Hugh on GDP

GDP or Gross domestic product is a statistical measure that is used to evaluate the condition of a countries economy. Simply stated, Gross domestic product is the monetary value of the final goods and services produced by a country. In evaluating the health of a country’s economy, people look at whether the output of the country is causing economic growth or whether it’s doing little to nothing for the country’s economy. When a country’s output is on the rise, consumers are buying more products or spending a large amount of money on varying services, when outputs are on the decline consumers are not spending as much. It is thought that GDP is a measure of how healthy a country’s economy is; a more accurate statement would be that GDP is really a measure economic growth and sales in terms of production. For a deeper understanding of what goes into evaluating a country economically, is to understand all of the parts that make up how GDP is calculated.  As indicated above, the largest part of figuring GDP is measuring the consumption of durable and non-durable goods and services.  Another important part of figuring a nation’s GDP is measuring its different investments by both businesses and consumers, this type of investment is not the movement of existing assets, but the investment and production put into the creation of new assets. The last two major components are the measure of government spending, and the country’s exports minus their imports. (Callen) As Americans we have a high GDP, in fact we have the highest GDP, because we are a massive nation and we are packed with thousands of massive international corporations, and we also use many of the resources we own already. Smaller countries tend to have lower GDP because trade isn’t on the same scale as larger countries, they also (for the most part) don’t have as large a population or as many natural resources.   

Countries with some of the highest GDP figures are the United States, China, Japan, Germany, France, Brazil the UK and Italy. (Statistics Brain) Ironically, almost all of the countries on this list of highest GDP also have some of the highest economic debt. (Williams) What GDP does not take into consideration are all of the negative effects that come with all of the international and nation-wide spending done. For example, the money spent on cigarettes is included in a country’s GDP, but what is not considered in the calculations, are the negative health effects that the product has on the population. So in reality although the GDP will have gone up because of the sale of cigarettes, as well as the money being spent on the medical care of those who develop an illness due to the use of cigarettes; what is not considered is the overall health of the population.   Another example is if there were some sort of epidemic to plague the U.S., and 75% of the population became infected and needed medical care, this would cause the country’s GDP to skyrocket, because of the money being spent on providing care for those who are sick. Although the GDP would have risen immensely, a very large portion of the workforce would be unable to work, and the countries production and sales of goods and services would diminish rapidly. Another way a country’s GDP can grow is if a country builds an excess of houses, this investment increases GDP as measured and can divert resources and energy from something society might need more. Although the GDP system may be the most effective way to accurately measure a country’s economic success, it is still a broken system. However, even though the system is flawed, it still works for the most part, which is why we use it. The only way a new system will be implemented is if it were able to more accurately measure the positive growth factors and not include all of the negative growth factors. Because GDP is an international standard, this type of change would be a huge challenge and right now, it isn’t worth a single country’s time or money to change an international system that works okay.

Citations

“Countries with the Highest GDP – Statistic Brain.”
2013 Statistic Brain Research Institute, publishing as Statistic Brain.
February 19^th, 2014
http://www.statisticbrain.com/countries-with-the-highest-gdp/

Callen, Tim.  “Gross Domestic Product: An Economy’s All” Finance & Development Magazine. International Monetary Fund.  March 28, 2012.  February 19^th, 2014  https://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm

Kurtzleben, Danielle.  “The 10 Countries with the Most Debt” US News and World Reports.                                                                                                             

January 28, 2011.  February 20^th, 2014

http://www.usnews.com/news/articles/2011/01/28/the-10-countries-with-the-most-debt

Williams, Ray.  “Why the GDP Is Not An Good Measure of A Nation's Well Being”  Psychology Today

September 12, 2013. February 20^th, 2014

http://www.psychologytoday.com/blog/wired-success/201309/why-the-gdp-is-not-good-measure-nations-well-being