The Size of the USA's economy

I read with interest The Sun's article, which appeard on Malaysia Today, where Tun Mahathir called the USA a "bankrupt country" because of its double trade and budget deficit . That resulted in a lively discussion among the readers of Malaysia Today.

The size of the US's economy is hard to comprehend because it is in the trillion of dollars. I came across this interesting tidbit of information on National Review's July 3rd, 2006 edition. Look at the chart and maybe we can begin to understand a little what the size of the USA's economy is.

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The American Colossus, in Perspective

One of the problems with economics is that the numbers involved are just too big. A trillion here, a billion there, who can keep track of it all? U.S. nominal GDP was about $13 trillion in the first quarter of this year. Corporate profits were about $1.6 trillion. The mind freezes just trying to think about such numbers.

Because of that, news reports tend to focus on the changes. Real GDP grew 5.3 percent in the first quarter. That’s the kind of number that one can easily digest. But the levels contain enormously important meaning. If one wants to put the U.S. place in history and geopolitics in perspective, then one must start by understanding the significance of our economic scale. If the global economic competition were a basketball game, then the U.S. would be Shaquille O’Neal, and all of the other players would be dwarves.

The accompanying chart illustrates the point. The United States is a giant. Its GDP is roughly comparable to that of Japan, Germany, the U.K., and France combined. But the really striking thing is that the U.S. is so prosperous and productive that many of its cities have larger economies than whole countries.

In 2005, for instance, the New York metropolitan area alone out-produced all but eight countries. Russia, on an economic roll because of its massive oil wealth, has a much smaller economy than New York.

Los Angeles topped both Belgium and the Netherlands. The annual production of our nation’s capital was almost identical to that of Poland. The Iranians are certainly causing political problems for the West. Their nuclear development has tied our diplomats in knots. Their threats move oil prices. In terms of purchasing power, however, they are Lilliputians. Even with all of their oil wealth, the Iranians have about the same size economy as Detroit. And Iran is relatively wealthy in its part of the world. Pakistan has about the same economic heft as Cleveland. If you could convince someone to give you the economy of Milwaukee in exchange for that of Kuwait, you would come out ahead (and have a beer to toast your good fortune).

Given these numbers, it’s odd that Americans would be, as sentiment indicators imply they are, so down in the dumps. Economic growth has been good, but the economic levels are stunning.



And why are they so good? Compounding is, as Einstein mused, the most powerful force in the universe. The U.S. is so wealthy because we saw the benefits of free markets long before most others. The result has been two centuries of almost uninterrupted growth. Inching ever upward while others stagnated, we are the earth’s colossus.

— KEVIN A. HASSETT