GDP is the best measure we have of our economic wellbeing. When we say, "America is the richest country in the world," what we mean is that America has the world's highest GDP.
Economic experts calculate our nation's GDP, and tell us how much better off we are this year than we were last year. They add up the value of all the things that we do for one another--well, not all the things, exactly, but the ones that are valuable, as witnessed by the fact that someone is willing to pay for them.
For example, if CVS pays an ad agency $10 million to pull customers away from RiteAid, and RiteAid pays another ad agency $10 million to pull customers away from CVS, our nation's GDP rises by $20 million.
Jack can't find a job, so he hires a resume consultant to burnish his resume, and as a result he gets the job instead of Jill. The money he pays to the resume consultant is part of our GDP. If Jill gets smart and hires a better resume consultant, the money she spends on the consultant increases our collective GDP as well, and this is true whether she gets a job or not. An unemployed work force with beautifully-formatted, grammatically impeccable resumes is a greater nation than a nation whose unemployed workforce all has amateurish resumes.
If there are a million people looking for a million jobs, then each one finds a job and the economy churns onward, with no increase or decrease in GDP. But if there are ten million people chasing after a million jobs, they will go back to school, the better to compete with one another. The tuitions paid by ten million unemployed help to put teachers to work and increase the GDP, whether or not the skills they acquire are relevant to the jobs they end up in, whether or not they learn anything in school at all. The company that expands its human resources department because there are more job applications than they have time to read also increases the GDP thereby.
If I break your car windshield and steal the stereo from inside, the $1,000 you pay for a new windshield and the $500 you pay for a new stereo both count toward an increase in our nation's GDP. The alarm system you buy and the money paid to the policeman to investigate and the money paid to cut down the trees so he has paper to fill out his forms in triplicate and the cost of pumping oil from the ground and refining it into gasoline so the thief (me) and the victim (you) and the policeman can all drive around doing these things -- all this contributes to increasing our nation's GDP. So does next year's increase in your insurance premium.
If I organize a volunteer block patrol in my neighborhood that prevents these crimes, these increases in the GDP will not occur.
The programmers who work for Goldman Sachs design computer programs that can buy a stock for $100 and sell it one thousandth of a second later for $100 + 10 cents. These programmers make millions of dollars a year that adds to our GDP. When the programmer at JP Morgan across the street figures out how to do the same transaction in a tenth of a thousandth of a second, he has increased his company's productivity tenfold. Productivity is how we justify our salaries, so this man's salaray will rise. His benefits and the cost of his office and the equipment he uses and his assistant and his business lunch tab all add to our GDP. Goldman will not take this sitting down--they will invest more in programmers next year to take back the lead from Morgan. Productivity goes up and up. Our standard of living rises as a logical consequence.
If Trump's EPA rolls back air quality standards, then less pollution control equipment is sold, lowering our GDP. But have no fear, this will be more than compensated by the increased number of children who come to ERs with complaints of asthma. The increased cost of caring for asthma patients will lead to a net increase in GDP.
If an expert economist gets a $100,000 contract from the Department of Commerce to advise them how to increase the nation's GDP, this contributes $100,000 to our GDP. If I write this article and post it on OpEdNews, our nation's GDP remains unchanged.
How much of the spending that we count towardl our GDP actually goes to support our lives and our comfort and our amusement and our edification? I estimate, about 25%. How much goes to zero-sum competition among people scrambling for the scraps that capitalism has thrown us? About 75%.
Pity the poor country that is surviving with only one fourth the GDP of our great nation. Hungaray, Trinidad and Uruguay are in this pitiful category. I believe the technical term for such a country is, "sh*thole". Hungary is an example of an honest sh*thole, eating its heart out each year that it can't be a rich country like the US of A. Bhutan is the worst example of a hypocritical sh*thole, where they regard "Gross Domestic Product" as sour grapes, and speak of "Gross Domestic Happiness" instead, because they know they can't compete with the big boys.
The Sh*thole of Bhutan - Could anyone be happy in a country like this?
(Image by Bhutan Tourist Board) Details DMCA
I hope this article has helped you to understand how GDP is calculated, and why it is important for the USA to maintain its economic leadership, and why our Department of the Treasury and our Department of Commerce and Federal Reserve Board and Council of Economic Advisors are seeking ever more ways to push our GDP upward. Progress is measured by our GDP.