GDP: A Brief but Affectionate History

Copyright Date: 2014
Pages: 184
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  • Book Info
    Book Description:

    Why did the size of the U.S. economy increase by 3 percent on one day in mid-2013-or Ghana's balloon by 60 percent overnight in 2010? Why did the U.K. financial industry show its fastest expansion ever at the end of 2008-just as the world's financial system went into meltdown? And why was Greece's chief statistician charged with treason in 2013 for apparently doing nothing more than trying to accurately report the size of his country's economy? The answers to all these questions lie in the way we define and measure national economies around the world: Gross Domestic Product. This entertaining and informative book tells the story of GDP, making sense of a statistic that appears constantly in the news, business, and politics, and that seems to rule our lives-but that hardly anyone actually understands.

    Diane Coyle traces the history of this artificial, abstract, complex, but exceedingly important statistic from its eighteenth- and nineteenth-century precursors through its invention in the 1940s and its postwar golden age, and then through the Great Crash up to today. The reader learns why this standard measure of the size of a country's economy was invented, how it has changed over the decades, and what its strengths and weaknesses are. The book explains why even small changes in GDP can decide elections, influence major political decisions, and determine whether countries can keep borrowing or be thrown into recession. The book ends by making the case that GDP was a good measure for the twentieth century but is increasingly inappropriate for a twenty-first-century economy driven by innovation, services, and intangible goods.

    eISBN: 978-1-4008-4997-0
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. [i]-[iv])
  2. Table of Contents
    (pp. [v]-[viii])
  3. Introduction
    (pp. 1-6)

    “In Greece, statistics is a combat sport.” Andreas Georgiou was speaking after the announcement that he would be facing criminal charges and a parliamentary inquiry. A distinguished man who had previously spent many years working at the International Monetary Fund (IMF) in Washington, DC, Georgiou could be played by George Clooney in the movie about the European economic catastrophe. In late 2010 he became the head of Elstat, Greece’s new official statistical agency, parachuted into the job by the European Union (EU) and the IMF. Within weeks his emails were being hacked, and within months he was accused by recently...

  4. ONE From the Eighteenth Century to the 1930s: War and Depression
    (pp. 7-40)

    Warfare is the mother of invention. Many new technologies that end up in use in civilian life have been spurred by the demands of conflict and funded by the military. Among these inventions, ranging from the Internet to Teflon, radar to programmable electronic computers, is Gross Domestic Product. GDP is one of the many inventions of World War II.

    Its name sounds as though it should be self-explanatory.Product:things that are produced.Domestic:at home.Gross:nothing deducted, the opposite ofnet(conversely, a cereal packet will give “net weight,” meaning the contents alone, not including the packaging). GDP...

  5. TWO 1945 to 1975: The Golden Age
    (pp. 41-58)

    Let’s pick up the story of GDP in the aftermath of World War II. Warfare is devastating in so many ways. The total conflict that ended in 1945 had an enormous cost in human lives and physical assets. This was particularly true in the case of the defeated countries, whose cities, factories, bridges, roads, and homes had been destroyed in the final part of the conflict. Germany, Japan, Spain, and Italy all ended the war with their countries and economies in ruins. The United Kingdom and France, although victorious, fared little better and owed large debts to the United States....

  6. THREE The Legacy of the 1970s: A Crisis of Capitalism
    (pp. 59-76)

    After the postwar boom, Western capitalism started to falter, and its troubles were various. There were four distinct challenges to conventional economic thinking by the 1970s, challenges that corresponded to disturbing developments in the global economy.

    The first was the switch from a virtuous circle of strong economic growth with steady prices to disappointing growth or even recession (when GDP declines for a sustained period, conventionally six months), combined with high and accelerating inflation. This ugly phenomenon had the ugly namestagflation. Conventional economic management tools seemed to make matters worse rather than better. Certainly there seemed no way to...

  7. FOUR 1995 to 2005: The New Paradigm
    (pp. 77-92)

    It was no surprise that the crisis of capitalism in the late 1970s led to a reaction, both political and intellectual, against the Golden Age conventions. The clearest example came in the United States and the United Kingdom with the Reagan-Thatcher revolution. Reagan and Thatcher’s policy agenda consisted of breaking the power of organized labor, deregulating the economy to encourage business, and privatizing state-owned corporations and other assets (including selling local authority housing to its tenants in the United Kingdom). Raising and lowering government spending and tax rates was no longer seen as the way to manage the economy’s growth...

  8. FIVE Our Times: The Great Crash
    (pp. 93-118)

    There are three elements to classic Greek tragedy: arrogance, foolishness, and destruction:hubris,ate, andnemesis. These have played out around the world since the start of the financial crisis in 2008.

    The arrogance was the triumphalism about the prevailing model of economic growth. It was based on technological innovation, of course, but also on financial market deregulation and the broader ideology of “free markets,” and the globalization of finance and trade. As globalization expanded its reach and scope during the 1990s and 2000s it also generated opposition to what many campaigners saw as adverse and unacceptable side effects. The...

  9. SIX The Future: Twenty-first-Century GDP
    (pp. 119-140)

    This book has described the origins and evolution of GDP, the measure of economic performance used all the time in the media and in the world of economic policy. GDP is a relatively modern way of measuring the size of economic output, and differs in some important ways from earlier methods. For example, early definitions of “national income” did not include government spending, because governments before the late nineteenth and early twentieth century had such limited functions. Paying for war, or similarly for the justice system, was seen as a necessary evil reducing national income, rather than a positive contribution...

    (pp. 141-142)
  11. NOTES
    (pp. 143-152)
  12. INDEX
    (pp. 153-160)