US Real GDP and GNP 1929–1950

I have calculated growth rates here in real GDP and real GNP from two sources:

(1) Real GDP in millions of 2005 dollars from Measuringworth.com.

(2) Real GNP in billions of chained 2005 Dollars from U.S. Department of Commerce: Bureau of Economic Analysis data.

First, real GDP in millions of 2005 dollars from Measuringworth.com (I have added the annual growth rates by my own calculation):

Year | GDP* | Growth Rate
1929 | $977,000
1930 | 892,800 | -8.61%
1931 | $834,900 | -6.48%
1932 | $725,800 | -13.06%
1933 | $716,400 | -1.29%
1934 | $794,400 | 10.88%
1935 | $865,000 | 8.88%
1936 | $977,900 | 13.05%
1937 | $1,028,000 | 5.12%
1938 | $992,600 | -3.44%
1939 | $1,072,800 | 8.07%
1940 | $1,166,900 | 8.77%
1941 | $1,366,100 | 17.07%
1942 | $1,618,200 | 18.45%
1943 | $1,883,100 | 16.37%
1944 | $2,035,200 | 8.07%
1945 | $2,012,400 | -1.12%
1946 | $1,792,200 | -10.9%
1947 | $1,776,100 | -0.89%
1948 | $1,854,200 | 4.39%
1949 | $1,844,700 | -0.51%
1950 | $2,006,000 | 8.74%
* Millions of 2005 dollars
http://www.measuringworth.com/datasets/usgdp/result.php

Secondly, real GNP in billions of chained 2005 Dollars from U.S. Department of Commerce data: (I have added the annual growth rates by my own calculation):

Year | GNP* | Growth Rate
1929 | $984.60
1930 | $900.00 | -8.59%
1931 | $840.70 | -6.58%
1932 | $730.50 | -13.10%
1933 | $720.30 | -1.39%
1934 | $797.70 | 10.74%
1935 | $868.90 | 8.92%
1936 | $981.10 | 12.91%
1937 | $1032.50 | 5.23%
1938 | $997.40 | -3.39%
1939 | $1077.80 | 8.06%
1940 | $1170.80 | 8.62%
1941 | $1371.50 | 17.14%
1942 | $1623.50 | 18.37%
1943 | $1887.90 | 16.28%
1944 | $2040.20 | 8.067%
1945 | $2016.60 | -1.15%
1946 | $1798.20 | -10.83%
1947 | $1784.80 | -0.74%
1948 | $1864.80 | 4.48%
1949 | %1854.20 | -0.56%
1950 | $2016.50 | 8.75%
* Billions of chained 2005 Dollars
http://wikiposit.org/a?uid=FRED.GNPCA

Some points:

(1) Even with the contractionary fiscal policy from 1937–1938 and recession, average GDP and GNP growth rates from 1934–1940 when moderately expansionary fiscal policy was used were high:

Average real GDP growth rate, 1934–1940: 7.33%.
Average real GNP growth rate, 1934–1940: 7.30%.

(2) It is curious that the annual GNP and GDP data show contractions in 1945, 1946, and 1947. I must check the quarterly data for a better view of what was going on in these years. But the contraction was mostly the result of the dismantling of the US command economy and conversion of the wartime economy back into a peacetime economy producing consumer goods. From its wartime peak in 1944 to 1947, GDP contracted by 12.7%. For GNP, the figure is 12.51%. That was indeed a technical depression, but a depression sui generis.

This can be compared to the contraction after WWI in the estimates of Balke and Gordon and Romer:

Year | GNP* | Growth Rate
1917 | $484.9 | -0.02%
1918 | $522.2 | 7.69%
1919 | $507.1 | -2.89%
1920 | $496.3 | -2.12%
1921 | $478.8 | -3.52%
1922 | $513.2 | 7.18%
* Billions of 1982 dollars
(Balke and Gordon 1989: 84–85).

Year | GNP* | Growth Rate
1916 | $476.498 | 7.54%
1917 | $473.896 | -0.54%
1918 | $498.458 | 5.18%
1919 | $503.873 | 1.08%
1920 | $498.132 | -1.13%
1921 | $486.377 | -2.35%
1922 | $514.949 | 5.87%
* Billions of 1982 dollars
(Romer 1989: 23).

Balke and Gordon’s estimates show a GNP decline of 5.58% from 1920–1921. From the wartime peak of 1918, the GNP contraction was 8.31% to 1921. Romer’s data shows no contraction in 1919 but a GNP contraction of 3.47% from 1919 to 1921.

It is obvious that Balke and Gordon’s estimates of a contraction in 1919, if true, must be regarded as sui generis recession related to the end of WWI.

(3) When certain Keynesians like Paul Samuelson predicted a depression after WWII ended, they were in fact correct, although wrong in predicting any long-term depression or stagnation. Moreover, the US government did in fact step in after 1946 to provide macroeconomic stability. The boom of 1948, which can be explained by the liberation of pent up consumer demand contained during WWII, gave way to a recession from November 1948 to October 1949. Truman’s budget surplus of 4.6% of GDP in fiscal year 1948 fell to 0.2% in fiscal year 1949, as spending went from $29.8 billion in 1948 to $38.8 billion in 1949, as automatic stabilizers kicked in. In fiscal year 1950 (July 1, 1949 to June 30 1950), the budget went into an actual deficit of 1.1% of GDP. Moreover, Congress had pushed through a tax cut in 1948, which boosted private spending in 1949. What we have here is classic Keynesian countercyclical fiscal policy. Some of the increases from 1950–1953 were, of course, related to the Korean war, but also to new social, welfare and military programs enacted under Truman. Government spending in both absolute terms and as a percentage of GDP surged from 1948 to 1953, fell slightly from 1953–1954 as the Korean war ended, but remained between about 25% and 30% of GDP throughout the classic era of Keynesian economics (1945–1973) – an unprecedented level to that point in American history. And the economy boomed.

BIBLIOGRAPHY

Balke, N. S., and R. J. Gordon, 1989. “The Estimation of Prewar Gross National Product: Methodology and New Evidence,” Journal of Political Economy 97.1: 38–92.

Romer, C. D. 1989. “The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869–1908,” Journal of Political Economy 97.1: 1–37.