To GDP or not to GDP

We have been bombarded with media reports of the UK’s recent increase in GDP as a sign of the new economic prosperity. Chanting this magic mantra is the new age therapy for most politicians. So what is ‘GDP’ and how relevant is this to the real growth of a state.

Gross domestic product or GDP is a measure of a country’s economic activity, namely of all the services and goods produced in a year according to the BBC. Bloomberg offers another way of looking at GDP as a process that ‘offers a value of marketed goods and services produced in a country in a given time frame’

Robert Kennedy once said that GDP ‘measures everything except what makes life worthwhile’. Ironically this is so true of the way the term GDP has been repeatedly abused.

My mapping below gives some of the key aspects of GDP which you can read further  (whilst on coffee or something more sinister and deadly fueled) on a trawl of the internet.

Looking at this map, we can see that the news that the UK will spend £2.5bn on buying new F-35 fighters will certainly add to the GDP whilst ignoring the fact that 20000 children in the UK spent Christmas without presents and ‘real’ food (read the story here http://bit.ly/1m4kTYm ). This dire fact will not be picked by the GDP chanters. It will also hide the fact that the UK trade indicators presented a deficit of £7.7 billion on goods while we recorded a surplus of £6.7 billion on services, a vast chunk of it from the financial sector.

While the media gloats over the rise in GDP, let us reflect on what is driving GDP rise in the UK.The new spurt is the UK economy is led by rising house prices, artificial buoyance in the market and optimism created by the various help to buy schemes. One of the direst projections comes from the telegraph blog by Jeremy Warner (read it here http://bit.ly/1ogWDRq) that seems to indicate we have lost the capacity to grow the UK economy any bigger. He also warns business investment in the UK has been stagnating over 15 years and this cannot be a source of new GDP. The office of national statistics also confirms this by adding that the value of both UK exports and imports has remained flat since mid-2011 (read it here http://bit.ly/1fXu59z ) .

Quoting Hamlet, I leave you to decide on whether ‘tis nobler in the mind to suffer’ further abuses of the GDP measure or ‘to take arms against a sea of troubles’ caused by the misuse of GDP.