On the "sacred GDP" - an indicator of economic growth

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

In this blog, we have repeatedly (for example, in 2014 here or this year here) raised the topic of falsity of GDP in the version of its calculation by the West, which does not prevent the countless tables and ratings with this indicator to have a serious impact on the consciousness and minds of citizens, in incl. and in Russia. After all, it is obvious that various comparisons in terms of GDP are an excellent tool for governing countries and peoples: what they put into people's heads, we expect from them - quite predictable actions.

On the Regnum portal, an article summarizing the topic has appeared, which we bring to your attention.

On the "sacred" indicator of economic growth

At a time of active propaganda, sanctions, "trolls", anti-Russian information and the work of social networks, the question of how to assess the real situation of the country and society is extremely acute.

The numerous man-made revolutions carried out by Britain and the United States in recent decades have clearly shown that relying on the media in this matter is fundamentally wrong.

With a certain impact, it is easy to achieve that a well-living society will sincerely believe that it lives poorly, and countries in conditions of permanent poverty, on the contrary, will continue to endure it for the sake of the illusion of friendship with the collective West.

Before the aggression and the arrival of the United States, Libya flourished, but its citizens were successfully convinced that the state was living fundamentally wrong. Today's Libya is a complete anarchy, but, unlike the times of Gaddafi, it suits the West more than ever.

In this regard, it would be worthwhile for each citizen to independently seek an answer to such a question, but the complexity of the task lies in the fact that it is not so easy to do this.

Usually, the main indicator used to assess the general level of a country's welfare is considered to be the level of its gross domestic product.

The world has long and reliably been taught that it is GDP that is the key measure of people's happiness. For years, the Nobel Committee and its laureates have clothed this message in the form of a "generally accepted" scientific theory, and today it is the GDP growth rate that is considered the main marker of economic growth.

As a result, the world community is accustomed to believe that GDP growth means an improvement in the lives of ordinary citizens, and its decline, on the contrary, means a decline or stagnation. In reality, the current approach to calculating the gross product has the most distant relation to the life of ordinary people …

Judge for yourself, earlier, at a time when the term GDP was only in its infancy, the methods for calculating it were indeed justified. They mainly recorded the list of goods and services that the country's economy created for the needs of people and their consumption.

For example, the formula summed up the cost of clothing, food, transport, housing and communal services, production machines, machine tools and equipment produced in the country, that is, everything that was really needed to create key funds, infrastructure and public goods.

In this form, the GDP said a lot, because if a society consumed more, it means it could afford more benefits, and if such an indicator grew, it means that the country was really developing. The current approach to GDP has nothing to do with the classical one. It is a banal race to see who is capable of the greater scam in his count.

The gross domestic product today is filled not so much with real goods necessary for people as with price speculations around a particular service. Thanks to this, even a country like Britain surprisingly occupies a leading position in the GDP ranking, and this despite the fact that it produces practically nothing.

A logical question arises, how can the Russian economy be much smaller than the British one, if we manufacture spaceships, technological weapons, lead in the field of peaceful nuclear power and the construction of nuclear power plants, launch unique icebreakers and underwater drones, curb hypersound, conduct numerous construction projects and import substitution, are we leading in a number of areas of basic science and at the same time lagging behind Britain in terms of GDP?

Where does money come from in the British economy, if every year London does not increase, but shrinks the real sector of its country? Under Margaret Thatcher, all coal mines in England were closed, under Tony Blair, all steel mills. Today, even the country's submarines, its once proud fleet, are equipped with American engines and American missiles.

The structure of the British GDP gives a simple answer to this - the service sector in Britain accounts for more than 2/3 of its GDP, and the main share in it (about 40%) is occupied by business and financial services. Government services account for 35%, trade 19%, and the hotel business 5%. In other words, 75-80% of Britain's GDP consists of speculation around the assessment of the provision of a particular "virtual" service. Moreover, London writes almost everything in the list of these services.

The United States has gone even further on this issue. Thus, having become the sole hegemon after the collapse of the USSR, Washington made a number of "minor" changes to its calculation formula. In particular, homeowners have since been listed as tenants in US GDP calculations. The justification was that the vast majority of them "own" houses on a mortgage, and therefore, the houses actually do not belong to them, but to banks from which American owners take out a loan.

For a US citizen, such a change in terms did not change much, but this affected the country's gross product in the most striking way. Thanks to the introduced "nuance", the ownership of real estate began to be considered a service, and GDP, as you know, is the sum of goods and services. As a result, all this began to be recorded in the total volume of US GDP, annually inflating its final figure by about 10%.

In 2014, the world's second axis of "developed democracy" - the European Union also decided to keep up with its overseas neighbor. In April of the same year, Brussels for the first time included prostitution and drug trafficking in the EU GDP data. This maneuver alone allowed Britain to increase its gross domestic product by £ 10 billion, not to mention other countries.

£ 3bn a year comes from included prostitution for London, and £ 7bn from the drug trade. The logic is extremely obvious: since GDP is the sum of goods and services, and both are, of course, services, why not include them? After all, GDP growth is also an excellent reason for the PR of politicians.

As a result, over the years of such experiments, when the West itself set the rules and did what it wanted, an extremely absurd situation was formed in the world. Given the current economic realities, it turns out that Russia, which considers prostitution a crime and refuses to include it in the GDP, is behaving unreasonably.

