What Will We Buy?
Robert Shiller recounts some figures on recent world GDP growth:
Among the 82 countries for which 2004 data are now available, there has been really good news: real per capita GDP has risen by an average of 18.9% between 2000 and 2004, or 4.4% per year. People generally are a lot better off than they were just a few years ago. At this rate, real per capita GDP will double every 16 years….
China isn’t the only success story. Other big winners in terms of real per capita GDP between 2000 and 2004 are Lithuania (up 48%), Romania (up 41%), Estonia (up 40%), Chile (up 33%), Hungary (up 32%), Greece (up 31%), New Zealand (up 28%), Australia (up 25%), Korea (up 23%), Ireland (up 23%), South Africa (up 23%), and Nigeria (up 22%).
So, if real per capita GDP continues to grow, what will we spend our money on? Medical care, houses, cars, vacations, and “personal business activities,” essentially:
According to my calculations comparing 1958 and 2005 data from the US Department of Commerce, Americans spent 27% of the huge increase in income between 1958 and 2005 on medical care, 23% on their homes, 12% on transportation, 10% on recreation, and 9% on personal business activities.
The kinds of things that advertisers and salesmen typically promote were relatively unimportant. Food got only 8% of the extra money, clothing only 3%, and personal care 1%. Unfortunately, idealistic activities also received little of the extra money: 3% for welfare and religious activities, and a similar share for education.
Thus, most of the extra money was spent on staying healthy, having a nice home, traveling and relaxing, and doing a little business.
The mere 3% for education is the shocker, to me at least. The rest of his piece is here.