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Capitalism Will Ruin the Earth By 2050, Scientists Say

Capitalism Will Ruin the Earth By 2050, Scientists Say

The good news is, by cutting our consumption, there’s another way.
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A spate of new scientific research starkly lays out the choice humankind faces in coming decades:

By 2050, we could retain high levels of GDP, at the price of a world wracked by minerals and materials shortages, catastrophic climate change, and a stuttering clean energy transition —paving the way for a slowly crumbling civilization.

Or, we could ditch the GDP fetish and enter a world of abundance, with energy consumption safely contained within planetary boundaries, and high-tech economies that support jobs, health and education for everyone without costing the earth.

On the first option, scientists backed by the European Union’s Horizon 2020 research and innovation program have concluded that capitalism-as-we-know-it cannot support a successful clean energy transition.

Not only that, but capitalism is on track to lead the world into mineral shortages and supply bottlenecks that could cut short efforts to decarbonize transport systems, guaranteeing dangerous climate change.

The new study published in the journal Energy Strategy Reviews finds that electrifying our cars, trucks and trains so that they run on renewable energy is only viable if we reduce the endlessly growing levels of consumption in industrial societies. That, effectively, means fundamentally transforming the very sinews of capitalism.

The good news is that separate research published in September proves that such an economic transformation is perfectly feasible while still maintaining a good quality of life for people all over the world.

Modeling the world

The transportation study is based on a highly sophisticated ‘integrated assessment model’ (IAM) that brings together a vast amount of empirical data. Known as the MEDEAS-World model, it incorporates feedback relations between global and regional economies; renewable, fossil fuel energy flows and energy infrastructure; technology developments and costs; minerals and land requirements; climate change and water; and many other sectors.

…click on the above link to read the rest of the article…

Is the Green Deal a card shuffle trick?

Is the Green Deal a card shuffle trick?

(NOTE; this is not an analysis of the US New Green Deal, it is about the “green growth” narrative with the European Green Deal as the point of departure.)

The European Green Deal is a ”growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use.”

There are reasons to discuss if the vision of the European Green Deal is desirable: why should it be a goal to be “competitive” or ”modern”? But let’s buy into the narrative and ask: is the vision possible? Is ”green growth” as expressed in the Green Deal or the Sustainable Development Goals even possible?

In a recent paper in New Political Economy, Jason Hickel and Giorgios Kallis do a good job in illuminating many of the discussions and concepts involved in the Green Growth debate. Their overall conclusion is that ”green growth theory – in terms of resource use – lacks empirical support”.  They note three caveats of their own conclusions. First, it is possible that ”it is reasonable to expect that green growth could be accomplished at very low GDP growth rates, i.e. less than 1 per cent per year”. Second, conclusions are based on the existing relationship between GDP and material throughput, but one might argue that it is theoretically possible to break the existing relationship between GDP and material throughput altogether. Third, the aggregate material footprint indicator obscures the possibility of shifting from high-impact resources to low-impact resources. Meanwhile, Hickel and Kallis also point out that material footprints needs to be scaled down significantly from present levels; to be truly green, green growth requires not just any degree of absolute decoupling, but rapid absolute decoupling.

…click on the above link to read the rest of the article…

Nobel prize-winning economics of climate change is misleading and dangerous – here’s why

Nobel prize-winning economics of climate change is misleading and dangerous – here’s why

While climate scientists warn that climate change could be catastrophic, economists such as 2018 Nobel prize winner William Nordhaus assert that it will be nowhere near as damaging. In a 2018 paper published after he was awarded the prize, Nordhaus claimed that 3°C of warming would reduce global GDP by just 2.1%, compared to what it would be in the total absence of climate change. Even a 6°C increase in global temperature, he claimed, would reduce GDP by just 8.5%.

If you find reassurance in those mild estimates of damage, be warned. In a newly published paper, I have demonstrated that the data on which these estimates are based relies upon seriously flawed assumptions.

