When GDP increases, it really grows a country?
Introduction
Plato in the development of his philosophy says that realities must be viewed from the standpoint of ideas, son one will be able to "save" or go beyond appearances that seem to be all reality to the common man. In the famous image of the cave (Republic, VII), shows that are chained and forced to see only the shadows of the things that the outside light projected onto the large wall toward which we are forced to conduct the hearing. (Ferrater Mora, Dictionary of Philosophy, p. 424-425)
On the issue of true knowledge, Plato suggests that in this life can be such an existence to the gods, with the chance to see the ideas, i.e. knowledge, directly and not only see the reflections. The explanation of reality through the opinions or reflections is sophistry to avoid.
This proposal suggests the economy, relative to GDP. When the annual results are published and proudly claim credit for achieving annual growth for prolonged periods and significant rates, it may look just the shadows, appearances and not true reality that growth represents.
The question seems to have an obvious answer. When GDP increases is because the country has experienced economic growth. However, before accepting this statement is good to determine which country the data is taken.
Suppose GDP in year 0 is 100 in four countries (A, B, C and D) and there is a constant annual growth of 5% for all, then for a five-year horizon, we would have the following scenario:
Introduction
Plato in the development of his philosophy says that realities must be viewed from the standpoint of ideas, son one will be able to "save" or go beyond appearances that seem to be all reality to the common man. In the famous image of the cave (Republic, VII), shows that are chained and forced to see only the shadows of the things that the outside light projected onto the large wall toward which we are forced to conduct the hearing. (Ferrater Mora, Dictionary of Philosophy, p. 424-425)
On the issue of true knowledge, Plato suggests that in this life can be such an existence to the gods, with the chance to see the ideas, i.e. knowledge, directly and not only see the reflections. The explanation of reality through the opinions or reflections is sophistry to avoid.
This proposal suggests the economy, relative to GDP. When the annual results are published and proudly claim credit for achieving annual growth for prolonged periods and significant rates, it may look just the shadows, appearances and not true reality that growth represents.
The question seems to have an obvious answer. When GDP increases is because the country has experienced economic growth. However, before accepting this statement is good to determine which country the data is taken.
Suppose GDP in year 0 is 100 in four countries (A, B, C and D) and there is a constant annual growth of 5% for all, then for a five-year horizon, we would have the following scenario:
It is understood that growth should have an impact on the economic and social development, which in turn is reflected in the increased possibility that the population has to access to education, health and safety and comprehensive quality as well as existence of means and opportunities for personal and social development. This includes quality infrastructure, reliable social institutions, a shared vision of the country for which you have explicit and implicit commitment of the whole society.
When little or nothing of the above is presented in correlation with GDP growth, intone the real picture would be:
The GDP (gross domestic
product) is defined as the “sum of the monetary value of all final goods and services
produced within a period of one year”.
When we talk about goods, are included roads, schools, built
hospitals, social services such as
school feeding, health campaigns, pensions
for older, among other things. If
a hospital is considered as part of the contribution to GDP; means it works well, it
is well equipped, it is a place where people find the care
they demand. It should not be
part of a very expensive hospital
GDP, which only looks good at the time of the official opening and then reveal the
shortcomings and deficiencies, which are not due to errors or
miscalculations but deliberate acts induced by corruption and incompetence.
What the name means A, B, C or D assigned to countries? Why despite having the same initial value and the same growth rate, they get different results?
The term A corresponds to an ideal country where the level of corruption is zero, so if you have a budget for public works for a total of 20, 20 are invested and the results are complete and operating public works. Thus, a hospital will be fully equipped with staff, resources and comprehensive services to work; a road is passable for years, subject to preventive maintenance and barring extreme circumstances only, corrective maintenance.
Country B can be associated with most of the developed countries with high levels of economic performance and growth, with a low level of corruption; countries C and D are those in which the level of corruption is so high that not only perceived as open and public corruption, supported or tolerated by the population, also as part of culture but its effects are seen directly in economic activity and development.
At home D, you can build a hospital, theoretically with the same capacity hospital coverage for country A, but the deficiency of construction (structural, low quality materials, unable to pass specific tests), the absence equipment or the poor quality of this (second class or recycled machinery as new), no provision of trained medical and auxiliary personnel, make that in practice only be a white elephant and that people do not perceive a benefit but damage and that the services of this hospital are the worst available option. The road disappears by wind action in a few months but is still spending huge amounts on the "maintenance" of a good that does not exist. At home D people may have higher wage because of growing, but this is an apparent advantage when you discover that you have to spend more on search services, health or education of better quality or to recover from the losses originated by the insecurity.
Real GDP and GDP false
To begin, we choose the base 100 as the initial value of GDP to eliminate the problem of the size of the economy, the currency and other considerations expressed so that it can perceive the real phenomenon of growth.
