The world of economists revolves around GDP. It is tempting sometimes to view economist as worrying about mathematical constructions that are not reality. GDP growth is a measure of wealth not health or happiness. Economists often seem to not even consider someone, or a society could be perfectly content at a given level of income per person. Maybe they don't need more wealth to be either healthy or happy?
Further, GDP is not a direct measure of technological and scientific advances. Finding ways to do things better in our day to day lives is unquestionably a good thing. But GDP measures many things totally unrelated to doing things more efficiently.
But that said, given all the talk about income inequality I decided to look into the whole concept of wealth to see what I would find - maybe there are some good reasons to be focused on GDP?
I begin with the proposition statistics about wealth are not precise but are probably educated estimates that provide some representation of reality.
I also begin with the proposition growth in itself is not the concern, the concern is growth allows more people to live comfortably. Studies tell us that the average American worker is comfortable with an income of about $70,000 a year. That is the point where they feel no need to work at getting more wealth. So if the whole world was generating an average yearly income of about $70,000 per person, we perhaps would not need more growth?
Where are we on growth?
I looked at wealth figures, even though GDP combines both wealth and income. Although wealth is not the same as income, it is a relatively good proxy for income. If you have a lot of wealth you probably have a decent income and if you have a lot of income you will probably will have a lot of wealth eventually.
Dividing the total wealth in the world (241 Trillion) by the total world population (7.4 billion) reveals that existing wealth amounts to $35,567.56 per person. That would be a decent yearly income but as total wealth it is pretty low. $35,000 invested to produce a 5% per year return would only be income of about $1,750 a year per person. Clearly the world could use some growth.
On the other hand dividing the total wealth of the United States (118 trillion) by the population of the United States (319 Million) reveals that existing US wealth amounts to $369,905.95 per person. A two person household with this theoretical wealth could generate an income of about $18,000 per year per person assuming a return of 5% on their wealth, which would be $36,000 for a two person household. Skimpy but not starving.
However data indicates the top 1% of the US population currently owns about 37% of the wealth. That means the top 1% (3.19 Million people) own $43 trillion of the countries wealth which equals $13,479,624 per person. At 5% per year the top 1% control assets could produce income of $673,981 per year per person.
Subtracting the top 1% share from the total national wealth (118 Trillion - 43 Trillion) leaves 75 Trillion for the other 99%.
However, the next 19% own 1/2 of this remaining wealth which amounts to $37.5 Trillion. 19% of the population equals 60 million people. Per person each of that 19% has assets of about $625,000. At 5% that would generate $31,250 per person per year.
The remaining $37.5 Trillion are shared among the remaining population (80% = 255,200,000 persons) The per person share is $146,944 which, if invested would produce $7347 per year per person.
Conclusions
Economists can't be faulted for obsessing about growth, the world needs it. However, the world would not need as much growth if economists could figure out policies that would spread wealth across populations more effectively.
Source of Data - Wikipedia articles on wealth, GDP and Income Inequality.
