Macroeconomic Indicators

Since the early 1990s, the globalization of S&T has proceeded at a quick pace. More open borders coincided with the development of the Internet as a tool for unfettered worldwide information dissemination and communication. Rising demand for business and leisure travel fostered the growth of dense and relatively inexpensive airline links. Systems of global and more limited trade rules gained in scope and stimulated a vast expansion in the production of, and international trade in, goods and services. Growing creation of wealth, though uneven, touched most countries and regions. Corporations responded by including international markets in their strategic planning and soon moved toward a global-market model for their business activities, suppliers, and customers.

By the late 1990s, many governments had taken note of these developments. They increasingly looked to the development of knowledge-intensive economies for their countries' economic competitiveness and growth. Private companies seeking new markets set up operations in or near these locations, bringing with them technological know-how and management expertise. Governments anticipated and stimulated these moves with targeted and often generous incentives, decreased regulatory barriers, development of infrastructure, and expanded access to higher education. The overarching aim of these policies was the development of a knowledge-intensive economy that promised sustainable growth and economic well-being for decades to come.

In this changed and changing world, the United States continues to occupy a prominent position as the world's largest economy. On a number of broad macroeconomic measures, it has performed well over the past two decades. Its gross domestic product (GDP) growth has been robust, both overall and on a per capita basis, and its productivity growth has been strong.

U.S. GDP growth is robust but cannot match large, sustained increases in China and other Asian economies.

World Bank and other data show that the world's total economic output nearly doubled over the past two decades.[1] Although most world regions participated in this rapid expansion of total economic output, increases did not occur evenly. A group of East and Southeast Asian economies (the Asia-10) gained more rapidly than did most of the rest of the world, initiating a slow shift of the epicenter of world economic growth toward the region (figure O-1figure.). Its GDP nearly tripled as China, India, and South Korea posted strong advances, even as Japan's economy struggled with slow growth. The rapid rise in Asian economic output over two decades, combined with slower growth elsewhere, pushed the region's share of world GDP from less than one-quarter in 1985 to 36% in 2005 (figure O-2figure.).

U.S. real GDP growth was slower than Asia's but faster than that of most other mature economies. It resulted in a near-doubling of real output over the two decades, leading to a small decline in the U.S. share of world GDP, from about 22% to just above 20% in 2005 (figure O-2figure.). The EU-25 faced slower growth and a larger share decline from 24% to 19%. Japan's economy continued to grow in real terms but at a declining rate, leading to a fall of the country's world GDP share starting in the early 1990s, from about 8% of the total to 6% by 2005. The "all others" category in figure O-2 largely reflects the breakdown in growth of Eastern European and Asiatic countries of the former Union of Soviet Socialist Republics (USSR).

Even as others gain in per capita GDP, the absolute U.S. advantage widens because of its advantageous starting position.

GDP growth in part reflects increases in population, and GDP per person provides a convenient means of adjusting for this factor, albeit a measure that does not take in-country distribution into account.[2] A comparison of GDP and population growth rates shows a highly variable relationship for different regions and countries: very strong GDP growth for Asia, even after accounting for rising populations; average growth for the United States and the EU-25; and below-average growth for some other regions with fairly large population growth (figure O-3figure.).

Over the past two decades (1985–2005), real annual growth of U.S. per capita GDP averaged 2.0%, almost identical to the world average and the growth rate of the EU-25. Many smaller EU countries, Ireland, the United Kingdom, and a smattering of countries in Latin America, the Middle East, and Africa had higher growth rates. So did virtually all East and Southeast Asian economies, regardless of size. The highest growth rate of real per capita GDP[3] was achieved by China, averaging 6.6% over the period, followed by South Korea, Vietnam, Thailand, and others; India's GDP per capita rose by 4.2%. Of 11 economies with at least twice the U.S. average per capita growth, nine were in Asia (table O-1 table.).

In terms of absolute per capita purchasing power, the United States has for decades led other regions by wide margins, the closest being the EU-25.[4] All regions but Africa and the former USSR-dominated category have shown two-decade increases, and the Asia-10 grouping has doubled its per capita GDP in real terms (figure O-4figure.).

Despite faster rates of growth elsewhere, the United States widened its per capita GDP lead in absolute inflation-adjusted terms because of its large initial advantage. The absolute gap in 2005 was smallest for the EU-25 (about $12,000) and largest for Africa (about $29,000). The Asia-10 gap increased from about $18,000 to $26,000, despite the region's rapid GDP growth. Since 1985, this gap has increased for each region (figure O-5figure.).

For some regions, the per capita GDP gap also increased as a fraction of their own growing per capita GDP. The only region to consistently reduce the relative per capita GDP gap with the United States was the Asia-10 (figure O-6figure.). The Asia-10 group managed to reduce the size of the gap from 8 times its per capita GDP to under 5 times, reflecting impressive underlying GDP growth numbers coupled with moderate (1.4%) population growth (figure O-3figure.).

Large relative productivity gains elsewhere fail to close absolute per-worker output gaps with the United States.

Rising productivity spurs economic growth and higher per capita resources. The preferred measure, volume of economic output per hour worked, is available for only a few countries. It shows that after enduring anemic productivity growth into the mid-1990s, the United States recovered to an annual, inflation-adjusted rate of about 2.5% from 1995 to 2004, significantly above the rates of major European economies and Japan.

A related measure, GDP per person employed, is more widely available and thus allows broad, but approximate, international comparisons. That measure shows generally higher real productivity gains for the regional aggregates in the 1995–2005 decade than in the preceding one, except for the EU-25 (figure O-7figure.). Neither the United States, nor major European countries or Japan achieved the kind of productivity growth rates of some Asian economies. These averaged above 3% during the first decade and approached 4% during the second. China and India had real second-decade productivity growth rates of 6.6% and 4.4%, respectively, albeit from low bases.

In inflation-adjusted dollars, U.S. output per worker increased more steeply over the 20-year period than that of any other economy. Again, this reflects the much higher U.S. output per worker at the beginning of the period: a 2% increase on a high base is much larger, in absolute terms, than the same percentage rise on a small base. As a result, even countries with fast-expanding economies faced a growing gap with the United States (figure O-8figure.). Even the EU-25, with a 20-year average productivity growth rate that matched that of the United States, saw its productivity gap widening after 1995.

The United States remains robustly competitive on these macroeconomic measures.

In terms of these three indicators, the U.S. economy has managed to maintain a strong competitive position. Its absolute GDP growth was sufficiently robust to broadly maintain the U.S. world share in the face of expanding world GDP and a shift of rapid GDP growth toward Asian economies. Similarly, it has maintained its advantages in both purchasing power and productivity. While per capita GDP of economies in Asia and elsewhere was rising at very rapid rates, smaller rates of increase in U.S. per capita GDP kept widening the absolute dollar gap, reflecting and continuing the large initial U.S. advantage. U.S. productivity growth was sufficiently robust to keep the country well ahead, in absolute productivity measures, even as others raise their productivity growth rates from relatively low levels.


[1] Data drawn from Conference Board and Groningen Growth and Development Centre, Total Economy Database (January 2007),, are measured in constant 1990 purchasing power parities (PPPs) converted into U.S. dollars. World Bank data are based on different conversion factors but show congruent trends.

[2] No internationally comparable data on in-country inequality are available.

[3] The growth rate of real per capita GDP is measured in constant 1990 PPPs.

[4] The estimated total is extended backwards to 1985.

Right-click on image to save.