After all, being interested in solving cases, and not in the volume of production of this "service", it deliberately reduces the volume of its GDP, and hence the world rating of the state as a whole. If Britain in the most arrogant and wild way includes the drug trade in its GDP, like the entire EU, by the way, then this is great, since it is generally accepted that GDP growth unambiguously indicates the development of the country and an increase in the standard of living.

In pursuit of these "mythical" indicators, modern GDP has long ceased to evaluate only those goods and a list of services that are really necessary for a good life in society, and began to include everything. Moreover, the more expensive the service, the higher the GDP, since the total amount also grows from the rise in prices. With this approach, if gas prices rise again in neighboring Ukraine, the state's GDP will also grow, the economic bloc will report on its successes, and people, according to this logic, should begin to live well.

In Western countries, everything works the same way. And if, for example, Chinese socks produced in China for 10 cents are sold in the United States for $ 2, then they increase China's GDP by only 10 cents, but the US GDP by $ 1.9. US GDP will grow many times more than China's, but does this reflect the real essence of things?

In a different situation, calculating the same parameter with completely different formulas would be perceived as an unambiguous scam, but not in this vein. The unipolar world wrote its own rules, and due to the absence of a competitor for many years there was no one to cancel them.

Nevertheless, even within the framework of the current "thimble" system, the indicator can be brought closer to the real state of affairs. To do this, it is necessary to calculate not the nominal GDP, calculated in dollars, but to carry out the calculation taking into account purchasing power parity (PPP). That is, without even touching all Western markups and personally American and British "special" formulas, you can get a much more realistic result.

The irony is that the PPP GDP calculation method is also purely official and was also created in the West for its own needs. Along with the classical GDP, it should have been applied when it was necessary to calculate the gross product of a country with a "transition" economy. That is, the GDP of those states where the standard of living, the exchange rate and domestic prices were too different from those in the West.

But from every rostrum, Washington and London refer to Beijing and Moscow as such. In addition, PPP GDP takes into account the dollar exchange rate against the national currency, which is extremely important in our case. Indeed, in 2014, after the depreciation of the ruble by two times, society did not live twice as bad, but according to the GDP rating at face value, it seems that this is exactly what happened.

Russia's GDP in terms of PPP in 2018 amounted to $ 4213.4 billion, and according to this indicator we still occupy the 6th place in the world. Only China, USA, India, Japan and Germany will be ahead. Moreover, in this calculation, Beijing bypasses Washington and ranks first in the world. Actually, this is precisely the main reason why the United States so stubbornly refuses to use it.

For Russia, the sixth place in the world is a good indicator, especially considering the past of our country, the current sanctions and the fact that modern Russia is only a part of the former USSR. After all, we are talking about the sixth position out of 251 states, despite the fact that since the end of the 90s, Russia's GDP in terms of PPP has almost tripled.

If we take the nominal GDP, which is used in its estimates by the Western press, then in current dollars it will be almost three times less for Russia ($ 1571, 85 billion) and, therefore, will throw our country back to 12th place.

But the United States will return to the pedestal of the economic hegemon. That is why all the world media and financial institutions use only the method of calculating at face value, although it is quite obvious to everyone that GDP at PPP is much closer to reality.

In GDP at par, the volume of goods and services produced is simply estimated at the current dollar rate. But after all, in Russia, basic goods are bought for rubles, and the prices for the same services in different countries are completely different. You can buy a kilogram of potatoes in our country for 25-30 rubles, and this will be less than half a dollar, in the United States, for the same 1 kg of potatoes, you will have to pay $ 2. less close to reality, since the West looks preferable against its background.

In fact, with the current method of calculating GDP, it is absolutely not important how it grows - due to the growth of production or the rise in prices for the cost of a service. The second option is even preferable. And if in terms of industrial production (in PPP dollars) Russia in 2018-2019 ranked 4th in the world (or first in Europe), then this does not matter much for Western rankings.

The gross domestic product of most countries that occupy the top lines of the world leadership has long been formed not due to the real sector, but due to price speculation. And this is very convenient, because thanks to such an assessment, it is completely unnecessary to admit that in 2019 Russia is ahead of Britain, Italy, France and Germany in terms of real production, and Canada is even three times higher. It is much more pleasant to say that Russia's GDP in current dollars (at par) is comparable to the GDP of Canada and is inferior to the English one, formed due to the wonders of virtual statistics.

The refusal to take into account prices in Russia, taking into account real purchasing power, is even more remarkable, because it allows us to state from the high tribunes that since 2014 Russia has been thrown back to the 12th place in the world in terms of GDP, which means that the sanctions really work.

In fact, in the capitalist world, the GDP indicator has long been transformed into a figure that fixes almost any income. And the governments themselves, in pursuit of this indicator, have long forgotten what their main goal is. Such realities force states to act not in the interests of the people, but at the same time they perfectly cover the flow of funds.

The race for GDP is a unique screen for satisfying the interests of big capital, and commercial, leasing, consulting, credit and other virtual "services", instead of creating an increase in the social product, perfectly stimulate the flow of funds from the real sector of a particular country into the pockets of banks, funds and financial corporations …