Not so happy-chappy, John McLaren, knows that a Scottish historian, Thomas Carlyle, described his discipline as a ‘dismal science’ but, undeterred, in the Times today:
‘The Scottish government has been accused of attempting to “bury bad news” after official figures revealed that Scottish GDP has been slashed by 3%, knocking £5bn off the total value of the economy.’
He’s well behind the game on this. Leaving aside the obvious point that Scotland’s GDP is the result of centuries of Westminster control of our economy, sucking all the talent and the profit into the South and impoverishing the North of England, Wales and Scotland in the process, no top economist actually values it any more as a measure of how well an economy is faring.
You see, GDP increases if you have lots of cash flowing around even if it’s in prostitution, gambling and illegal drug consumption! However, to be serious, real leading economists don’t value GDP and have not done so for decades. See these three arguments against valuing it:
First, even the DAVOS elite have turned against GDP. As far back as 2016 they said:
‘Three leading economists and academics at Davos agree: GDP is a poor way of assessing the health of our economies and we urgently need to find a new measure. Speaking in different sessions, IMF head Christine Lagarde, Nobel Prize-winning economist Joseph Stiglitz, and MIT professor Erik Brynjolfsson stressed that as the world changes, so too should the way we measure progress. A country’s GDP is an estimate of the total value of goods and services they produce. But even when the concept was first developed back in the late 1930s, the man behind it, Simon Kuznets, warned it was not a suitable measure of a country’s economic development: “He understood that GDP is not a welfare measure, it is not a measure of how well we are all doing. It counts the things that we’re buying and selling, but it’s quite possible for GDP to go in the opposite direction of welfare.”’
Secondly, from Manchester University:
‘The official statisticians are not the only people who think the quarterly ritual of City economists and commentators making a song and dance about the headline change in GDP – is it 0.2% or 0.3% – is a nonsense. The figure for the change every three months is the outcome of a very complicated process of collecting data from many different sources, adjusting it for seasonal changes, summing it, adjusting for inflation and so on. The inevitable margin of error is sometimes bigger than the headline number. Revisions occur frequently. With hindsight, recessions can be revised away.’
Thirdly, from real professor Richard Murphy at City University in London:
‘There will, no doubt, be those saying that low GDP growth (and none in terms of GDP per head) is bad news for Scotland. This, though, assumes that, first of all the GDP data is right, and second that GDP matters. There is no way we can be sure that the GDP data for Scotland is right because the calculation of GDP requires accurate data on imports and exports from Scotland and all experts agree that Scotland does not have that information. In that case whether or not the data is accurate depends upon whether or not a fair proportion of estimates to and from Scotland to the rest of the world, as well as to and from the rest of the UK, are correctly estimated. I have my doubts about this and explained why to the Scottish Parliament last year……We now know that GDP is a poor indication of well-being. In particular, the share of wages in GDP has been falling steadily over time whilst that of profits has been rising…..The Scottish Government would be wise to adopt increases in median pay as its economic goal and stop worrying about the nearly meaningless Scottish GDP measure that is beloved only by those who do not seem to have the best interests of Scottish people at heart.’
The above are only three, from a host of commentaries, debunking the value of GDP. Try Googling for ‘GDP no good professor’ and you’ll have more than any of us has the time to read, from many ‘leading’ thinkers.