If you find reassurance in those mild estimates of damage, be warned. In a newly published paper, I have demonstrated that the data on which these estimates are based relies upon seriously flawed assumptions.

Nordhaus’s celebrated work, which, according to the Nobel committee, has “brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth”, gives governments a reason to give climate change a low priority.

His estimates imply that the costs of addressing climate change exceed the benefits until global warming reaches 4°C, and that a mild carbon tax will be sufficient to stabilise temperatures at this level at an overall cost of less than 4% of GDP in 120 year’s time. Unfortunately, these numbers are based on empirical estimates that are not merely wrong, but irrelevant.

Nordhaus (and about 20 like-minded economists) used two main methods to derive sanguine estimates of the economic consequences of climate change: the “enumerative method” and the “statistical method”. But my research shows neither stand up to scrutiny.

The ‘enumerative method’

…click on the above link to read the rest of the article…

False Bizarre Economy Renders GDP Useless (Part 1)

False Bizarre Economy Renders GDP Useless (Part 1)

GDP Growth Is Akin To “Magic Illusion 101”

We may be getting to the place where more people are beginning to realize the illusion created from printing and pouring trillions of dollar haphazardly into the economy can’t last. Today, consumer confidence hinges on what Washington decides to do with the next stimulus package. At this point it is likely they will pour enough money into the economy to keep things artificially inflated. Still, anyone looking at the coming gross domestic product (GDP) figures as an indication of how the economy is faring is barking up the wrong tree.

The usefulness and validity of the GDP numbers in determining how rapidly the economy is growing has been disputed over the years. Let us face the fact the illusion the economy continues to work its way forward is completely based on “government deficit spending” coupled with the Fed’s very easy monetary policy.  At the same time, we should concede much of the perceived growth is because all the money being printed has to go somewhere. Sadly, economic growth does not guarantee a healthy economy. 

The original formula for measuring economic growth was full of flaws but over the years we have allowed numbers that mean “nothing” to seep into how the GDP is calculated all in an effort to create the illusion of growth. In years past America far outproduced the rest of the world and manufactured goods that it exported across the seas. Today much of our economy is dominated by the service sector, this means if you wash my windows, then I will mow your yard. Another huge problem is that the GDP counts government spending, and politicians spend (other people’s) money on stuff simply to get reelected. If this isn’t the clearest cut case that the calculation of GDP is meant to obscure, rather than to inform, I can’t imagine what would be.

…click on the above link to read the rest of the article…

The Economy Has Fundamentally Changed in the 21st Century–and Not for the Better

The Economy Has Fundamentally Changed in the 21st Century–and Not for the Better

The net result is we have an economy that’s supposedly expanding smartly while our well-being and financial security are collapsing.

Gross Domestic Product (GDP) and other metrics of economic activity don’t measure either broad-based prosperity or well-being. Elites skimming financialization profits by expanding corporate debt and issuing more loans to commoners while spending more on their lifestyles boosts GDP quite nicely while the security and well-being of the bottom 90% plummets.

Under the hood of “recovery” and a higher GDP, life has gotten harder and more insecure for the bottom 90%. The key is not to look just at wages (trending up, we’re assured) or inflation (near-zero, we’re assured) but at aspects of daily life (lived experience) that cannot be captured by conventional economic / financial attempts at quantifying the economy.

How do we quantify the cost of the financial anxiety provoked by huge insurance deductibles or staggering healthcare bills? What matters isn’t just whether the patient or their family has to declare bankruptcy because they can’t afford the enormous co-pays: what matters is the debilitating stress caused by having to decide between risking an operation and bankrupting the family or foregoing the operation and hoping for a miracle.Or how about the eventual cost of foregoing healthcare except in emergencies due to having to pay cash for any care due to the high deductibles?

Small stresses add up, leading to chronic stress and a host of debilitating consequences. Consider the daily commute to work, which has become longer and more stressful due to increasing congestion and the limits of public transport infrastructure that hasn’t been improved or expanded in decades.Why New York City Stopped Building Subways (via Mark G.) Unlike most other great cities, New York’s rapid transit system remains frozen in time: Commuters on their iPhones are standing in stations scarcely changed from nearly 80 years ago.

