Category Economics

Military Aid to Ukraine as measured by percent of GDP

A couple of articles worth looking at. First: Where Military Aid to Ukraine Comes From

This was published three hours ago, showing the total aid “pledged” by each country through 27 March. The U.S. certainly leads in that category with 4.77 billion provided. Biden today just added another 800 million in military aid and 500 million in humanitarian aid in addition to 800 billion in military aid promised in mid-April.

Second on the list is Estonia followed by the UK. Most people can’t find Estonia on a map. It is a small country of only 1.3 million people.

This leads us to the next article here from yesterday: Estonia sent Ukraine aid worth 0.8 percent of GDP in first month of war

It is also from the Kiel Institute for the World Economy and only covers through March 27. It tracks aid “pledged” as a percent of GDP. Estonia is by far the largest there with 0.8% of their GDP dedicated to helping Ukraine. Poland is second. The U.S. is in the middle of the pack. At the bottom of the list is Europe’s economic powerhouse, Germany, followed by Italy and France.

For some reason, NATO member Canada is not listed on this chart but are in the chart above. The numbers appear confused. Also, Germany is providing significant aid above and beyond military aid. This will boost the percent of GDP figures higher if that was used as the metric. Figure 5 is shown below from the Kiel Institute report, provided here as a courtesy of one of the followers of our blog: https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/-ifw/Kiel_Working_Paper/2022/KWP_2218_Which_countries_help_Ukraine_and_how_/KWP_2218.pdf.

It clearly shows the additional non-lethal aid being provided by Germany, France, Italy, Spain and Belgium. Still, with the aid figures doubled for Germany, France and Italy, it still does not reach the same level of support as provided by the United States as measured by % of GDP. It certainly does match the level of support provided by Estonia (which is on the front line). The figure above also does not pick up the 1.5 billion in non-lethal aid that the U.S. is providing.

In the end, Germany, France, Italy and the UK probably need to up their game a little bit.

Update: Statista provided an updated chart showing financial, humanitarian and military aid as a percent of GDP, which was figures I did not have at the time. Germany, even when all their non-military aid is included, it still at the bottom of the list, followed by Italy and France. Now, this data only goes through 27 March. We do seem to be seeing a slow readjustment by Germany. As there is only one country between them and Ukraine, you would think they would take a little more seriously.

The new chart is here:

 

U.S. versus China (GDP) – update 1

Dredging up our old posts. This one is from 13 November 2018.

U.S. versus China (GDP) | Mystics & Statistics (dupuyinstitute.org)

As of 2017, U.S. GDP was $19.391 trillion according to the World Bank. The Chinese economy was $12.238 trillion. This was 63% of the U.S. economy.

Now?

Using the World Bank figures for 2019 it is 21.428 trillion for the United States. The Chinese economy is $14.343 trillion. This is 67% of the U.S. economy and these figures pre-date the Covid crisis.

IMF has estimated 2020 figures. I have no idea how relevant or meaningful they area. For the US. it is $%20.807 trillion while for China it is 14.861 trillion. This is 71% of the U.S. economy. Don’t know how much of the Coronavirus issues affected these 2020 IMF figures. China started dealing with Coronavirus in January 2020 while it only became an issue in the United States in March of 2020. China has since brought it under control and are seeing about 200 cases a day. The United States has failed to bring it under control and are looking at something like 180,000 new cases each day. As such, I would expect that China GDP is growing faster than the United States and this will probably also be the case for 2021.

 

P.S.: The U.S. GDP declined 3.5% in 2020. See: https://www.cnn.com/2021/01/28/economy/us-fourth-quarter-gdp/index.html

No Deal Brexit?

This is a little out of our normal lanes of discussion, but I have watching Brexit for a while. In the end, economic power = military power, so the impact of this is worth examining. The UK is one of four of the ten largest economies in the world that are located in Europe (note that Russia is 11th, behind Canada). Here is a rough comparison between them:


……………………GDP……….Population…..Per Capita GDP……..PPP
Germany………3.8………….83.1……………..46,259…………………56,052
UK……………….2.8…………66.8………………42,300…………………48,710
France…………2.7………….67.2……………..40,494…………………49,435
Italy……………..2.0…………60.0………………33,190…………………44,197

Russia…………..1.7………146.7………………11,585…………………29,181

United States…21.4……..330.8……………..65,281…………………65,281

 

Spain……………1.4………….47.3……………..29,614…………………42,214

Netherlands….0.9………….17.5……………..52,448…………………59,687

Ukraine…………0.15……….41.7……………….3,659…………………13,341

 

These are 2019 World Bank data, which pre-dates the coronavirus. GDP is in trillions. Population is an estimate as of 2020. It is in millions. Per capita is the World Bank 2019 figures, so as to again dodge the coronavirus. It is in dollars.

