is your argument that you want GDP to be a useful number to measure our economy again and that's it?
Quite the opposite!
GDP is
the international measure of the health of a country’s economy.
In most countries, GDP and GNP are closely aligned so that it maters little which measure is used.
But in Ireland, because of multi-national activity, such as the “on-shoring” of intellectual property to Ireland in 2015 thus adding it to Ireland’s capital stock, there is a growing divergence between the two, in other words between real and artificial growth.
Because of IP shifting and other self-styled multi-national activity, in 2015 Ireland’s GDP was revised upwards from 7.8% to a record breaking 26.3%.
In reality, it was nowhere near that, leading to accusations of “leprechaun economics” by Paul Krugman and derisory dismissals of our GDP growth by others.
But the distortion in GDP growth led to a potential increase in Ireland’s EU Budget Levy by an extra circa €380m per annum except for a government appeal to use GNI instead.
Most of the growth, artificial or otherwise, concentrated in Dublin. But even in Dublin, most people didn’t feel the benefit of any increased wealth.
As for those in the rest of the country, could anyone blame them for feeling marginalised in a period of so-called unprecedented growth.
Using GDP as a measure gives the impression that our economy is much healthier than it actually is.
In calculating the national debt, current & projected future shortfalls in the Social Insurance Fund and Ireland’s Stability Programme, to give just three examples, it is important that the correct measure is used to inform decision making.
In fact, the only poster I’ve seen mention the Stability Programme was
@Sarenco, perhaps others did that I missed.
To illustrate, the
debt to GDP ratio is projected at
66.0%, whereas the
debt to GNI, a better measure that filters out multinational activity, is projected at
97%. –
source, page 3 – leading the Finance Dept to caution “This highlights the importance of the Government’s strategy of implementing prudent budgetary policies designed to further reduce the elevated burden of public debt.”, policies that
@Brendan Burgess has been advocating for some time.
It is difficult to fully iron out GDP distortion by multi-nationals. It was noticed
worldwide in 2015 because it was huge but it happens to a greater or lesser extent every year.
I am not saying that multi-nationals are not important, but their importance to domestic growth can be exaggerated by using incorrect measurements.
Despite this, I regularly hear politicians using GDP in order to gild the lily. I suppose old habits die hard and there is a danger of their reverting to profligacy.
or what am I misunderstanding here? If employment is high, income is high, inequality is some of the best in the world (but lots of work to do), quality of life is high etc. do we really care if "GDP is no longer a reliable measure of our economic performance" once we know this to be the case? Again if I'm missing your point please say