 …click on the above link to read the rest of the article…

Canada In Recession? GDP Unexpectedly Drops For 2nd Month In A Row

Canada In Recession? GDP Unexpectedly Drops For 2nd Month In A Row

Canadian GDP just contracted for the second month in a row, leaving the headline Canada GDP up just 0.4% SAAR in 4Q, according to Statistics Canada (dramatically below the estimate of +1.0%). The headline quarterly change misses even lowest of economist estimates.

And on a YoY basis…

Under the hood it was just as ugly, with household consumption growth slowing further to 0.7% QoQ (weakest since 2015), investment and housing declining sharply, and helped only by an inventories accumulation (inventories added 1.53 percentage points to growth in 4Q).

Business gross fixed capital formation dropped 9.6% in 4Q, from -8.4% in previous quarter:

  • Non-residential investment falls 10.9%, largest decline since 2016
  • Residential structures fall 14.7%, biggest decline since 2009

Final domestic demand tumbled 1.5% in 4Q, from -0.5% in previous quarter

Worse still, first half of 2018 growth revised down to 2.0% from 2.3%. 

But apart from that – everything is awesome and you should be buying Canadian stocks!!

The result – as Poloz et al. are about to reverse all hawkishness even further – a tumble in the loonie…

Debt and Deficits: They’re Unsustainable

Debt and Deficits: They’re Unsustainable

Economic growth won’t save us, not without serious cuts in government spending.

The most important issue facing America today is the national debt and increasing federal deficits. Our national debt now exceeds yearly gross domestic product (GDP).

The U.S is the wealthiest country in the world, but our government has the largest spending deficits and national debt in recorded history.

The budget deficit in FY 2018 was $800 billion, but the debt increased by $1,300 trillion, and is now $21,500 trillion dollars. Government accounting (oxymoron) allows for spending and loans outside of the budget. The practice of underreporting deficits is fraud and is not legal in the private market.

Note the US Debt Clock (here).

In simple terms, the national debt consistently increases more than the federal deficit, which will cause a devaluation of the dollar and eventually, a major financial crisis.

In FY 2019, the federal budget projects the following:

  1. Total revenue $3,422 trillion or 17% of GDP
  2. Total spending $4,407 trillion or 21% of GDP

In the best of times, regardless of tax rates, the federal revenue rarely exceeds 18% of GDP. This means based on projected spending, we cannot grow or tax our way out of the deficit because spending is projected at 22% of GDP.

To balance the federal budget in FY 2019, it would be necessary to cut all spending by 22%. 

Yes, this means Social Security, Medicare, defense, food stamps and college loans. A cut of 22% would be devastating to our economy, which means we must begin now to reduce federal spending and debt as a national priority.

During the last major recession in 2008, we had a national debt of $10 trillion. Now, in 2018 we have a debt of $21,500 trillion. On average the debt is increasing at 1 trillion per year, but last year it increased by $1,300 trillion.

 …click on the above link to read the rest of the article…

Global GDP Still Propped Up By A Massive Amount Of Debt

Global GDP Still Propped Up By A Massive Amount Of Debt

While the government agencies and economists continue to publish strong GDP figures, they seem to overlook how much debt it took to produce that growth.  Or should I say, the “supposed growth.”  The days of adding one dollar of debt to get one dollar of GDP growth have been long gone for more than 40 years.  And, as global debt has increased, it has forced governments to lower interest rates.

Yes, it’s really that simple.  I get a good chuckle when I hear analysts talk about rising interest rates to 10-15%.  If the U.S. Government interest rate on the Treasury Bonds increased to just 5%, Uncle Sam would be paying over a trillion dollars a year just to service the debt.  So, no… we aren’t going to see 10-15% rates again.

