US Healthcare & the Global Economy
Look suffering readers will be pleased to hear that I now putting the finishing touches to the next post in my series on ‘capital’.
But today I want to share just one chart. It’s a chart which I think fundamentally changes how people perceive the Global macro-economy.
(And annoyingly enough – the two lines are mislabeled, reverse them).
The headline figures of US consumption as a share of GDP rising from 60% in the late 1960s to over 70% today are crucial to the ‘global imbalances’ theory. The US consumer has been on a credit fuelled binge – buying SUVs and plasma screen TVs and under saving, whilst Asia has saved too much. The world economy is unbalanced.
But what this chart suggests is that this is not the case. Excessive US consumption is not driven by what we typically think of as consumption – but by rising healthcare costs.
This should be viewed alongside John Ross’s article on China.org:
Equally striking, the level of US investment (14.7 percent of GDP) is scarcely above its calculated rate of capital consumption (12.9 percent of GDP)–which means that, in net terms, the US is scarcely accumulating capital.
Such an extraordinarily low investment rate precludes a rapid rate of recovery from the economic downturn. US economic growth following the recession will therefore be relatively anaemic compared to previous downturns.
Could it be the case that excessive healthcare costs are squeezing out US investment?