The Republican’s Macro Deception

By Dean

The macro economic indicators that are used in political discourse in the USA are simply a farce. The government’s financial accounting has not been updated to factor in the effects of globalization on the US economy. In a typical republican fashion, the measures of economic growth are a deception intended to deceive the masses into stupor and ignorance.

When the republican dominated mass media praise the improvement in the US economy, they cite the official increase in the GDP, the Gross Domestic Product, and the increase in the productivity of the American worker.

This obsolete measure quantifies all of the goods and services that are bought and sold domestically during each quarter. A sale is included in the GDP if the purchase was done in the USA by a corporation or consumer, regardless of the nation of origin of the product or service.

In 1992, the Gross National Product was transformed into the GDP by changing the rules regarding the accrual of profit margins from multi-national corporations. Prior to the GNP/GDP change over, all profits were accounted for in the GNP of the nation where the corporation was based, regardless of the country of origin of the product or service. After the GNP./GDP changeover, all sales are accounted for in the GDP account of the producer nation, and also in the GDP account of the consumer nation, i.e. the USA. In the global economy, this accounting trick has inflated the GDP of the producer nations, such as China, and also artificially increased the GDP of the USA.

For example, if a pair of shoes is made in China, the value added to the shoes in China is accounted for in the Chinese GDP when the shoes are sold back to the manufacturer in the USA, thereby increasing the Chinese GDP artificially, since the shoes are not consumed in China, but rather exported for sale elsewhere. When the shoes are sold in the USA, their retail price is added to the USA’s GDP, thereby increasing it as if they were manufactured here.

The net result of this dubious scheme is that the GDP in the USA is increased, for every sale, even if the products or services are not made in the USA. The more outsourcing is done, the higher the GDP’s, because all outsourcing will accrue to both the producer and the consumer nation GDP accounts.

It is a well known fact that vertical integration reduces GDP, since it eliminates inter-corporate invoicing in the supply chain. The opposite function occurs with outsourcing, where international corporate invoicing in the supply chain increases with every link in the chain, thereby adding to the GDP accounts without actually increasing real production.

When the republicans claim that the GDP has increased, and therefore that the US economy is recovering, they are hiding the fact that American corporations are outsourcing more production overseas, and accounting for multiple invoicing along global supply chains. Politically, this statistical deception works, for both producers and consumers. The economy is not doing better, it’s outsourcing, stupid!

The much touted New Economy and the higher US productivity is also a falsehood. The productivity of an economy is a function of the domestic GDP divided by the value of the hours worked in the domestic economy. But, since the GDP is in reality a only a gross total of the value of the goods and services sold in an economy, regardless of the nation of origin, then a comparison of a GDP against domestic hours worked is a farce, because the products or services are not produced in the consumer nation, but are accounted for in the consumer GDP. All outsourcing will lower the value of the hours worked in the domestic economy, while the retail price of the products or services sold will remain the same.

A higher productivity rate shows a higher rate of outsourcing. This is the reason the republicans feign ignorance about why the economy is recovering without new jobs being created. Simply put, a higher GDP is a reflection of more outsourcing, and domestic productivity is also higher, for the same reason.

For example, if a pair of shoes which retails for $60 has a manufacturing cost of $30 if produced in the USA, the same pair of shoes will cost only $10.- if manufactured overseas. The retail sale price of the shoe remains the same, (lest the economy fall into "deflation"!), so the $20.- increase in the profit margin from outsourcing the production to a factory overseas will go to the corporate bottom line, i.e. as profit to the C-class and the financial elites in the USA.

Table 1: GDP increases (+) due to outsourcing for each hypothetical pair of shoes

USA * consumer

Outsourced ** producer

Cost

$30

Cost

$10

GDP + inhouse

$0

GDP + outsource

$10 * & $10 **

Retail

$60

Retail

$60

Profit

$30

Profit

$50

Total GDP +

$60 *

Total GDP +

$10 ** & $70 *

Productivity *

50%

Productivity *

83%

We are told by the republican mass media that the productivity American workers is at record levels. Obviously, since American labor is no longer needed, yet the GDP is increased by supply chain outsourcing, while the retail price remains the same.

A better national accounting for sustainable growth which takes into account not only the amount of money that changes hands, but also the quality of life of our People, and the ecological harmony that we must maintain is advocated by groups such as the United Nations Division for Sustainable Development.

The bottom line is that the outsourcing of jobs overseas has resulted in gigantic profit margins for global multinational corporations. This is the reason the C-class is so intent of maintaining the status quo of the Bush deception. Globalization benefits only the financial elites in the USA, allowing them to shower their subservient neo-fascist government with money and buying all of the media spin that power and privilege entitles them to.

Atlanta, GA
August 20, 2004

print this article send this article to a friend link to this article
Privacy Policy: The vantari.com Center for Alternative Solutions will not rent, sell, share or disseminate any information about you with other people or non-affiliated companies and organizations. We do not set client side cookies. Our server logs are used only for traffic analysis, and are erased from our server monthly. ©Copyright 1993 - 2007 by Center for Alternative Solutions - Atlanta
The Four Corner Stones:
Cybernetic Democracy • Financial Justice • Ecological Harmony
Peace and Non-Violence
frontpage | headlines | next | deeper | top