Country B may have a population of 60 million inhabitants and a GDP of two billion dollars, the country D a population of 30 million and a GDP of eighty billion dollars, at first glance there is no comparison, but the use of a standardized figure avoids discussions. Moreover, when it affects growth and development, is meant to benefit the entire society; if there is no growth and development is perceived, the whole society is affected. Leaving aside the case will always be a group that benefits more or less harm; in any case it is a matter of a more complete study.
The explanation for this difference is a phenomenon present increasingly aggressively in countries of type C and D, and by theoretical convenience is not included in many economic studies. We assume that corruption; in country A is 0% in country B to 10% in country c of 50% and 70% D country. How do you explain this percentage?
In ideal country A, we only take the example of the public sector and assume that the private sector has the same orientation, because it is an undeniable fact that the culture of corruption or honesty is shared by both sectors. If the Government is highly corrupt, it will be also the private sector because there is no other way to act; if there is high level of honesty in the Government, just the private sector acts so because to do otherwise would lead to social and effective penal sanctions. (Note 1)
In country with a GDP of 100 year 0, public program spending for social programs 20; 25 to build schools and hospitals, 20 to road; in year 1 is just spend the amount indicated on as planned; the end of the year in the country there will be a school, a hospital, a road with the features shown in the respective projects. Naturally, the population will receive the full services of these works, which is an indicator of development.
In Country D, common in backward regions and doomed to backwardness and false development despite is located in geographical areas privileged by nature, the situation is: Public expenditure programmed is 20 for social programs; 25 to build schools and hospitals, 20 for road. In year 1, the corrupt officials in collusion with contractors decide to appropriate 70% of the amount of work, so that only 30% will be invested in each case.
Contractors to recover losses, reduce costs, "according to the original project" but building hospitals schools, structurally deficient roads with low quality materials, with unskilled labor; with shoddy equipment or recycling and incomplete functionality. Hospitals are flooded to the first month of operation, equipment care miscarry after two months of use and there are no parts that were purchased in suspicious deals with countries stopped producing them years ago and settled their surplus stocks; roads deteriorate to the first step and although the expenditures in maintenance are high, it never is realized. The winner is always a public official (or officials forming conniving group) that has the option to drop it and choose another more accommodating contractors. As for social services, for example to provide school feeding, then damaged, unhealthy and useless inexpensive and unsecured products are delivered.
Naturally, approval of construction or approved for the supply of goods (rather the acceptance of fraud or "blind eye") by the authorities is assured. In the picture the origin of the differences is shown.
What the name means A, B, C or D assigned to countries? Why despite having the same initial value and the same growth rate, they get different results?
The term A corresponds to an ideal country where the level of corruption is zero, so if you have a budget for public works for a total of 20, 20 are invested and the results are complete and operating public works. Thus, a hospital will be fully equipped with staff, resources and comprehensive services to work; a road is passable for years, subject to preventive maintenance and barring extreme circumstances only, corrective maintenance.
Country B can be associated with most of the developed countries with high levels of economic performance and growth, with a low level of corruption; countries C and D are those in which the level of corruption is so high that not only perceived as open and public corruption, supported or tolerated by the population, also as part of culture but its effects are seen directly in economic activity and development.
At home D, you can build a hospital, theoretically with the same capacity hospital coverage for country A, but the deficiency of construction (structural, low quality materials, unable to pass specific tests), the absence equipment or the poor quality of this (second class or recycled machinery as new), no provision of trained medical and auxiliary personnel, make that in practice only be a white elephant and that people do not perceive a benefit but damage and that the services of this hospital are the worst available option. The road disappears by wind action in a few months but is still spending huge amounts on the "maintenance" of a good that does not exist. At home D people may have higher wage because of growing, but this is an apparent advantage when you discover that you have to spend more on search services, health or education of better quality or to recover from the losses originated by the insecurity.
Real GDP and GDP false
To begin, we choose the base 100 as the initial value of GDP to eliminate the problem of the size of the economy, the currency and other considerations expressed so that it can perceive the real phenomenon of growth.
Country B may have a population of 60 million inhabitants and a GDP of two billion dollars, the country D a population of 30 million and a GDP of eighty billion dollars, at first glance there is no comparison, but the use of a standardized figure avoids discussions. Moreover, when it affects growth and development, is meant to benefit the entire society; if there is no growth and development is perceived, the whole society is affected. Leaving aside the case will always be a group that benefits more or less harm; in any case it is a matter of a more complete study.
The explanation for this difference is a phenomenon present increasingly aggressively in countries of type C and D, and by theoretical convenience is not included in many economic studies. We assume that corruption; in country A is 0% in country B to 10% in country c of 50% and 70% D country. How do you explain this percentage?
