Although there are various measures of the economic growth rates of countries, the GDP stands out to be most efficient, and widely used one. It incorporates four aspects i.e. the consumption level, government policy, investments, and net exports. In this respect, it is quite useful in approximating the economic growth rate of any nation. This paper focuses on the GDP of the USA, Japan, Ethiopia, and China for the last 20 years.
Using data from the Bureau of Statistics, the GDP of the USA grew on average by 2.33% since 1996. However, the fluctuation on the GDP was significant in some years than others. On the other hand, Japan’s GDP grew by 0.765% over the same period. At the same time, the GDP for China increased at 9.025% on average for the same period. Ethiopia’s GDP was at 3.095% on average (World Bank. 2015). However, recent GDP for Ethiopia grew between 2004 and 2014, was at 10.9%.
The above data shows a wide discrepancy in the average economic growth rate. China is the leading with 9.025% followed by Ethiopia at 3.095%, then the USA at 2.33% and Japan took the last position at 0.765%. One wonders what causes such differences in the economic growth.
According to IMF (1997) just about the beginning time under consideration in this paper, China had begun experiencing tremendous changes in machinery that triggered growth. As a result, business transactions became cheap that in turn increased a flow of funds from within and outside the nation. Besides, the government of China increased its expenditure that allowed the citizens to produce more goods and services. Availability of cheap labor attracted multinationals to China that reduced unemployed and raised income that also increased consumption rate and investment from private individuals. For instance, the household responsibility system (HRS) was one of the earliest reforms alongside others like special economic zones (SEZs), dual-track pricing and township and village enterprises (TVEs).
The USA had bust and lows of economic growth in the past twenty years. The country moved from the great moderation into the great recession. The great moderation involved a steady economic growth with the government encouraging development alongside banks that increased or lowered interest rates to keep inflation in check. The USA did not have a high population growth rate to offer cheap labor like China. Investors had trust in the monetary policies that targeted inflation. As a result, prices of goods and services were significantly low, encouraging consumption and savings for investments. However, the financial crisis of 2008 led the country to slip back into a volatile economy. The USA enacted the AARA in 2009 bringing to an end the great recession and established a growth path of the USA economy (Blinder and Zandi, 2015).
Japan also experienced slow growth in its GDP. The global economic volatility had adverse effects on Japan’s’ automobile industry that has a significant influence on it growth. An unsteady value of its currency also set back exports. The domestic market has also shirked due to the slow population growth. The government has attempted to revive it using fiscal pumps that have yielded weak economic growth. Comparing Japan, USA, and China, Japan has the least population growth rate that may considerably affect its internals markets.
Ethiopia has a relatively high GDP due to government initiatives. For example, servicing agriculture, and public investments in infrastructure. About 65-70% of the government budget is for pro-poor development activities (Tafirenyika, 2015). It also has a relatively high population and peace that are attracting investors from abroad.
References
Blinder, A. S., & Mark, Z., (2010). How the Great Recession Was Brought to an End. PDF file. Available at https://www.economy.com/mark-zandi/documents/End-of-Great- Recession.pdf
Tafirenyika, M. (2015, August). Ethiopia's development is mostly people-driven | Africa Renewal Online. Retrieved April 28, 2016, from http://www.un.org/africarenewal/magazine/august-2015/ethiopia’s-development-mostly- people-driven
World Bank. (2015). GDP growth (annual %). Retrieved April 28, 2016, from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?page=4
