GDP per capita: indicator of economic production
Gross domestic product, or GDP, is the total value added of a country’s economic activity, assigned a monetary value. In other terms, it is the sum of agricultural and industrial goods and services produced over the course of a given year.
The difference between GDP figures from one year to the next determines a country’s economic growth over the same period. Likewise, GDP per head is one of the oldest economic indicators, used since the 1940s to measure “development”. To allow for differences in prices, GDP/head is often calculated in terms of purchasing power parity (PPP), which establishes a weighted price for a given basket of goods.
GDP figures nevertheless are criticised on three main grounds:
- it does not reveal whether wealth distribution is equitable;
- it does not include non-monetary aspects of the economy (self-production, self-consumption, volunteering, the informal sector);
- it does not take into account environmental degradation or depletion of non-renewable resources.
A selection of countries representative of the world political-economic situation demonstrates the limits of this indicator (see table). Some of the highest reported GDP figures come from countries which are otherwise barely developed. In terms of GDP per head, Hong Kong ranks higher than Japan; Singapore is on a par with France; the United Arab Emirates is similar to Spain; and South Korea outperforms Portugal. The data could be interpreted as a sign of the “economic takeoff” of eastern Asian newly industrialised countries (NIC). From a growth standpoint, such reasoning is not wholly unfounded, especially in the case of South Korea. However, these performances reveal structural bias. Countries with oil revenues and those attracting foreign companies by social and fiscal dumping may be pushed to the higher rankings, whilst the standard of living for the majority of their population does not follow suit.
It is interesting to note the GDP/head of Russia, erstwhile number two world power in the days of the Soviet Union. The country now ranks after Argentina and South Africa. While this situation reveals the scope of post-Soviet economic collapse, it does not necessarily indicate the country’s actual industrial and technological achievements.
Other GDP figures fit in relatively well with traditional pre-conceived notions of “development’, with Latin America on a par with Asia. China is still ranked fairly low in spite of its current role in the world economy, because of the size of its population. Africa, especially Sub-Saharan Africa, is the most struggling region, including Côte d’Ivoire and Senegal which were for many years cited as examples of success.
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