The rate of global economic growth is meaningless

EVERY now and then an economic concept must be gracefully retired. My latest nomination for this honour is the notion of a “global rate of economic growth”.

A meaningful definition of a global rate of economic growth requires that a fair number of countries, or at least a preponderance of global gross domestic product, moves in the same direction at a broadly common and even intertwined rate. This idea once made sense, as often there were a few common factors – Chinese-driven growth, for example, or energy prices – that affected a large number of countries in similar ways. In the future, however, economic growth will increasingly come from idiosyncratic and nation-specific factors, not global ones.

Consider China first. For most of the last several decades, Chinese economic growth ran at 8 per cent or higher. And with all its construction projects, the Chinese economy had a voracious demand for commodities and raw materials. So there were a lot of booms across the world, from the soybean fields of Brazil and Argentina to the machine-tool factories of Germany and the dairy farms of New Zealand. Not everything in those economies grew in proportion, but there was a basic floor, because at least a few export sectors were booming and creating new jobs.