Wealth and GDP: Intangible Tangibles

Something absolutely crazy happened earlier this month! It sounds like it should be big news, but it wasn’t. Nigeria’s economy grew 89% overnight! Now Nigeria, not South Africa, possesses the championship belt for largest economy in Africa.

Ok, the news is actually not that big of a deal. Nothing really changed (or grew) in the actual lives of Nigerians. Their GDP just grew… because they adjusted how GDP was gathered and calculated. You see, for many years Nigeria was using 1990 as the base year when calculating GDP. This is problematic as the Nigerian economy was a different shape in 1990 than it is now. Much fewer cell phones and oil production was… you know, I’ll just let The Economist Explain.

There has been quite a bit written lately on the topic of what GDP is and what it isn’t. What are the important activities GDP leaves out of the equation, and what are the negative or destructive activities GDP includes.

If you prefer reading: (Mis)leading Indicators: Why our Economic Numbers Distort Reality

If you prefer listening to public radio: When a Poor Country Gets A Lot Richer and/or The Invention of ‘The Economy’

Also, a couple full-length books have been written all about GDP and the numbers that define our economies. I haven’t read them yet, but they look to be riveting! Ok, perhaps riveting is not quite the right word. Intriguing? Mmm maybe just informative.

GDP: A Brief but Affectionate History

The Leading Indicators: A Short History of the Numbers that Rule our World

Fun one-question test

In what region of the world do exactly 7.5% of the world’s poor live?

Go ahead guess!

Maybe Southeast Asia?

No.

Perhaps Latin America?

Wrong.

Does China count as a region? What about India?

No and Nope.

Oh, I read an article about the Winter Olympics… it’s got to be Russia!?

Nice try, but wrong again.

Ok, 7.5% seems a bit low but, Africa for sure then.

Wrong yet again.

Ready for the answer?

It is North America!

Surprised?

I think you should be a little. The craziest thing is, some of the people who make up this 7.5% are a few of the richest people in the world.

Read why: Stop Adding up the Wealth of the Poor

Screen-Shot-2014-04-04-at-2.02.31-PM

Does this even matter at all? Is this just economists and statisticians messing around with numbers? Do these numbers affect anyone in real life? Well, it does matter and it does have an effect on policy and our understanding of the world. It affects international investments and humanitarian aid in real ways, which in turn affect the actual lives of actual people.

GDP, wealth, and the economy may all just be intangible ideas, but our understandings of them affect real people in tangible ways.

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