Yesterday I started playing with an idea about measuring an economy, but without much progress. Because GDP measures price, it doesn't really tell you much about output. When prices go down, GDP goes down. When prices go up, GDP goes up. I've stated before, and it's obvious, that GDP isn't a good way to measure an economy. El Mat has pointed out that companies in the US have formed subsidiary and related corporations in other countries for various reasons. Thus, if, for example, General Motors imports car parts from Brazil from a GM subsidiary, that has a lot of similarities to getting the same part from a GM subsidiary in Michigan. A Brazilian made the part, but the value is added in the US. How do you measure that?
I came to the realization - and I am not saying it's profound - listening to hearings about the US airlines, which were ordered by the US government to stop flying last week. I can see, very easily, "where did the money go?" The airlines still have all their capital wealth - planes, terminals, routes, capital equipment, employees with special training and special knowledge - but they have no cash flow. Without cash flow, they can't operate. The airline industry is 10% of GDP, so by grounding the planes last week, 10% of US GDP vanished.
We know where the cash flow went, because the planes were grounded on order of the government - an unprecedented act. Is that similar to "where the money goes" in recessions/depressions? Is it just cash flow?
If making widgets is productivity, then what are all the rest of us doing? Are we just parasites? A lot of people would argue that.
It seems like the old ways of measuring productivity are geared towards an economy that makes widgets, and ours doesn't do that anymore.
I wish El Mat would come back and explain it to me.
I realized how clever the targets of the attack are. What was struck were the actual life blood of the USA - the free flow of capital through the beating heart of US capitalism, Manhattan - the ability of the USA to preserve peace, the Pentagon - and the free flow of products and people, air traffic. It wasn't a twofer, it was a threefer. (US slang - twofer is two for one, threefer is three for one). |
