The idea of GDP is simple: the summation of what is produced within the UK avoiding any double counting. It is used to assess how well the economy is doing overall. For the government of the day, growth is good because it suggests we will all be better off. Though GDP is a very imprecise measure, it is one that most people broadly accept.
The economy used to be measured by gross national product (GNP). That measured what UK-owned assets produced, irrespective of where they were in the world. But GNP fell out of favour as UK owned assets were sold to foreign investors with the result that the economy, by that measure, appeared to be in decline. Successive Chancellors tried to make out the sale of UK owned assets was good, because it showed UK was ‘open for business’. But it didn’t really wash. So, since the 1980s, GDP has been the standard measure.
GDP is calculated by simply adding the product of various sectors together as if they were all of equal worth. But in truth some sectors benefit the common good and others are predatory on the common good. But if GDP is growing the government of the day takes credit for successful economic management, irrespective of the fact that it is the predatory components that have grown at the expense of the good sectors.
Continue reading The Great GDP Deception
