housing. The quality of food and housing are much higher in the U.S., unless you like pork and rice, and don’t mind living in a cramped apartment or dormitory at work in a heavily polluted city.

      1. Warren Platts says:

        Read the note from the CIA again: “in China’s situation, GDP at purchasing power parity provides the best measure for comparing output across countries.”

        Get it? They are not talking about “living standards”. The idea that as long as we have bigger houses than Chinese people, we are “winning” displays an utterly naive understanding of national security and international rivalries. The capacity to field a strong military depends mainly
        on OUTPUT capacity, not on average standards of living.

        On a PPP basis, China is almost matching our own spending. And as they continue to grow, all they have to do is keep it at a nice, sustainable 2% of their GDP. In order to keep up, we will have to continually increase defense spending as a percentage of GDP, until the distortion to the rest of the economy becomes unsustainable. And then it is game over.

        Thanks a lot guys…. It makes me so angry the way this country has been sold down the river to a bunch of Communists.

        1. PeakTrader says:

          China’s PPP was adjusted 40% one year over a prior 10 year period.

          It’s very inaccurate.

          1. PeakTrader says:

            China is still a very poor country. Over 1 billion Chinese are very poor. The 100 to 200 million “middle class” are much poorer compared to Americans. The rich communist elite are doing well, but their capital outflows have been huge. Many of them left China.

    2. Mark Perry says:

      Adjust for PPP on a per-capita basis and you’ll find that China’s PPP-adjusted per-capita GDP last year was equivalent to the US per capita GDP in about 1950. So on that basis, China is still 60 years behind the USA.

      1. Warren Platts says:

        IIRC correctly, Mark, the last time you brought up this factoid China was in the USA 1960′! 😉

        Not that it matters. I do not know why it is so hard for you guys to understand that when it comes to geopolitical risk to U.S. hegemony, GDP/capita is totally irrelevant.

        For example, Qatar happens to have a GDP/capita that is about twice the U.S. GDP/capita. Does it therefore follow from that fact that Qatar is a major potential threat to U.S. hegemony? Not at all. We are the threat to them: we could take over their entire country in one afternoon!

        It is the same with China. Their GDP/capita is irrelevant to their threat potential. What counts is absolute Gross National Product. (And I am not quibbling about the difference between GNP and GDP.)

        It would be one thing if Chiang Kai-shek had won the Chinese Civil War, and there was a Taiwan-style, friendly, denuclearized democracy in all of China. Then maybe we could graciously hand over the baton to them.

        But you free traders need to face the truth. China is not merely a mercantilist economy that does not do international trade fairly. If only that was the only problem! It is only the skin-deep surface.

        I see my laundry list of 20 major Chinese human rights and international law violations was deleted. But it could easily be doubled in length. The question is: Do you have an individual right to trade with Nazi Germany, no matter what they do? If not, then the same logic applies to China….

        I wonder what the GDP/capita of the barbarians that overran Rome back in the day was compared to the Romans themselves.

  5. PeakTrader says:

    I read 14% of Chinese millionaires relocated to another country. And:

    “The U.S. is the top destination among Chinese millionaires looking to move their families, and money, to another country, according to a new study.
    More than a third of rich Chinese surveyed “are currently considering” emigrating to another country, according to a report from the Hurun Research Institute, a China-based wealth research firm, and Visas Consulting Group, an immigration advisory firm. They surveyed 224 Chinese people with an average wealth of $4.5 million.
    Many rich Chinese are leaving China for better education systems elsewhere and to flee the country’s polluted cities and strict government. They’re also looking to protect their wealth. Overseas assets account for an average of 11 percent of the total assets of Chinese…The U.S. topped the list as the most popular destination for the fourth year in a row while the U.K. ranked second, followed by Ireland and then Canada. The strong education system, cleaner air and better food safety made the U.S. a favorite for Chinese investors.”

    https://www.google.com/amp/s/www.cnbc.com/amp/2018/07/05/more-than-a-third-of-chinese-millionaires-want-to-leave-china.html

    Chinese capital flight was $3.8 trillion over the last 10 years, although investment was about $2 trillion, for a net loss.

    1. Warren Platts says:

      If your argument is that there is nothing to worry about and that we should just continue business as usual, you are wrong. That is the argument of an ostrich. NONE of your little points regarding the margins of Chinese society have to do with China’s true, physical danger to U.S. assets, interests, and citizens: namely things like how China now has the world’s largest Navy; they launch more satellites to orbit per year than we do; their steel-making capacity is ten times ours, they got millions of men they can turn into solders, and they have repeatedly demonstrated they are willing to do whatever it takes to realize their ambitions.

      1. PeakTrader says:

        The U.S. has a much more powerful navy and has many powerful allies.

        And, the communists are very aggressive and don’t care about international law, along with human and property rights.

        It’s a much weaker country and than you believe.

        1. PeakTrader says:

          What the Chinese do best is corruption, crony capitalism, misallocate resources, cause negative externalities, prevent creativity, produce inefficiencies, export much of its GDP, and drive wealth out of the country.

          1. Mark Perry says:

            And provide Americans with hundreds of billions of dollars in low-cost goods every year, which bless US consumers with millions of dollars in savings, and thereby significantly raising our standard of living, especially low-income Americans.

