Welcome to the blog of Miroslav Georgiev - classical pianist and conductor. Here you can read and discuss interesting stuff from the world of music, life, politics and more.

Monday, March 3, 2014

Industrialization, Progress, GDP and more contemporary catchwords, Part II

Now, let's take a look at the GDP, the vaunted Gross Domestic Product, the one sacred measure of a country's economy which today determines how valuable it is to the world.
GDP is a sum of a country's domestic consumer spending, government spending, private industries spending and export balance (that is, the result of exports -minus - imports). It is all, of course, tied to the monetary system, each component being measured usually in US dollars. Let's dissect that shall we?

- Consumer spending is what each one of us buys during a period, meaning not only goods, but also communal services like gas and electricity, other services like health insurance or car repairs, rent, dept repayment, etc. In other words, the more we spend per period, the more this component of the GDP will rise, leading to overall GDP rise. So, if the government, say, decides all of a sudden to impose 20% more income taxes, GDP will also all of a sudden rise, because we all will have to pay more taxes.  
- Private business spending - that means all a company spends for the period, including purchasing materials and goods for its business, investing in improvements and paying salaries and taxes. Technically, if a company suddenly needs to pay 20% more for raw materials, GDP will rise, because this component will increase.
- Government spending - here goes all government activity, including not only 'good' things like education and healthcare spending, infrastructure or salaries, but also.... military budgets, or debt repayments. Again, if a country decides suddenly to increase its military spending by 50%, GDP will rise.
- Net exports - that would be the value of all goods a country has exported, AFTER we've deducted the value of the ones it has imported. We don't know here where those goods have gone, or where have the others come from, we just know that some goods have left the country while others have come into it. For example, if a million tons of iron have left the country, and later came back аs expensive agricultural machinery, we would consider that 'bad' (despite the machinery being greatly useful to our agriculture for many years). On the contrary, if we exported millions of barrels of expensive oil and imported in turn millions of tons of cheap plastics, we still consider that a 'good' thing (despite the fact that these plastics won't actually have any good impact on our society). 

If you look above you'll notice that for each component I've given an example that sounds simply ... silly. And still, it's true. And I'm sure real specialists would be able to find many more examples of gross contradictions to the whole logic of the GDP as the primary sign of a 'strong economy'. Why, if we pay more for rent each year, if we spend more to buy food, clothes, medications and everything, than our economy is growing! If we need to use more and more often our health insurances because we're constantly feeling unwell, then the economy is booming! If our country produces thousands of tanks and jet fighters and millions of machine guns, than our economy is flourishing! If our government creates phony administrative jobs, pays for bogus needs like flower purchases for anniversaries and higher-quality toilet seats, if it takes more and more loans - then our economy is the new rising star!

And indeed, this is the reality in all western 'industrialized' countries nowadays. People spend bigger percentages of their income each year just to maintain their standard of living, while trillions are being squandered by all countries for military purposes. It doesn't matter that having an army and being prepared to counter an invasion doesn't have anything at all to do with mine, or your well-being; it doesn't matter that it would be better that I didn't need to go to the doctor at all - the GDP has grown, and the investors will bring their money here because they think this is good. And good old common sense and logic be damned - the economists say this is good, so it must be good. After all, the economists are the new Gods, and Banks are the new temples for us. Material well-being has been drilled into each one of us as the single most important purpose of human life nowadays.

And  in the final part of this blog post, I'll discuss how all this fits into the contemporary concept for Progress.

(to be continued...)

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