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One of the other key measures of our economy is the unemployment rate. This measure provides something of a counterpoint to a growing GDP. The unemployment rate increased in October 2008 to 6.5%. The ability to find meaningful work is a key component of GPI, yet the GDP can grow even if unemployment is high. One of the reasons is that the GDP does not measure wealth distribution. The wealth gap has increased over the past eight years. Average household wealth has increased, but the rate of increase is faster in the top quartile of households. Real wealth in the lower quartiles has stagnated. Again, the GDP would measure the wealth as having grown nationally. But over the past eight years wealth distribution has worsened. While this clearly constitutes economic success for some individuals, it does not constitute economic success for the majority.
The current account deficit has continued to grow. Over the past eight years, the world economy has been characterized by wealth transfer from the U.S. To the rest of the world. Manufacturing jobs are going to Asia, spurring record growth in China and factory closings in the U.S. America's consumers are highly leveraged, their debt fuelling wealth in petroleum rich countries in the Middle East and Venezuela. As with unemployment, this wealth transfer is well-documented and understood in economic circles. Yet,...
The wealth transfer shows up in the GDP because products from other countries are wholesaled, retailed, transported and marketed in the United States. All of these activities contribute to the GDP but ultimately these transactions contribute to a loss of domestic wealth.
In the past eight years, we have seen the GDP grow, but we have not seen economic progress. The growth was spurred by the depletion of resources, by war, and by a speculative bubble in the housing market. Genuine contributions to the economy such as manufacturing output, job creation, and wealth distribution have lagged. Proponents of the GPI argue that merely measuring transactions is insufficient; that GDP simply does not capture the true progress of a nation. When economic growth comes at the expense of resource depletion, war, wealth outflow and increasing income disparity, it is the wrong kind of growth. In the past eight years, we have seen this theory illustrated starkly. The economy has seen growth by traditional measures, but has not seen the sort of healthy, sustainable growth that constitutes genuine economic progress.
Works Cited
Cobb, Clifford; Halstead, Ted & Rowe, Jonathan. (1995). If the GDP is up, why is America down? The Atlantic. Retrieved November 9, 2008 at http://www.theatlantic.com/politics/ecbig/gdp.htm
Works Cited
Cobb, Clifford; Halstead, Ted & Rowe, Jonathan. (1995). If the GDP is up, why is America down? The Atlantic. Retrieved November 9, 2008 at http://www.theatlantic.com/politics/ecbig/gdp.htm
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