An Agrarian Take on US Economic Malaise

Understanding the current era of US economic malaise lies, at least in part, with the most basic of American enterprises - the production and marketing of food.   A historical, even defining feature of economic growth has been a decline in the share of expenditures that consumers devote to food and food services (hereafter food). However, since 2002 for the US, Engel's Law, so named for the economist who first observed it, has not held. Real inflation adjusted Gross Domestic Product (GDP) has increased by 27%, but the share of consumer expenditures spent on food has flat-lined at 11.8%. In contrast, between 1955 and 2002, a period that post-dates the dislocations associated with the World Wars and Great Depression, the share spend on food declined from 23.5% to 11.8%, or on average by 0.25 percentage points per year. As the share spent on food declined between 1955 and 2002, the share spent on medical care and a category of other goods and services grew notably. Medical care's share has continued to grow at about the same rate since 2002; but, as with the share spent on food, the share spent on the other category has changed little (see Figure 3). The other category is diverse. It ranges from cosmetics and jewelry, to education, electronics, recreation and travel. Not being able to spend a greater share on these discretionary goods and services that reflect individual preferences and life styles has likely frustrated consumers and helped create a sense of economic malaise.