Simon Kuznets who, devised the GDP in the
early 1930's for US President Roosevelt for a
purpose almost entirely different to what it has
since been used for.
Bandicoot's otherwise excellent article What is Australia's population "carrying capacity"? suffers from one minor flaw. Of the Gross Domestic Product (GDP), which economists have insisted upon using to tell us how our prosperity has increased, Bandicoot writes:
Also, GDP per capita is a better measure of the economic well-being of a country than total GDP, as it takes into account population size – very populous countries may have very large overall GDP, but when divided by population size the resultant GDP per capita figure will give a much clearer indication of the country’s comparable wealth.
Of course it is plainly ridiculous to use Gross Domestic Product and not per capita GDP as a measure of prosperity, particularly, prosperity economists dishonestly claim to be the result of population growth.
... makes even per capita GDP figures, and not just Gross Domestic Product (GDP) figures, look good. According to this, per capita GDP "went up from $41,000 to $51,000 in real (chain volume) terms, an annual average increase of 2.2%."
So, either Bandicoot is wrong about population growth reducing per capita GDP (whilst allowing gross GDP to grow) or there is something badly flawed about the GDP, even when used on a per capita basis.
In fact, the GDP has been used and is being used by the ABS and most orthodox Australian economists in a way different from what its originator Simon Kuznets intended. In his very first report to the US Congress in 1934, he wrote:
...the welfare of a nation can, therefore, scarcely be inferred from a measure of national income...#main-fn1">1
One of the things wrong with the way that the GDP is used by the ABS and orthodox economists is that it doesn't accurately measure many increases in the cost of living. Many it ignores completely.
30 or 40 years ago one car per family would have been adequate. Today, the same family needs two or three cars in order to be able to travel around to all the places they could once get to in plenty of time in one car, on foot, on bicycle or on public transport.
So, a family which earns enough to buy two cars today looks substantially wealthier in per capita GDP terms than a family of 30 or 40 years ago who could afford only one car, but in real quality of life terms, I would argue that they are not and any family which could afford to buy one car, but which could not afford a second car, would, in real quality of life terms, be poorer.
Much car parking which used to be free is no longer so. Our local shopping mall charges a minimum of $1 for less than one hour's parking up to a maximum of $10 per day. Parking charges in CBDs of major cities such as Brisbane are vastly more extortionate, being of the order $50 in order to park your car just long enough to see a movie.
There are a large number of additional things on which people need to spend money, which they didn't have to 30 or 40 years ago.
The most obvious is shelter. Real housing costs, the massive increases of which have impoverished broad layers of previously prosperous Australians, cannot possibly have been accurately taken into account in the above GDP figures.
Those no longer able to afford secure shelter must also bear a range of costs caused by substandard accommodation or frequent changes of abode, which I doubt that economist/propagandists take into account: time and money spent searching for new accommodation, time and money spent changing residence, rent or bond money that one is often forced to forego as a result of residence change, loss of possessions that can't be fitted into or transported to a new residence, having to secure your possessions against incompatible people you may have to share a roof with.
How much more income is consumed in buying alarms, stronger padlocks, deadlocks, etc? How much more needs to be spent on insurance of household items against theft?
How about mobile phones and the Internet? Whilst I think these are good things on the whole, it is not good that so many must have these things and pay for them in order to go about life and work.
I think that if all the increases in costs of living, including costs that we didn't have to meet in the past, and all the losses in quality of life were taken into account by the GDP, I think it would show a massive decline in average income instead of the claimed $10,000 annual increase, and that is not even taking into account our non-renewable natural capital, which is being destroyed at an increased rate.
So, it appears that even the per-capita GDP figures are being fraudulently used to cover up a massive decline in our standard of living caused by our politicians in the service of Australia's wealthy elite. This fraud must be brought to the attention of ordinary Australians. Any economist or any other public figure who uses this fraud to justify they way they are running the country must be judged accordingly.
See also: Living standards and our material prosperity of 6 Sep 07 and comments, What is Australia's population "carrying capacity"? of 31 Dec 10.