Wednesday, July 22, 2009

The wealth of nations

As of 2008, three of the major GDP estimations agree on the list of the ten richest nations on Earth. First is the US, then, with close to the US GDP between the three of them, Japan, China, and Germany; the lists then all proceed with France, Italy, and the UK (in that order). The final three, which the different lists rank differently, are Brazil, Spain, and Russia.

In a moment of curiosity, I decided to plot these with respect to population... land area... there's not really anything in common with the list. It gets worse when we go a few more places down, which pulls in India and Mexico.

The only thing that's really clear on these lists is that the wealth of nations is still fairly concentrated. The 800 million people in the EU and US control half the world's economy; the 2.5 billion people in China and India control a tenth of it. Mostly that's China speaking, there, India is part of the 2.8 billion population unit that only accounts for 5% of global GDP.

India. The Tiger. The rapidly developing, technologically savvy country. Rapidly growing economy or not, a rising reputation for churning out talented engineers and programmers or not, they're still quite poor in terms of cash dollars.

When I think of all the things I bought, there's very little in terms of durable goods that came from the US or EU; some fencing equipment, some odds and ends, some books - and when I read the 538 post near the end of June (see link above) talking about how to take out about 40% of the world's population for the small price of 5% of the world's GDP, I have to wonder if we aren't undervaluing the contribution these countries make to the global economy when we choose to rely on GDP as a measure of it.

I also have to wonder if it's a question of the value of their labor being truly different, or if it's really more of a product of how money moves. Or doesn't move, as the case may be. Some evidence suggests that the supply and demand for money - and therefore, currency exchange rates - are a large piece of the picture, for when we look at GDP(PPP) figures - measuring local purchasing power - the EU misplaces about three trillion dollars and China picks up a similar amount, rocketing past Japan.

India shoots up from 12th (1.2$T) to 4th (3.2$T). The local goods and services available in India would be worth about three times as much on the European market as Indians actually buy/sell them for. It's amazing, and more than a little bit disturbing, to think that the difference in the value of money is so terribly significant.

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