this post was submitted on 08 Oct 2024
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During WWII they invented the concept of gross domestic product to quantify a country's ability to wage war. The higher the GDP, the bigger the military it could support.
GDP is a measure of how much economic activity there is. If I pay you and then you pay someone else and then that person pays me the same amount we've increased the GDP without actually doing anything. So the US, knowing this was their key performance indicator, set about increasing GDP.
So they make everyone buy a car, then gas, then service, then insurance instead of building rail infrastructure. The same goes for child care: If you make it so both parents have to work and pay someone else to watch their kids that's a much bigger boost to GDP than one or even both parents being able to stay home and raise their kids. Having everyone in a suburb have to buy their own lawnmower and trimmer and grill and stove and washer/dryer and dishwasher also boosts GDP way more than sharing things.
Plus there's the fact that cars require a lot of the same technologies and factories as a lot of war materiel. If we were ever to be in another global conflict we'd need to build all the guns and trucks and uniforms at home, and without a strong car industry we'd have to start a lot of that from scratch.
But we've got the biggest GDP in the world so I guess that's something.
Thank goodness the UN and the World Economic Forum have started talking about replacing GDP with a measure of economic activity that takes human well-being into account. That was one of the points at the Summit of the Future a could weeks ago. Better late than never.
You're kind of right that GDP is strictly a measure of economic productivity, and a lot of people look at it to represent a lot of other things like the size of the economy, the health of the economy, how well citizens are doing, etc.
However, you are dead wrong on this point:
It's possible that, you've "increased the GDP without actually doing anything" if you're each not doing anything actually useful (see the broken window fallacy). However, in most case, each of those steps resulted in a useful service or product.
I dunno if I'd say that, really. "useful service or product" is inferring a lot about the context in which these transactions are done, it doesn't really open up the box, there. Is gambling a useful service to have access to, for instance? What about, say, setting everyone about buying a big suburban house, a car, running out a ton of asphalt to these places, putting out utilities to them that are both financially insolvent in the abstract and also take up too many resources for what they are? Like, I dunno, if we're considering the alternatives, there, which incur much less consumption, and thus, much less trade, the alternatives that cost a whole lot less, I would say that the idea that this is a useful measurement really at all begins to totally fall apart. I dunno. I maybe wonder if, say, free healthcare might be thought to decrease the GDP of a country simply because less money is being thrown around.
Man I really wish all that conspiracy rambling was real. As misguided as it would be, it would show a ruling class with political direction and effectiveness. I’d be happier if that was the reality - even if everything you said was true - over the mindless chickens we have wandering around our collective political landscape.
A bunch of mindless chickens chasing GDP would have the same effect
Wrong. This transfer of funds would be taxed in some form or the other. GST if u r a registered business. If u aren't, it would come under personal income tax. Therefore, it would not be profitable for you to do this money exchange without expecting something in return. If you say that you simply enjoy seeing cash change hands, then u r generating value. U r getting pleasure in return of doing this experiment. Soooo that does come under GDP.
Now of course, GDP shouldn't be the only metric you judge a country by. It's clearly very flawed in measuring stuff like quality of life per person, wealth inequality and so on. However, it doesn't mean that you should completely ditch it either. It certainly has its use case when trying to understand the economy of a country.
Wrong. Most jurisdictions have Value-Added Taxes, including I'm pretty sure all places that call their sales tax GST (Goods and Services Tax). In the given scenario, as long as the businesses were making those purchases (as business expenses), they would take the taxes paid as ITCs (Input Tax Credits), and be left will a GST bill of NIL.
Source: Here's Canada's info on ITCs. It's pretty similar in other jurisdictions.