So, to put in simple terms, UK and France are about the same population wise, GDP wise and in per capita GDP. Germany is a little larger and a little richer. Italy is a little smaller and a little poorer. This is a good group of candidates for a long-term comparison. 

Now, I happen to think that economically, Brexit is a bad idea. What I expect to see over time is a change in the UK GDP compared to other western European countries. But we probably won’t really know what the full impact will be until we have gotten through the coronavirus issues and economies and the rest of the world have re-adjusted back to a more normal existence. Meaning, it may be a few years before we appreciate and fully understand the impact of Brexit and its long term effects. So maybe revisit this post in 2022? 

 

Hard to Ignore the Coronavirus

It is hard to ignore the Coronavirus. It is kind of the biggest game changer right now, not only for the tragic mortalities, but for its economic impact and as a result, for its impact on international relations and national security. While its rate of expansion in China seems to be slower (see my previous post), it is appearing in various “hot spots” across the world. As of the moment I am writing this (after 1:00 PM Feb. 24) there were 80,350 confirmed cases worldwide and 2,705 deaths…assuming all the reporting is complete and correct. Right now in South Korea there are 977 cases and 10 deaths, in Italy there are 283 cases and 7 deaths, in Japan there are 170 cases and 1 death (and 3 from the cruise ships) and in Iran there are reported 95 cases and 16 deaths. There is a sense that the Iranian figures are low and the real numbers are higher. So outside of China there are pockets of disease in multiple locations.

See: https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

Beyond the immediate dangers the virus poses, there are the problems and cost of containment. China, in its efforts to control it, effectively shut down entire cities. Is that what Korea, Italy and Iran are going to have to do? This is a major economic hit.

The markets on Monday clearly picked up on this with the Dow Jones dropping over a thousand points yesterday. It is down 500 800 almost 900 points today. Markets in South Korea, Italy, etc. are getting hit even worse. Oil prices are also declining. Right now they are over $50 a barrel but they could decline to the low $40s. The exchange rate for the ruble has also declined to 65 to a dollar. Their economy and government budget is heavily impacted by oil prices. My post from 28 January:

The Snowballing Effects of a Virus?

This is clearly going to affect the world markets through this quarter and probably into the next quarter. If it is fully contained, then the economies will start to recover. The question is, can this virus be fully contained? Because of the rather “stealthy” way it spreads, with people apparently able to spread it before they show symptoms of the disease, it may take a while to fully contain. Suspect these are not the last outbreaks. Each outbreak then produces another round of costly containment efforts.

It has been estimated that the economic cost of the SARS virus of 2002-2004, which only included 8,098 documented cases and 774 deaths in 17 countries, cost 1.05% of the Chinese GDP in 2003. Hong Kong took the biggest with a 2.63% loss in GDP in 2003 while the U.S. economy had a negative 0.07% effect. It is clear that this virus is going to have a lot bigger impact. Right now, it is 80,350 cases, 2,690 cases outside of mainland China, and 2,705 deaths (with 42 of them outside of China).

One estimate is here: https://www.ncbi.nlm.nih.gov/books/NBK92473/

The Table 2.2 is here (and a lot less blurry): https://www.ncbi.nlm.nih.gov/books/NBK92473/table/ch2.t2/?report=objectonly

 

Population Now versus 2050

As you may have noted in my previous demographics posts, I was tracking the population of the various nations I was looking at, both in 1950, currently and the estimated for 2050. Let me summarize briefly what we are looking at (measured in millions of people):

                                       1950                    2017                    2050

China                               583 (1953)         1,411                   1,360

India                                 361 (1951)         1,324                   1,700

United States                   151                       309  (2018)          402

Soviet Union/Russia        182  (1951)           143  (2018)          132

Japan                                83                        127                       109

Germany                           69                          83                        79

 

Now, a lot of numbers there. Let us set the U.S. at a value of 1 and everyone else at a value relative to it. So:

                                       1950                     2017                    2050

China                               3.86                     4.57                      3.38

India                                 2.39                     4.28                      4.23

United States                  1.00                     1.00                      1.00

Soviet Union/Russia         1.21                       .46                        .33

Japan                                 .55                        .41                        .27

Germany                            .46                        .27                        .20

 

So, during the height of the bad old days (1950s), the Soviet Union had more population that the U.S.; and China, part of the communist bloc and actually in a hot war with us, had four times the population. Now….well the Soviet Union is gone. In 2050,  China will only have three times the U.S. population while a number of major powers (like Japan, Germany and Russia) will be a smaller fraction of the U.S. population.

