Friday, July 17, 2015

Comparison of the Wealth of Nations: The 2015 Update

Yup, it’s that time of year again. A few weeks ago, BP released their latest updates for the production and consumption of energy throughout the world. (These links go to the previous posts on this subject made in 2011,  in 2012, in 2013, and in 2014 on the Wealth of Nations.) One thing to note is that, this year, I've added five countries to the list of countries analyzed: Saudi Arabia, South Korea, Indonesia, Mexico, and Italy. This now means that all 15 countries with the largest GDP PPP (as of 2015) are included in this analysis. (The next 3 largest countries would be Iran, Turkey, and Spain, which I would like to add next year to the analysis.)

Here are some conclusions before I get into a detailed breakdown of the analysis for this year.

(1) The US economy (as measured in [TW-hrs] of useful electrical and mechanical work produced) increased by 1.0% in 2014. 
(2) Many countries had negative growth rates in 2014: Mexico (-1.5%), Canada (-1.8%), Germany (-2.3%), France (-2.7%), Japan (-3.0%), Italy (-4.0%) and the UK (-4.8%). This was a particularly bad year for the UK as far as generating useful work. There were two countries with near-zero growth rates: South Korea (0.0%) and Russia (0.5%.) The major countries with the highest growth rates were: China (3.3%), Indonesia (3.6%), Brazil (3.7%), Saudi Arabia (7.4%), and India (7.8%.) This was a particularly good year for India and Saudi Arabia, which is one reason that Saudi Arabia is now on my list of countries to analyze. (Another reason is that it's economy is very different than other countries I analyze, so it'll be good to see how their useful work generation compares with their GDP PPP.)

(3) The purchasing power parity GDP (i.e. PPP GDP) remains a pretty good reflection of a country's capability to do mechanical and electrical work. However, there are still some countries who generate a lot more useful work [TW-hr] than they are given credit in their GDP PPP. These countries are: Canada, South Korea, and Saudi Arabia. However, there are a number of countries whose GDP PPP is significantly higher than their generation of useful work: Indonesia, Italy, UK, Germany, and India. Of these, Indonesia has the widest gap between their GDP PPP and their generation of electrical+mechanical work. It's not clear to me why there is such a difference between Canada and Indonesia. As I'v mentioned before, if I were a Canadian representative for the IMF, I would voice my concern that the IMF is underestimating the size of the Canadian economy by at least two fold.

So, now I'm going to present a more detailed breakdown of the analysis and present the data in graphical form. 

First, I've calculated the total amount of work generated per year in each of the major economies. I calculated the total amount of work as: the electricity generation plus the amount of mechanical work (as estimated by the average fuel efficiency of vehicles in the country). This fuel efficiency was a function of time and varied from country to country. As seen below, the US generated the most amount of total mechanical and electrical work in the world until 2011, at which point in time it was surpassed by China. Japan’s economy was the third largest back in 2000, but it has since been surpassed by India’s. Brazil is growing rapidly and is now starting to work its way out of the clump of countries that generate ~1000 TW-hr of useful work per year. The country with the least amount of useful mechanical work was Indonesia (out of the 15 countries analyzed.) 


(a)

 (b)

Figure#1: Total Work Generation 2000-13  (a) Linear Scale (b) Log Scale

The next graph (below) plots the yearly rate of return on useful work invested in 2014. This is the growth rates listed above in the summary section. As mentioned earlier, China, India and Brazil put in the best performances, followed by Canada and the US. Japan is feeling a hangover from shutting down its nuclear power plants, but I’m not really sure why the UK is performing so poorly. This may be a hangover from hosting the 2012 Summer Olympics, but I’m not really sure. 


Figure#2: Rate of Growth of Useful Work in 2014

Figure#3 (below) plots the average yearly rate of return on work invested between 2000 and 2014. The equation used to determine the rate of return was: 

 [(Work Generated in 2014) / (Work Generated in 2000)]1/14 – 1

This graph shows the long term average growth rates, and once again, we see that China, India, Brazil, Saudi Arabia, South Korea, and Indonesia have been doing well over the last fourteen years. Russia and Mexico have been doing so-so over the last fourteen years, but I expect to see a major drop in the size of the Russian economy in next year’s analysis (due to the ramification of invading the Ukraine and a hangover from the 2014 Winter Olympics.)



