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When economies just don’t grow

Some countries suffer from long-term economic stagnation

In general, economies grow. They do this by accumulating capital (machinery, structures, infrastructure), increasing higher education, and making technological progress. Sometimes they shrink for a time because of recessions, but the general trend is for economies to move upward. Yet, there are a few countries that have stagnated or even shrunk over the longer run.

The graph shows five of these countries. (By the way, we use real GDP per capita so that population growth and inflation don’t muddy our measurement of economic performance.) Two of these are poor countries that just don’t seem to be making any progress. The worst case is Madagascar, which has suffered from endemic mismanagement since its independence. The other is Zimbabwe, which had impressive growth in the late 1960s and early 1970s that was reversed in the past two decades by mismanagement that culminated in extreme hyperinflation.

Two other countries have a very different history. Brunei is a small southeast Asian nation rich in oil and natural gas. It has been wealthy since its independence, but the decline of oil prices as well as lower production have had an adverse impact on the economy. Equatorial Guinea benefited from the discovery of oil in the 1990s, leading to a spectacular boom that allowed it to shoot past its former colonial power, Spain. But here, again, the lower price of oil has shrunk the economy substantially in subsequent years.

The final case is Ukraine, which had a few very rough years after the fall of the Berlin Wall, as did all economies in the former Soviet Union and Eastern Bloc. But unlike its neighbors, it’s still far from returning to the level it started from, at least in part because of chronic corruption and political upheaval at home and with neighboring countries.

How this graph was created: Search for “constant GDP per capita Madagascar” and click on the series. To add the other lines, click on “Edit Graph,” open the “Add Line” panel, and search for the next series. Add the series and repeat until satisfied. Finally, as the range of values for the series is quite wide, open the “Format” panel and put the y-axis to right for some of them (in our case, Brunei and Equatorial Guinea).

Suggested by Christian Zimmermann.


Some economies get stuck

If you want to compare economies, a good source is the World Development Indicators from the World Bank. Economic definitions differ and data exist in different currencies, but the World Bank makes the relevant reconciliations. For example, their data are in 2005 U.S. dollars (and thus in real, not nominal, terms). These graphs depict two countries currently in the news whose economies have stagnated. The first is Venezuela, which had been much richer than its neighbor Colombia but has had essentially no growth over the sample period. The second is the Ukraine, which suffered a deep recession in the early 1990s, along with other former Soviet bloc countries. The Ukraine never recovered, while its neighbor to the north, Belarus, did. In fact, the Ukraine’s situation is even grimmer: The data show GDP per capita, but do not show that the population in the Ukraine has actually been falling for several years, which means total GDP has been on a sharp decline.

How these graphs were created: For both, you can either start from the World Development Indicators release and narrow down the choices using the tags or simply search for “constant GDP per capita” for the countries of your choice.

Suggested by Christian Zimmermann


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