Bowyer: Whatever Happened to GNP?
Why don’t they tell us the GNP anymore? When I was a kid, they always told us about GNP. We’d stand next to our dioramas (or is it diorami?) of SovietCollective Farms, or Asian rice paddies, and Mrs. Swallow (yes, actual name) would tell us about the GNP of the Soviet Union was such and such, or the GNP per person of whatever country we happened to be focusing on in Social Studies that week was higher than that of the social studies unit from last week.
Then sometime in the 90s GNP was quietly escorted off to some undisclosed location and mysteriously GDP appeared. “Does this have something to do with the metric system?” I wondered. No, it doesn’t. But it still was a bad idea. Here’s why: GDP doesn’t count the wealth which American businesses create in other countries. The D stands for ‘Domestic’ as in Gross DOMESTIC Product. If we make it here, GDP counts it. If we make it somewhere else, GDP doesn’t count it. For many countries, this doesn’t matter much. Their companies produce domestically.
But America is the land of the free and the home of the multinational
corporation. If it weren’t we’d be in a recession right now. We source globally, produce globally and sell globally. Increasingly the domestic function is coordination.
When I used to be a talk show host, the old guys would call me and ask “Do we still make anything in America anymore?”
“Yes”, I’d tell them, “Decisions, we make decisions”.
That’s why even though GDP is the updated euro-metric-system-trendy growth stat; it’s already the least up to date. Like Disco, we dumped good old Gross NATIONAL Product just at the time that the great wheel was turning its way once again, when world trade was starting to explode and America was in the middle of it all. When the world went GLOBAL our stats went DOMESTIC.
So what if we hadn’t? What would things be looking like right now? Basically the surprisingly strong showing among large cap American company stocks would have been a lot less surprising. For the past year or more, GNP has been beating GDP.
In fact, last week’s growth revisions show that the gap is currently running at about a quarter of a trillion dollars per year. I don’t want to get too wonky here, but if I feed my thoughts into the Econo-geek to Plain English Paraphrase Dictionary it comes out to this: The wealth that US based companies are creating overseas minus the wealth that foreign corporations are creating here, is over $200 billion per year right now.
No wonder no one talks about GNP anymore – it’s showing far too much good news.
Jerry Bowyer is chief economist at Benchmark Financial Network and makes regular appearances on CNBC. He also writes extensively on finance and history for the National Review, UPI, The Pittsburgh Post Gazette, Crosswalk.com, and The New York Sun.