We’re in a Low-Growth World. How Did We Get Here?
One central fact about the global economy lurks just beneath the year’s remarkable headlines: Economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth.
The United States is adding jobs at a healthy clip, as a new report showed Friday, and the unemployment rate is relatively low. But that is happening despite a long-term trend of much lower growth, both in the United States and other advanced nations, than was evident for most of the post-World War II era.
This trend helps explain why incomes have risen so slowly since the turn of the century, especially for those who are not top earners. It is behind the cheap gasoline you put in the car and the ultralow interest rates you earn on your savings. It is crucial to understanding the rise of Donald J. Trump, Britain’s vote to leave the European Union, and the rise of populist movements across Europe.
This slow growth is not some new phenomenon, but rather the way it has been for 15 years and counting. In the United States, per-person gross domestic product rose by an average of 2.2 percent a year from 1947 through 2000 — but starting in 2001 has averaged only 0.9 percent. The economies of Western Europe and Japan have done worse than that.
Over long periods, that shift implies a radically slower improvement in living standards. In the year 2000, per-person G.D.P. — which generally tracks with the average American’s income — was about $45,000. But if growth in the second half of the 20th century had been as weak as it has been since then, that number would have been only about $20,000.
To make matters worse, fewer and fewer people are seeing the spoils of what growth there is. According to a new analysis by the McKinsey Global Institute, 81 percent of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97 percent in Italy, 70 percent in Britain, and 63 percent in France.