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June 01, 2005
Who Cares about Savings?--Part I
In a world where money flows easily across national borders, does savings still matter for growth?
Here's a simple and stupid experiment. Take the industrialized countries. If you knew which ones had a higher national savings rate in 1995, could you predict which ones would have better economic performance over the next ten years? Maybe not.
increase in real per capita GDP
Low savings countries 26.9%
Medium savings countries 30.1%
Medium savings countries
(except Ireland)* 23.0%
High savings countries 21.4%
Not much benefit to being a big saver, is there?
Low savings countries (national savings rate less than 20% in 1995) are United Kingdom, United States, New Zealand,Iceland,Australia, Greece,Canada,and France.
Medium savings countries (national savings rate between 20% and 25% in 1995) are Denmark, Sweden, Ireland, Austria, Italy, Germany, Finland, and Spain.
High savings countries (national savings rate above 25% in 1995) are Belgium, Norway, Netherlands, Japan, Switzerland, and Korea.
*Ireland is an outlier in terms of its per capita GDP growth, so it may make more sense to omit it from the group.
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All this irrelevant drum-beating about "savings rates" shows an ignorance of fungibility. It matters not one whit whether I put my money in a savings account (and somebody else invests the pooled cash), or I put my money directly in the investment.
Why do government officials fret so over whether the investment is direct or indirect via savings (save whether there're savings to measure)? Maybe some of our economists need to study the dynamics of money.
Posted by: Carol Anne Ogdin at June 20, 2005 11:32 AM