          2. PeakTrader says:

            Yes, we offshored entire industries – older industries with declining prices – to China, and imported those goods at lower prices and higher profits.

            Then, we shifted limited resources into emerging industries and high-end manufacturing.

            However, China is moving up the value chain, mostly by stealing and coercing massive amounts of foreign technology to dominate our high-paying future industries.

          3. Mark Perry says:

            Note that the rest of the world offshores more than 7M jobs TO the US. We hear about “outsourcing” a lot, but never about the significant “insourcing” of jobs that takes place at US affiliates of foreign MNEs. YUGE!

          4. Warren Platts says:

            >Then, we shifted limited resources into emerging industries and high-end manufacturing.

            Our resources are not limited in the sense you are thinking of: we are not at full employment at the Production Possibility Frontier (PPF) where an increase in one sector necessarily results in a decrease in another sector. Since we are not, an addition in one sector need not be accompanied by taking resources from another sector. Conversely, when one sector is reduced, other sectors do not gobble up the freed up resources.

            In actual practice, of the 10 or 12 million factory workers that we should have right now are mostly either in (a) the service sector; or (b) have dropped out of the labor force altogether.

            The overall result is a lowering of productivity: factory workers put out in round figures about $200K of GDP per year, whereas for service sector workers it is on the order of $50K/year. Therefore, there are no efficiency gains when factory workers are transformed into service workers.

            @Mark: yes imports improve the standard of living of poor people qua consumers, but imports reduce the standard of living for poor people qua workers. Combine that with rampant price increases in non-tradables: housing, education, healthcare, and it is at best a wash.

          5. PeakTrader says:

            The only way to move from one economic revolution into the next is through productivity, because of limited labor and capital. The U.S. leads the world in the agricultural-industrial-information-biotech revolutions.

          6. PeakTrader says:

            Productivity was very high in U.S. manufacturing in the 1990s and 2000s.

            Chart:

            https://www.bls.gov/lpc/prodybar.htm

          7. Warren Platts says:

            I agree that U.S. manufacturing productivity is very high. I thought that’s what I just said. Therefore, when you transform manufacturing workers into service workers, unless those displaced workers become lawyers and brain surgeons and Wall Street bankers, their productivity goes down. I think the output per worker in the food service industry is only about $30K/year. That $30K includes the profit of the owners of the restaurant, so that does not leave much left over for the worker.

            The old fashioned theory is that when furniture and textile workers get displaced by cheap foreign labor, those “resources”, i.e., the people, they just move at negligible cost and find work in expanded aerospace and chemical manufacturing plants.

            For whatever reason, that theory has broken down for 21st century USA. That is, it looks like Samuelson’s last paper was correct: that free trade is causing a headwind to U.S. economic growth.

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  6. PeakTrader says:

    Productivity has been very low, since 2009, in part, because excessive taxes and regulations slowed small business start-ups and expansions, including in manufacturing. There are many highly educated Americans working in low skilled jobs. Krugman also has another theory:

    Profits Without Production
    June 20, 2013

    “Economies do change over time, and sometimes in fundamental ways.

    “…the growing importance of monopoly rents: profits that don’t represent returns on investment, but instead reflect the value of market dominance.

    …consider the differences between the iconic companies of two different eras: General Motors in the 1950s and 1960s, and Apple today.

    G.M. in its heyday had a lot of market power. Nonetheless, the company’s value came largely from its productive capacity: it owned hundreds of factories and employed around 1 percent of the total nonfarm work force.

    Apple, by contrast…employs less than 0.05 percent of our workers. To some extent, that’s because it has outsourced almost all its production overseas. But the truth is that the Chinese aren’t making that much money from Apple sales either. To a large extent, the price you pay for an iWhatever is disconnected from the cost of producing the gadget. Apple simply charges what the traffic will bear, and given the strength of its market position, the traffic will bear a lot.

    …the economy is affected…when profits increasingly reflect market power rather than production.

    Since around 2000, the big story has been one of a sharp shift in the distribution of income away from wages in general, and toward profits. But here’s the puzzle: Since profits are high while borrowing costs are low, why aren’t we seeing a boom in business investment?

    Well, there’s no puzzle here if rising profits reflect rents, not returns on investment. A monopolist can, after all, be highly profitable yet see no good reason to expand its productive capacity.

    And Apple again provides a case in point: It is hugely profitable, yet it’s sitting on a giant pile of cash, which it evidently sees no need to reinvest in its business.

    Or to put it differently, rising monopoly rents can and arguably have had the effect of simultaneously depressing both wages and the perceived return on investment.

    If household income and hence household spending is held down because labor gets an ever-smaller share of national income, while corporations, despite soaring profits, have little incentive to invest, you have a recipe for persistently depressed demand. I don’t think this is the only reason our recovery has been so weak — but it’s probably a contributory factor.”

    1. Warren Platts says:

      I think you mean that productivity growth is down. But yeah, the main problem is demand. Wages are down, so aggregate demand is down. Hence there is no incentive to invest in new labor saving machines because it is easier to substitute cheap labor, whether here or abroad. Hence the obvious answer is to continue to manage for a tight labor market by restricting immigration and free trade. Once labor costs start going up, aggregate demand will go up, and firms will once again have an incentive to invest in new machines.

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