Well, we could… but, most of the global debt would have to collapse or be forgiven.  Unfortunately, if global debt vaporizes or is forgiven, then the entire economy collapses as well.  We must remember, GDP growth is also driven by oil production growth.  There is no way in HADES that the oil industry can fund future production with 10-15% interest rates.  IT JUST AIN’T GONNA HAPPEN.

Why?  If it weren’t for the Fed dropping rates down to nearly zero, the Great U.S. Shale Oil Ponzi Scheme and the six million barrels per day of unprofitable shale oil production would have been a pipe dream.  I can assure you that the shale oil industry could not fund operations or service their debt with 10-15% interest rates.

Most shale oil companies are paying on average between 4-5% interest to service their debt.  If the companies’ interest rates double or triple, then it would make it extremely difficult to service the shale industry debt that is estimated to be $280-$300 billion.

…click on the above link to read the rest of the article…

Here’s a Simple Solution to the Growth/De-Growth Debate

HERE’S A SIMPLE SOLUTION TO THE GROWTH/DE-GROWTH DEBATE

A number of high-profile economists – people like Carlota Perez and Michael Liebreich – have recently come out swinging in favor of “green growth” theory, trying to assuage mounting public concerns about the fact that climate change and ecological breakdown are being driven by capitalist growth.

What’s interesting about these interventions is that they explicitly pit themselves against their opposite – the idea of de-growth.  Even just a year or two ago, de-growth wouldn’t have been part of the conversation.  Once the province of ecological economists, it’s now gaining more mainstream attention as the evidence against growth mounts – and orthodox economists have no choice but to reckon with it.

But as they try to edge their way around certain prickly facts, their arguments get stranger and stranger.

Green growth theory relies on the assumption that GDP growth can be permanently and absolutely decoupled from resource use and emissions, and at a pace that’s fast enough to reverse ecological breakdown and keep us under 1.5 degrees, so that GDP can continue growing forever while environmental impacts decline.

There’s just one problem.  There’s no evidence that this is feasible.

Let’s start with emissions.  Fortunately, we know that GDP can be absolutely decoupled from emissions.  The real question is whether we can decarbonize fast enough to stay under 1.5 degrees, without relying on fanciful negative emissions technologies.  The answer, sadly, is no.  If we carry on with growth as usual, we need to decarbonize at a rate of 11% per year. That’s more than five times faster than the historic rate of decarbonization and about three times faster than what scientists project is possible, even under highly optimistic conditions.

…click on the above link to read the rest of the article…

We Should Ditch GDP as a Measure of Economic Activity

This article exposes the false economic concepts behind GDP, which is only the visible tip of a large iceberg of economic deceit. Describing an increase in GDP as economic growth owes its meagre validity to imprecise definition. An economy does not grow, only the quantity of fiat currency deployed grows. A successful economy progresses our condition, our wealth, our standards of living. The evolution of misleading statistics such as GDP to their current condition is only governed by their usefulness to governments, not as an objective development of sound theory by seekers of truth.

There are perhaps two plausible reasons for producing the GDP statistic, other than employing statisticians, and both have nothing to do with economics. By compiling the figures, a government keeps track of its tax base, and it can enter into the game of my-country-is-bigger-than-yours.

In international comparisons of economic performance, gross domestic product adjusted for price inflation is the most common metric used. Countries are ranked by size, and success is measured by the rate of growth in GDP. This is important to the political class.

About two years ago, I was told that the Indonesian central bank had a plan to do away with cash entirely, because it would bring unrecorded transactions into Indonesia’s GDP, promoting it from sixteenth to perhaps the thirteenth largest nation measured by GDP. I have no idea if this was true, but allegedly, this was important to the Indonesian government.

We should not be surprised if going cashless is partly motivated to give the illusion of GDP growth, in the same way that in 2014 the EU decided to add in estimated contributions from prostitution and drug dealing. These are examples of why and how GDP is manipulated to produce a goal-sought answer.

…click on the above link to read the rest of the article…

Is Capitalism Killing Us?

Is Capitalism Killing Us?

