Who Cares about Savings?--Part I

Michael Mandel

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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