In ideal country A, we only take the example of the public sector and assume that the private sector has the same orientation, because it is an undeniable fact that the culture of corruption or honesty is shared by both sectors. If the Government is highly corrupt, it will be also the private sector because there is no other way to act; if there is high level of honesty in the Government, just the private sector acts so because to do otherwise would lead to social and effective penal sanctions. (Note 1)
In country with a GDP of 100 year 0, public program spending for social programs 20; 25 to build schools and hospitals, 20 to road; in year 1 is just spend the amount indicated on as planned; the end of the year in the country there will be a school, a hospital, a road with the features shown in the respective projects. Naturally, the population will receive the full services of these works, which is an indicator of development.
In Country D, common in backward regions and doomed to backwardness and false development despite is located in geographical areas privileged by nature, the situation is: Public expenditure programmed is 20 for social programs; 25 to build schools and hospitals, 20 for road. In year 1, the corrupt officials in collusion with contractors decide to appropriate 70% of the amount of work, so that only 30% will be invested in each case.
Contractors to recover losses, reduce costs, "according to the original project" but building hospitals schools, structurally deficient roads with low quality materials, with unskilled labor; with shoddy equipment or recycling and incomplete functionality. Hospitals are flooded to the first month of operation, equipment care miscarry after two months of use and there are no parts that were purchased in suspicious deals with countries stopped producing them years ago and settled their surplus stocks; roads deteriorate to the first step and although the expenditures in maintenance are high, it never is realized. The winner is always a public official (or officials forming conniving group) that has the option to drop it and choose another more accommodating contractors. As for social services, for example to provide school feeding, then damaged, unhealthy and useless inexpensive and unsecured products are delivered.
Naturally, approval of construction or approved for the supply of goods (rather the acceptance of fraud or "blind eye") by the authorities is assured. In the picture the origin of the differences is shown.
Thus, GDP declared only exists on paper but in reality there is no factual basis to support the figures. It is true that there is or may have more schools, more hospitals, more roads but they are so useless and unusable in practical terms, we can say that there no are. Therefore, the claim is logical when economic analysts in some countries compare a country to prosperous neighbors and declare that to get to their level in year 5, to cite one example, has a delay of 25 years. Indeed, the calculation for GDP = 38.3 30 * (1 + 5%) 25 = 129.7 (Note 2)
A final observation. Functional expression of GDP is
GDP = f (C, G, I, XN) Formula 1
+ + + +
Where some variables that adversely affect, such as corruption, have minor and ignore. This is the case in countries A and B. For countries C and D, the expression should be:
GDP = f (C, I, G, NX, Corruption) Formula 2
+ + + + -
Corruption is a significant variable, so that if a regression model is built with real data, the statistical validity of this variable would be very high.
According to the above, one can see that the new variable in the formula 2 explains that although the country experienced economic growth, also form and grow the "slums" pockets poverty, exclusion, low educational levels or health, insecurity, very poor attention to the disadvantaged. It also means that some countries despite having the means, resources and opportunities to grow and develop are being doomed to fail deterioration and continuous degradation. The platonic shadows "in the cave are the high rates of GDP growth; the reality behind and you cannot see are these "slums" and all associated social problems.
Conclusions
a. The statements shown appear heresy regarding studies and publications of GDP in many countries, especially undeveloped or those where corruption is already a cultural characteristic.
b. The actual calculation should be displayed in the component variables by subtracting the fraction lost in the secret accounts and companies created to hide the thefts.
c. The real evidence is clear: countries that have increased dramatically, which has huge endowments, still prostrate in backwardness, poverty, low levels of competitiveness (Countries C and D) while countries A and B, yet have no natural resources or minimum geographical space, in addition to economic growth reveals a high degree of economic and social development.
d. Apparently, we must adopt the Platonic vision and strive to understand behind appearances: If the GDP grows, is it really true growth? Really society benefits from this "growth" or just a sophistical trick of who controls power to justify or conceal misconduct?
Note 1. In two Latin American countries, that are neighbors, the following case is presented. In country A, corrupt, driver of car major offense can get rid of the penalty, fine or imprisonment by paying a bribe to the police; also can commit a very serious offense and run and kill the passer. The bribe will be higher, but always possible under the criminal deal; the police already know how to twist the facts. In the neighboring country, more developed, more culture, better education and health services, and lower levels of corruption, it is virtually impossible for the driver to bribe the police even slightly offense like passing a red light even when no traffic. The attempted bribery involves the arrest and effective punishment by the judge. The first country is of type C or D; the other is of type B or A.
Note 2. If a parent has an income of 100 initial and fully intended on improving family potential in all aspects (education, home improvement, purchase of goods, etc.) can be achieved in five years the value 127.6 (as GDP growing at the rate of 5% per annum). If however, systematically deviates 70 of 100 for illicit affairs, entertainment, vices and other things outside the family welfare, to achieve the required amount of 127.9 it will required at least 30 years. And this, if lucky maintains productive potential during this long period (as a country).
REFERENCES
Ferrater Mora, José (1964) Dictionary of Philosophy, Volume II
Editorial Sudamericana, Buenos Aires