Ecological economists, such as Herman E. Daly, stress that as the external costs of pollution and resource exhaustion are not included in Gross Domestic Product, we do not know whether an increase in GDP is a gain or a loss.

External costs are huge and growing larger. Historically, manufacturing and industrial corporations, corporate farming, city sewer systems, and other culprits have passed the costs of their activities onto the environment and third parties. Recently, there has been a spate of reports with many centering on Monsanto’s Roundup, whose principle ingredient, glyphosate, is believed to be a carcinogen.

A public health organization, the Environmental Working Group, recently reported that its tests found glyphosate in all but 2 of 45 children’s breakfast foods including granola, oats and snack bars made by Quaker, Kellogg and General Mills. https://www.theguardian.com/environment/2018/aug/16/weedkiller-cereal-monsanto-roundup-childrens-food

In Brazil tests have discovered that 83% of mothers’ breast milk contains glyphosate. https://www.telesurtv.net/english/news/Brazil-Poisonous-Agrotoxin-Found-Over-80-of-Breast-Milk-Samples-in-Urucui-20180809-0008.html

The Munich Environmental Institute reported that 14 of the most widely selling German beers contain glyphosate. https://sustainablepulse.com/2016/02/25/german-beer-industry-in-shock-over-probable-carcinogen-glyphosate-contamination/#.W3XKtC-ZOGQ

Glyphosate has been found in Mexican farmers’ urine and in Mexican ground water. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5486281/

Scientific American has reported that even Roundup’s “inert ingredients can kill human cells, particularly embryonic, placental and umbilical cord cells.”
https://www.scientificamerican.com/article/weed-whacking-herbicide-p/

A German toxicologist has accused the German Federal Institute for Risk Assessment and the European Food Safety Authority of scientific fraud for accepting a Monsanto-led glyphosate Task Force conclusion that glyphosate is not a carcinogen. https://gmwatch.org/en/news/latest-news/17307-german-toxicologist-accuses-eu-authorities-of-scientific-fraud-over-glyphosate-link-with-cancer

Controversy about these findings comes from the fact that industry-funded scientists report no link between glyphosate and cancer, whereas independent scientists do. This is hardly surprising as an industry-funded scientist has no independence and is unlikely to conclude the opposite of what he is hired to conclude.

…click on the above link to read the rest of the article…

If the Economy is So Good, Why are Wages Flat?

If the Economy is So Good, Why are Wages Flat?

Photo by Nathaniel St. Clair

We are supposedly seven years into a “recovery” from the global economic collapse that commenced in 2008. The latest evidence offered to promote this oft-peddled mantra is that U.S. gross domestic product showed a strong uptick for the second quarter of 2018, an annualized rate of 4.1 percent, nearly double that of the first quarter.

Coupled with the ongoing decline in unemployment (although standard unemployment rates greatly underestimate the true rate of employment), orthodox economists, conservative propagandists and apologists for the Trump administration would have use believe happy days are here again.

So why aren’t our wages increasing?

In part, it is because the true unemployment rate is not nearly so low as the “official” unemployment rate used by governments around the world, and thus the ranks of unemployed and underemployed are sufficiently large that there is no upward pressure on wages. Orthodox economists, dedicated as they are to ignoring any evidence that doesn’t match their models designed to “prove” that all manners of capitalist excess are as natural as the tides of the ocean — and thus in practice the professional wing of conservative propagandists — have various excuses for stagnant wages and ever increasing inequality. A favorite among these is an alleged “skills mismatch” — too many unskilled workers and a shortage of skilled workers for the high-tech jobs of today.

The data tells a different story, however. A 2014 report by the National Employment Law Project found that low-wage jobs were created at a faster pace than higher-paid jobs were lost in the first years to that point. The Project reported this breakdown:

* Lower-wage industries ($9.48 per hour to $13.33) constituted 22 percent of the 2008-2010 losses, but 44 percent of jobs gained since then.