Again, I note that some people like to talk about America in decline on the world stage. I really don’t see it economically or demographically.

U.S. versus The World (GDP)

Of course, the real challenge would be predict GDPs in 2050. Probably can with the U.S. On the other hand, it is pretty hard to say where the Chinese economy will be in 2050. I would be hesitant to do a straight line estimate.

U.S. versus China (GDP)

U.S. versus The World (GDP)

There has been a lot of statements lately coming out of Russia (Putin in particular), China and other places about how the U.S. is in decline. Not sure what is the basis of these statements. Right now the United States GDP is $19.391 Trillion. The entire world’s GDP, according to the World Bank, is $80.684 Trillion. This means that the U.S.’s GPD makes up only 24% of the world’s GDP. This hardly puts us out in the dumpster.

Now, it has changed over time. In 1960 the U.S. GDP was $543.3 billion while the World’s was $1.366 Trillion. This is 40%. So we have declined from having 40% of all the goods and services of the world to only having 24% of all the goods and services in the world. I would argue that in fact this is not a decline, but a growth on the part of the rest of the world, and in many cases a well-deserved growth. In fact, it was the intention of the Marshall Plan to restore the European economy for the purpose of making stable democratic economically viable counties. This is a plan that succeeded in spades. The data from 1960 is only 15 years after the devastating World War II, so it is really no surprise that the U.S. economy, living in “splendid isolationism” or at least conveniently isolated by two very large bodies of water, was in much better shape than those people who had panzers running back and forth across their front lawns.

As of 1980 the United States GDP was 26% of the world GDP. Much of this change was a result of the growth of the western European and Japanese economies. It was before the later boom of the Chinese economy. But this is close to the same percentage as it is now. Just to compare over time:

Year…………Percent GDP

1960             40%

1970             39%

1980             26%

1990             26%

2000             31%

2010             23%

2017             24%

 

There is definitely a trend here, but it is a trend caused by the rest of the world growing, not by the United States declining. You can definitely see the world economy growing significantly after 2000. But most significant relative shift occurred between 1970, when the U.S. economy made up 39% of the world’s economy, to 1980, when it was down to 26%. It is now 24%, so really not a hugely significant shift in the last 40 or so years from the 26% it was in 1980. Not sure how you then conclude the United States is now in decline.

In the 57 years on this graph, the U.S. GPD actually only declined in one year (2009). That is a pretty good run.

U.S. versus China (GDP)

Right now (as of 2017) the U.S. GDP is $19.391 Trillion according to the World Bank. The Chinese economy is $12.238 Trillion. This is 63% of the U.S. economy. No economy has been that close to the U.S. economy since Japan leading up to 1995.

It is a rather amazing growth on the part of China. Back in the bad old days, after we had fought a war with them over Korea, they were threatening to invade Taiwan, they were supporting North Vietnam against our ally South Vietnam, and allied with the Soviet Union as part of the Communist Bloc, the difference was much greater. The U.S. GDP in 1960 was 543.3 Billion, while China’s was 59.716, meaning the U.S. economy was 9 times greater. Now it is only 1.6 times greater.

Of course, the two economies are intertwined, with the United States being China’s largest trading partner. This sort of leads to the odd situation where some in the U.S. and China consider the other to be a rival. But, I can’t think of too many cases where major trading partners were opposing hostile players on the world stage. Still, it is a very uncomfortable arrangement with the U.S. nominally the leader of the free world, while China had been known to run over its people with tanks. They are still very much a dictatorship. So the two nations seem to exist as trading partners who are not really friends and not really enemies. They may be rivals in the long run, or may not. There is, of course, an on-going trade dispute between the two nations.

Now….if were extend those lines on the graph out…..it does look like they will cross at some point around 2050 or so. This of course, leads me back to this post:

Demographics of China

It is projected that by 2050 the Chinese population will decline to 1.36 billion by 2050 (it is currently 1.41 billion) while the U.S. will grow to 402 million by 2050 (it is currently 328 million). For a number of reasons, I don’t think we will see the Chinese economy exceed the U.S. economy by 2050.

China versus India

In a blog posts on Indian demographics someone asked “The question is why India (per capita income $6,490-2016) is still so poor compared to China (per capital income $15,000 – 2016).” I have never really examined this, but it is an interesting enough question that I wanted to take a further look at it.

