GDP PROBLEM
No. Don’t get me started. In a short article like this, there’s not enough time to go into everything. But here are a few points, all of which are covered in much greater detail in my book, The Growth Delusion: Wealth, Poverty and the Well-Being of Nations.
In fact, this was the slowest growth since January to March 2013, when the economy had grown at 4.30 percent, when Manmohan Singh was prime minister. The economic growth during the period April to June 2019, had come in at 5.01 percent.
While in Italy in 2010, I was invited by the Head of the Italian Statistical Institute to a gathering of statisticians and economists aimed at discussing the limits of GDP and identifying potential alternatives. This was just after the so-called Stiglitz Sen Fitoussi Commission had released its report on measuring economic performance and social progress. I had been questioning GDP myself for a few years, and during the gathering I realized that, while many economists had tried to replace GDP for years, nobody had ever analysed the very politics of GDP.
GDP's inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two. For seven decades, gross domestic product has been the global elite’s go-to number. Fast growth, as measured by GDP, has been considered a mark of success in its own right, rather than as a means to an end, no matter how the fruits of that growth are invested or shared. If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it.
Also, even within the sector, the growth was primarily driven by public administration, defence and other services, which grew by 11.61 percent. This is basically nothing but the government spending more. There has been a considerable slowdown in trade and financial services.
The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics.
Most of us understand GDP as the measure of a country’s economic output, expressed as a single monetary value. But it’s more than that. GDP, and how fast it is growing, is the universal indicator of development, wellbeing, and geopolitical strength. Positive GDP growth is every government’s goal.
View all articles by Mark Thoma on CBS MoneyWatch» Mark Thoma is a macroeconomist and time-series econometrician at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has worked on political business cycle models. Mark is currently a fellow at The Century Foundation, and he blogs daily at Economist's View.
In late December, this disconnect was addressed with the passage of the 2017 Tax Cuts and Jobs Act. By lowering the corporate-tax rate to a globally competitive level and granting better terms for repatriating profits, the tax package is expected to shift corporate earnings back to the United States. As a result, the divergence between GDP and GNI will likely close in both the US and Ireland, where many major US corporations have been holding cash.
Bhutan has a Gross National Happiness Commission, chaired by the prime minister, which screens all new policy proposals put forward by government ministries. If a policy is found to be contrary to the goal of promoting gross national happiness, it is sent back to the ministry for reconsideration. Without the Commission’s approval, it cannot go ahead.
In fact, this was the slowest growth since January to March 2013, when the economy had grown at 4.30 percent, when Manmohan Singh was prime minister. The economic growth during the period April to June 2019, had come in at 5.01 percent.
While in Italy in 2010, I was invited by the Head of the Italian Statistical Institute to a gathering of statisticians and economists aimed at discussing the limits of GDP and identifying potential alternatives. This was just after the so-called Stiglitz Sen Fitoussi Commission had released its report on measuring economic performance and social progress. I had been questioning GDP myself for a few years, and during the gathering I realized that, while many economists had tried to replace GDP for years, nobody had ever analysed the very politics of GDP.
GDP's inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two. For seven decades, gross domestic product has been the global elite’s go-to number. Fast growth, as measured by GDP, has been considered a mark of success in its own right, rather than as a means to an end, no matter how the fruits of that growth are invested or shared. If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it.
Also, even within the sector, the growth was primarily driven by public administration, defence and other services, which grew by 11.61 percent. This is basically nothing but the government spending more. There has been a considerable slowdown in trade and financial services.
The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics.
Most of us understand GDP as the measure of a country’s economic output, expressed as a single monetary value. But it’s more than that. GDP, and how fast it is growing, is the universal indicator of development, wellbeing, and geopolitical strength. Positive GDP growth is every government’s goal.
View all articles by Mark Thoma on CBS MoneyWatch» Mark Thoma is a macroeconomist and time-series econometrician at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has worked on political business cycle models. Mark is currently a fellow at The Century Foundation, and he blogs daily at Economist's View.
In late December, this disconnect was addressed with the passage of the 2017 Tax Cuts and Jobs Act. By lowering the corporate-tax rate to a globally competitive level and granting better terms for repatriating profits, the tax package is expected to shift corporate earnings back to the United States. As a result, the divergence between GDP and GNI will likely close in both the US and Ireland, where many major US corporations have been holding cash.
Bhutan has a Gross National Happiness Commission, chaired by the prime minister, which screens all new policy proposals put forward by government ministries. If a policy is found to be contrary to the goal of promoting gross national happiness, it is sent back to the ministry for reconsideration. Without the Commission’s approval, it cannot go ahead.
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