Delaware’s economy is shrinking, but it does not have to
By Jane Brady, Co-Chair
You are probably familiar with the term “gross domestic product.” That is a figure that represents the total value of the goods and services produced by businesses in a country or a state. The gross domestic product takes into account the productivity of an economy, measured by the creation of products or services over a particular period of time. Generally speaking, that figure represents the value of the products and services to the people who created them and to those who will be using those products and services. Governments and citizens like to see the value of those products and services grow over time as the workforce increases or technology advances production. The increase in gross domestic product reflects a growing economy, which produces more jobs, new and different products, and prosperity.
In times of inflation, however, the value of those products and services is diminished by the higher prices that people are required to pay. The increase in price does not represent any increase in value but rather, simply the reality that consumers are paying more for the same item or service. In those instances, there is a calculation that can be made to reflect that overpricing, resulting in a figure which is called the “real domestic product.” That figure, then, more closely measures the economic activity of the country or state. In times of significant inflation, that figure can sometimes even be a negative number, representing the fact that the economy, despite a larger number, is not growing but is, in fact, shrinking.
Even before the COVID pandemic, in 2019, Delaware’s economy was expected to grow at 0% – that is, we were not expected to increase our gross domestic product in the State of Delaware at all. Pretty bleak. The reality today is much worse. When you take into account the current gross domestic product for the state of Delaware, and you include in the calculation the impact of inflation on consumers’ buying power, the real gross domestic product is down 8.7%, that is -8.7%. This figure is supported by research from the Caesar Rodney Institute and also by the St. Louis Federal Reserve, which makes calculations of gross and real domestic product for the country and each state.
The United States has the largest gross domestic product in the world. Delaware is perfectly situated geographically to be a much bigger part of our nation’s production and export story. But our state’s business policies are putting us behind. We need leadership that is going to be creative and innovative in restoring our manufacturing base, bringing good-paying jobs back to Delaware; to look at the opportunities in the Coastal Zone to make Delaware a player in the increased interest in returning the manufacture of vital medicines and technology back to the US. And, we need to support the current reality – increasingly, most of the new businesses in Delaware are small businesses – many employing 5 or fewer people.
Delaware has a proud history of leadership in business and driving our nation’s economy. Our objective should be to bring prosperity to Delaware families by renewing our role as a leader in the business world.