Potiphar12's Blog
An Octogenarian in the modern world

GROSS NATIONAL PRO

I don’t understand why there is so much fuss about the UK economy growing faster than many other countries. Does not this euphoria ignore other measures? GDP is, I believe, the sum – by value – of all the economic activity in a country. The Internet tells me that GDP is made up of Consumer Spending plus Investment plus Government Spending plus or minus the difference between Exports and Imports. So an increase in GDP sounds OK. But the formula means that a big increase in consumer spending might disguise a serious alteration in the Import/Export balance. We might be up five billion, for instance, in consumer spending but down three billion on Import/Export, and be showing growth of two billion. Does this matter? If we ignore it, then it matters a lot because it means that foreigners want what we have to offer less than we want what they offer. They would find it easier to do without us than we would find it to do without them.

Push the argument to the extreme and you can imagine a situation in which we make and buy and dispose of more rubbish goods each year: goods that we buy and foreigners don’t. And we build more factories to make rubbish goods each year. So our GDP grows and our standing as a nation fades, And don’t forget that some of the government spending is borrowed money anyway. i could ask an economist about it, but then the next one I asked would give me a different answer.

We surely need to focus much more on the goods and services that the rest of the world wants. Too much of the talk concentrates on the domestic scene.

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