Figure#3: Average Yearly Rate of Growth of Useful Work 2000-2014

None of the other countries has a rate of return on work invested greater than 1%/yr. The U.S., Canada, Japan and E.U. have had virtually stagnant economies over the last fourteen years.  Yes, I would call a 0.5%/yr rate of return on investment a poor showing for the US over this time period. This has been a lost decade economically for those of us living in the US. We should be aiming for at least 5%/yr if we want to keep up with China. But this will not be easy because (a) we need to limit our CO2 emissions and this likely involves investing in energy technology with lower rates of return on investment compared with traditional fossil fuel technologies, (b) we have an aging population, and (c) we seem reluctant to cut government waste for fear of the friction associated with going from dependency on the gov’t to being hired by the private section. Note that in (c), it goes both ways. Politicians seem reluctant to cut government waste and people dependent on government funds seem reluctant to move into the private section.

But let's move on and discuss the following graph, which shows the total amount of electrical and mechanical work generated in 2014 on the x-axis and the 2014 GDP PPP in Trillions of $USD on the y-axis. The GDP PPP is the average value calculated by the IMF, the World Bank and the CIA. The data was taken from the following wiki site on List of countries by GDP (PPP).



Figure#4: 2014 GDP PPP (y-axis) vs. 2014 Useful Work Generation (x-axis)

The black curve above is a power-law distribution line through all of the data. It should be noted that the value of the exponent that best fits the data is not 1.00, which it should be in theory. The value is only 0.85, which means that something is wrong either with my analysis, with the way that the IMF/World Bank/CIA estimate the size of world economies, and/or some combination thereof. 
The green curve above is the best-fit linear equation that goes through the data. which would be the case if an economy could be completely described by it's total generation of useful mechanical and electrical work. The coefficient in this equation is 2.33, which means that one can get a rough estimate of the GDP PPP in [Trillion$U.S. 2014] of a country by multiplying its total generation of useful mechanical and electrical work in [TW-hr] by the factor 2.33.

With the exception of South Korea, the countries well below the black curve are oil exporting countries (Saudi Arabia, Canada, and Russia.) But there are a number of oil exporting countries above the black line (Indonesia, Mexico, and Brazil.) So, it's not clear to me why there is still a lot fo scatter in the data points in Figure#4.

To make it easier for people to work with the data I've shown above, I've created data tables of my estimate of the Useful Electrical Work (just the electricity generation estimated by BP), the Useful Mechanical Work (my estimate of how much mechanical work is generated by cars/trucks/machines, and the sum total of each two.

TWh of Electricity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US 3990 3924 4050 4076 4168 4257 4266 4365 4325 4147 4331 4302 4249 4269 4297
China 1356 1481 1654 1911 2203 2500 2866 3282 3496 3715 4207 4713 4988 5432 5650
Japan 1058 1040 1058 1083 1108 1153 1164 1180 1184 1114 1156 1104 1107 1088 1061
Russia 878 891 891 912 932 954 992 1019 1040 993 1038 1055 1069 1059 1064
India 555 575 592 624 658 690 739 798 824 870 922 1006 1054 1103 1208
Canada 599 582 595 580 587 614 601 620 617 592 582 600 610 626 615
Germany 577 586 587 607 615 621 637 637 637 592 629 613 630 633 614
France 541 550 559 562 573 575 575 570 564 542 573 564 561 568 556
UK 377 385 387 398 394 398 397 397 389 377 382 367 363 359 335
Brazil 349 329 346 364 387 403 419 445 463 463 516 532 552 570 583
Saudi Arabia 126 134 142 153 160 176 181 191 204 217 240 250 272 284 304
South Korea 290 310 332 348 368 389 403 425 443 452 495 518 531 517 518
Indonesia 93 102 108 113 120 127 133 142 149 157 170 183 200 216 227
Mexico 204 210 214 217 231 242 250 257 262 261 271 289 297 289 290
Italy 277 279 284 294 303 304 314 314 319 293 302 303 299 290 278