In 1960, the World Bank has China’s GDP at $60 billion. India’s GDP at $37 billion. India’s GDP is around 61% of China’s. Considering that India’s population was smaller, they were clearly at similar levels of development. This is, of course, back in the day when China and India were having border fights in the Himalayas (like in 1962).

Over the next couple of decades, India actually closed in on China. In 1970, India’s GDP was 67% of China’s GDP. In 1980 it was 96%. In 1990, they had separated a little with India’s GDP being 88% of China’s. So for three decades they grew at similar rates. And then as you can see rather clearly from the chart below, China’s economy took off.

By the year 2000, China’s GDP was 2.6 times larger than India’s. India was at 38% of China. By 2010, the disparity widened, with China’s GDP now 3.7 times larger than India’s (27%). As of 2017, the disparity continued to grow with China’s GDP now 4.7 times larger (or 21% for India). This is a pretty significant change over time, with clearly most of the difference developing from 1990 to the present. It has been an amazing three decades for China.

Of course, the last time we saw such amazing growth was with Japan up through 1995. Is China growth permanent and sustainable (like U.S. growth tends to be), or is it a bubble?

See:

Where Did Japan Go?

 

Japan versus Germany

Comparing Japan and Germany is an interesting exercise….as they kind of started at the same point. Their leaders in World War II were disgraceful incompetents who got their nations into wars they could not win, leading to them being bombed into oblivion and then occupied. They both started at the same point for recovery. In 1970 Japan had a GDP of 212.609 billion while Germany had a GDP of 215.022 billion. They oddly enough, almost ended up at at the same point, for in 2017 Japan had a GDP of 4.872 trillion while Germany had a GDP of 3.677 trillion. Considering that in 2017 the Japanese population is 127 million, and the German population is 82 million, at this stage Germany actually had the higher per capita income, being $44,550 compared to $38,440 (or $50,206 compared to $42,659 using PPP – Purchasing Power Parity, IMF 2017 figures). On the other hand, their trips to these points are very different as shown in this graph, showing their GDP from 1970-2017:

From 1970 through 1977 their economic growth almost parrelled each other. After that Japan’s economy started growing faster, then it boomed and after 1995 it busted. The German economy also declined after 1995, but since then seems to have grown and then stabilized.

While both nations have a fertility rate well below 2.1 (which is the replacement rate) they have reacted differently to immigration. Germany has been far more accepting of immigration than Japan. The end result is that Germany’s population is projected to still be at around 79 million in 2050 while Japan is expected to decline to 109 million. I am probably on safe ground to state that in the long run, Germany will have a higher GDP than Japan, meaning it will probably rise to be the third largest economy in the world.

Where Did Japan Go?

This post is a follow-up to this posting:

Demographics of Japan

In that post, I was talking about that there was a time in the 1980s when Japan’s GNP was 60% of the United States and people were talking about Japan’s economy outgrowing the United States by the year 2000, 2010 or 2020. Now…..we know that did not happen. The following chart, measuring GDP (Gross Domestic Product) shows this change of fortune rather dramatically:

In 1995, Japan’s GDP was $5.449 Trillion while the United States was $7.664 Trillion. Japan’s GDP was 71% of the United States and it looked to be closing. Now, in 2017 it was 25% of the United States ($4.872 versus $19.391). This is a hell of a change in fortune. Not near as bad as the collapse as the Soviet Union, but pretty damn significant in the larger picture.

Let us look how this developed over time (figures are from the World Bank):

Year       Japan GDP     U.S. GDP     Percent

1960         .044307          .5433             8%

1965        .09095             .7437           12%

1970        .212609         1.076             20%

1975        .521542         1.689             31%

1980       1.105              2.863             39%

1985       1.399              4.347             32%

1990       3.133              5.98               52%

1995       5.449              7.664             71%

2000       4.888             10.285            48%

2005       4.755             13.094            36%

2010       5.7                 14.964            38%

2015       4.395             18.121            24%

 

That is a trip. If the percentages were graphed out, it might start looking like a bell curve. I don’t have the depth of knowledge on the Japanese economy to pontificate as to why this developed this way.

So, we have seen a political and military challenge after World War II from the Soviet Union. They went from claiming that “We will bury you” (1956) to dissolving (1991). We have seen an economic challenge from our ally Japan, and it certainly impacted our car industry and consumer electronics. This has gone in only two decades from a point where the economic growth trajectory lines of Japan seemed to be on track to surpassing the United States to a point now where Japan’s economy is a quarter of our economy. And…..it still does not appear to be growing much. It makes you wonder about the next political, military or economic challenge…..and how that will play out.