…click on the above link to read the rest of the article…

Why GDP Is Fake

Why GDP Is Fake

Why GDP Is Fake

Gross Domestic Product, or GDP, is the most commonly used measure and ranking of a nation’s economy. According to the OECD and Wikipedia, its definition is: “an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs).” No subtractions are included in it for debts that were undertaken in order to generate the given “gross values added.” A trillion dollars of increased assets (additional “gross values” of “production”) adds a trillion dollars to GDP, even if all of it was produced by increasing the debts by a trillion dollars: only the assets-side of the balance-sheet is relevant to GDP.

However, wealth is assets minus liabilities; it is assets minus debts; it is not assets alone. Therefore, a nation’s wealth has no necessary relationship at all to a nation’s GDP, because the nation’s wealth is its assets minus its liabilities, not its assets regardless of its liabilities (such as GDP is).

Britannica provides this definition of “GDP”: “Gross domestic product (GDP), total market value of the goods and services produced by a country’s economy during a specified period of time. It includes all final goods and services — that is, those that are produced by the economic agents located in that country regardless of their ownership and that are not resold in any form. It is used throughout the world as the main measure of output and economic activity.” In this definition, too, no subtractions are included in it for the debts. Britannica then goes on to state:

GDP = Consumption + Investment + Government Spending + Net Exports

or more succinctly

GDP = C + I + G + NX

…click on the above link to read the rest of the article…

GDP Is Bogus: Here’s Why

GDP Is Bogus: Here’s Why

Here’s a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation.
The theme this week is The Rot Within.

The rot eating away at our society and economy is typically papered over with bogus statistics that “prove” everything’s getting better every day in every way. The prime “proof” of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two.

Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn’t reflect changes in the balance sheet, i.e. debt.

So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn’t accounted for at all.

Here’s Dave’s explanation:

Once I learned about accounting, I figured out why the GDP metric wasn’t sufficient. What is missing?

The balance sheet.

Hurricanes are a direct hit to your nation’s balance sheet. The national income statement goes up because of increased spending to replace lost assets, but the “equity” part of the national balance sheet ends up taking a hit in direct proportion to the damage that occurred. Even if you rebuild everything just the way it was, your assets remain the same, while your liabilities have increased.

We know this because we use the balance sheet equation: equity = assets – liabilities. Equity is another word for wealth.

Before hurricane:

wealth = (house + car) – (home debt + car debt)

After hurricane, you rebuild your house, and buy a new car, using borrowed money:

wealth = (house + car) – (2 x home debt + 2 x car debt)

Wealth (equity) has declined by the sum (home debt + car debt)

…click on the above link to read the rest of the article…

World GDP in current US dollars seems to have peaked; this is a problem

World GDP in current US dollars seems to have peaked; this is a problem

World GDP in current US dollars is in some sense the simplest world GDP calculation that a person might make. It is calculated by taking the GDP for each year for each country in the local currency (for example, yen) and converting these GDP amounts to US dollars using the then-current relativity between the local currency and the US dollar.

To get a world total, all a person needs to do is add together the GDP amounts for all of the individual countries. There is no inflation adjustment, so comparing GDP growth amounts calculated on this basis gives an indication regarding how the world economy is growing, inclusive of inflation. Calculation of GDP on this basis is also inclusive of changes in relativities to the US dollar.

What has been concerning for the last couple of years is that World GDP on this basis is no longer growing robustly. In fact, it may even have started shrinking, with 2014 being the peak year. Figure 1 shows world GDP on a current US dollar basis, in a chart produced by the World Bank.

Figure 1. World GDP in “Current US Dollars,” in chart from World Bank website.

Since the concept of GDP in current US dollars is not a topic that most of us are very familiar with, this post, in part, is an exploration of how GDP and inflation calculations on this basis fit in with other concepts we are more familiar with.

As I look at the data, it becomes clear that the reason for the downturn in Current US$ GDP is very much related to topics that I have been writing about. In particular, it is related to the fall in oil prices since mid-2014 and to the problems that oil producers have been having since that time, earning too little profit on the oil they sell.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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