TWH of Mechanical Work 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US 2644 2641 2681 2729 2841 2864 2851 2896 2797 2698 2776 2784 2733 2802 2843
China 1211 1251 1347 1506 1726 1868 2024 2155 2192 2262 2450 2614 2695 2781 2836
Japan 675 660 657 682 672 687 670 658 648 588 601 611 651 634 611
Russia 399 410 402 422 418 418 436 441 460 440 462 497 514 516 519
India 395 402 424 441 463 484 515 560 599 638 666 711 771 805 853
Canada 265 272 280 293 303 304 305 313 312 296 318 324 325 331 325
Germany 334 342 336 336 338 340 350 329 346 342 356 351 350 352 349
France 251 256 251 256 261 261 263 262 265 258 256 249 246 246 237
UK 251 253 253 257 267 270 268 263 263 251 255 240 240 237 234
Brazil 245 250 253 252 264 275 283 308 337 338 374 386 399 433 459
Saudi Arabia 201 209 217 233 254 260 273 290 318 342 371 379 403 410 443
South Korea 258 262 270 276 277 281 285 297 290 293 305 313 325 328 327
Indonesia 146 150 159 163 171 170 167 172 176 182 198 212 217 215 219
Mexico 230 229 225 235 247 259 262 268 271 269 271 281 290 288 279
Italy 258 258 260 265 263 261 262 257 250 235 234 226 210 200 185

TWh of Total Useful Work 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US 6634 6565 6731 6804 7009 7121 7118 7261 7122 6845 7107 7086 6982 7071 7140
China 2567 2731 3001 3417 3930 4369 4889 5437 5688 5977 6657 7327 7682 8213 8485
Japan 1733 1699 1715 1765 1780 1840 1834 1838 1832 1702 1757 1715 1758 1722 1672
Russia 1277 1302 1293 1334 1350 1372 1428 1460 1500 1433 1500 1552 1583 1575 1583
India 950 977 1017 1065 1121 1173 1253 1358 1423 1508 1589 1717 1825 1908 2062
Canada 864 854 875 873 890 918 906 933 929 889 900 925 935 957 940
Germany 911 928 923 942 953 961 987 966 984 935 985 964 980 986 963
France 792 806 811 818 834 836 838 832 829 801 829 813 806 814 792
UK 628 638 640 655 661 669 666 660 652 628 637 608 604 597 569
Brazil 593 579 598 616 651 678 703 753 801 801 890 917 952 1003 1042
Saudi Arabia 327 342 359 386 414 436 455 481 522 559 611 629 675 694 747
South Korea 549 572 602 624 645 671 688 722 732 745 800 830 856 845 845
Indonesia 239 251 267 276 291 298 300 315 325 338 368 395 417 431 446
Mexico 434 439 439 452 479 501 512 525 533 530 542 569 586 577 569
Italy 534 537 545 558 566 564 576 571 569 527 536 529 509 489 463


And now, just like how I ended last year’s post, I'd like to end this post on both a positive and a negative note:  We all have the capability to change our habits and return to growth, even while reducing greenhouse emissions in the atmosphere. We just need to invest the electrical and mechanical work we spend on projects that can yield higher rates of return on work invested. Don’t spend money just to give people a job. All money can be used to give somebody a job. The question is: does that job help grow the production of useful work? If not, there will be less and less useful work available, which means that our lives will be harder, less enjoyable, and eventually will mean that there is less useful work to spend on science and space exploration.

Also, I want to point out that this underlying cycle of growth (i.e. power plants, chemical refineries, steel mills, oil&gas drilling, coal mining, as well as the factories that build the equipment used by these companies) needs to eventually switch to being near-greenhouse-gas-emission-free. We are still far-away from having the entire economy be greenhouse-gas-emission free, but we are making baby steps in this direction, but much more action to limit greenhouse gas emissions is needed.

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