the GDP Lie

Zynks

GDP vs GNP according to Wikipedia:

Gross domestic product (GDP) is defined as the "value of all final goods and services produced in a country in one year".[1] On the other hand, Gross National Product (GNP) is defined as the "value of all (final) goods and services produced in a country in one year by the nationals, plus income earned by its citizens abroad, minus income earned by foreigners in the country".[2] The key difference between the two is that GDP is the total output of a region, eg. United States, and GNP is the total output of all nationals of a region, eg. Americans.

Funny how the GDP vs GNP has been used extensively to distort figures about our economy in recent years. When the government wants something to look cheaper the say % of GDP, and GNP only comes into the picture when it suits them.

Ireland has probably the largest difference between GDP and GNP in Europe (about 20%) because of all the multinational here. The revenue of these companies shows on GDP, but not on GNP.

The most worrying thing is how the two measures are really performing. I just found this in the CSO's Quarterly National Accounts published on 18 December 08:

I consider GNP to be a far more realistic view of where we stand as an economy. Unfortunately this also means that we are in a much deeper hole than we realise, but for the sake of truthfulness, maybe the government should be more honest in how it reports its data.

OhNoYouDidn't

GNP should be taken as a measure of national wealth.

GDP should be used for growth measurements.

Its quite simple.

SkepticOne

OhNoYouDidn't wrote: »

GNP should be taken as a measure of national wealth.

GDP should be used for growth measurements.

Its quite simple.

GNP should probably not be used for growth measurements either, imo, due to our status as a sort of corporate tax shelter.

puglover

There is very little difference between GDP & GNP in most countries because the value of goods exported & imported more or less cancel each other out.

In Ireland, due to the fact that we have such a huge amount of foreign national companies trading here who are sending profits back to their parent countries it would be misleading to use GDP as a measure. Therefore Irish economists always use GNP.

When the Government use GDP figures it is a tactic to make the Economy look more bouyant.

OhNoYouDidn't

puglover wrote: »

There is very little difference between GDP & GNP in most countries because the value of goods exported & imported more or less cancel each other out.

In Ireland, due to the fact that we have such a huge amount of foreign national companies trading here who are sending profits back to their parent countries it would be misleading to use GDP as a measure. Therefore Irish economists always use GNP.

When the Government use GDP figures it is a tactic to make the Economy look more bouyant.

None of the above is even almost correct. Not even close.

OhNoYouDidn't

SkepticOne wrote: »

GNP should probably not be used for growth measurements either, imo, due to our status as a sort of corporate tax shelter.

I agree. Which is why I didn't say it should be.

puglover

OhNoYouDidn't wrote: »

None of the above is even almost correct. Not even close.

And this is based on what? Can you back up your statement?

OhNoYouDidn't

puglover wrote: »

There is very little difference between GDP & GNP in most countries because the value of goods exported & imported more or less cancel each other out.

Wrong.

Practically every 'first world' economy has a far higher GNP than GDP. The converse is true for less developed manufacturing based economies.

puglover wrote: »

In Ireland, due to the fact that we have such a huge amount of foreign national companies trading here who are sending profits back to their parent countries it would be misleading to use GDP as a measure.

GDP as a measure of what?

puglover wrote: »

Therefore Irish economists always use GNP.

When measuring national wealth levels, yes.

puglover wrote: »

When the Government use GDP figures it is a tactic to make the Economy look more bouyant.

Wrong.

All economists and research agencies everywhere use GDP to measure economic growth. Not just Irish ones.

SkepticOne

OhNoYouDidn't wrote: »

I agree. Which is why I didn't say it should be.

Sorry I meant GDP. GDP should not be used for growth measurements due to Ireland's status as a corporate tax shelter.

SkepticOne

OhNoYouDidn't wrote: »

All economists and research agencies everywhere use GDP to measure economic growth. Not just Irish ones.

Probably a mistake to use GDP to measure economic growth in Ireland.

OhNoYouDidn't

SkepticOne wrote: »

Sorry I meant GDP. GDP should not be used for growth measurements due to Ireland's status as a corporate tax shelter.

I agree Ireland is unique from a GDP perspective, but at the same time, its still economic activity so has to be reflected.

OhNoYouDidn't

SkepticOne wrote: »

Probably a mistake to use GDP to measure economic growth in Ireland.

What alternative measure would you use?

Not a trap or anything, genuine question.

SkepticOne

OhNoYouDidn't wrote: »

What alternative measure would you use?

Not a trap or anything, genuine question.

I don't know to be honest. The problem with GDP, though is that it can be affected by purely by decisions in multinationals to attribute profit to their Irish operation. There need not be any change in genuine economic activity for this to happen. The key thing is to take GDP growth figures with a pinch of salt.

Zynks

About the manipulation of data, have a look at this speach by Mr. Cowen: http://193.178.1.117/index.asp?locID=582&docID=4049

...total Capital investment next year will be €9.2 billion or 5.4% of GNP...

In addition, we also had to consider and make decisions on raising taxes by 2 billion euro in net terms in order to end up with a General Government Deficit of 6.5% of GDP.

In the first figure, he wants to make it look big, so he compares it to GNP. On the second one he wants it to look small, so he compares it to GDP....

They have been doing that for years, and nobody seemed to care, or notice.

turgon

Lies damned lies and statistics, eh?

Zynks

turgon wrote: »

Lies damned lies and statistics, eh?

Your point being...?