Don’t worry about “nearly meaningless” GDP figures, say economic experts

The latest GDP figures were announced on Wednesday, but should we care?

ECONOMIC EXPERTS Professor Richard Murphy and Dr Craig Dalzell have joined the Scottish Green Party in responding to the latest Gross Domestic Product (GDP) figures by arguing that better measures are needed if the true state of economic wellbeing – felt in the pockets of the population – is to be reflected.

The Scottish Government published the GDP figures for the third quarter of 2017 on Wednesday, which indicate that the Scottish economy grew by 0.2 per cent in real terms compared to the previous three months. Compared with the last three months of 2016, the economy has grown by 0.6 per cent.

READ MORE: GERS 2017 guide: Scotland reacts to latest figures

The GDP per person remained the same, with zero per cent growth.

Broken down by industry, the output in the services sector grew by 0.2 per cent, and by 1.2 per cent in the production sector, while output in the construction sector fell by 2.9 per cent.

The Scottish Government has presented the statistics as positive due to the overall growth, while opponents in Labour and the Conservative Party have criticised the SNP for allowing Scotland to “lag behind” the rest of the UK, where GDP since the final quarter of last year has grown by 1.7 per cent.

However, GDP is far from universally accepted as the most effective measure of economic growth, for a number of reasons.

Speaking to CommonSpace, political economist and tax expert Professor Richard Murphy suggested that both the accuracy of the data, and its usefulness from the perspective of how the economy is impacting on people’s wages, are dubious.

Murphy said: “There will, no doubt, be those saying that low GDP growth (and none in terms of GDP per head) is bad news for Scotland. This, though, assumes that, first of all the GDP data is right, and second that GDP matters.

“There is no way we can be sure that the GDP data for Scotland is right because the calculation of GDP requires accurate data on imports and exports from Scotland and all experts agree that Scotland does not have that information.

“In that case whether or not the data is accurate depends upon whether or not a fair proportion of estimates to and from Scotland to the rest of the world, as well as to and from the rest of the UK, are correctly estimated.

“I have my doubts about this and explained why to the Scottish Parliament last year. I suggest that it would be wise to share my suspicions.”

Murphy argued that there are other measures which would better reflect how well the economy is doing in tangible terms: “We now know that GDP is a poor indication of well-being. In particular, the share of wages in GDP has been falling steadily over time whilst that of profits has been rising.

READ MORE: GERS: Scottish deficit drops but remains over £13 billion

“It is the increase in profits that have pushed up UK GDP as a whole - reflecting the activity of the City of London - whilst real wages have been stagnant or falling when adjusted for inflation. If you want to know what is really happening in Scotland look at employment data, average wages and changes in them, and how this data compares to the UK.

“The Scottish Government would be wise to adopt increases in median pay as its economic goal and stop worrying about the nearly meaningless Scottish GDP measure that is beloved only by those who do not seem to have the best interests of Scottish people at heart.”

The left wing and pro-independence think tank Common Weal has long advocated for economic measures which better represent a progressive approach to the economy, arguing that GDP “tends to reinforce the interests of corporations” and drive a policy focussed on improving short term profits.

Head of research at Common Weal, Dr Craig Dalzell, spoke on the subject before the Economy, Jobs and Fair Work Committee at the Scottish Parliament on Tuesday. He explained his view to CommonSpace: “Since the 2008 Financial Crisis there has been a significant decoupling between GDP and wage growth.

“Where wages used to rise in line with GDP, they have been flat or declining in real terms for the past decade with the difference being largely pocketed as company profits or sent overseas.

“The government would be well advised to focus as much on inclusiveness in the economy as they do on growth in and sheer size of overly simplistic measurements such as GDP.”

This view was reflected in the Scottish Green Party’s response to the latest figures. In contrast to the other opposition parties’ suggestion that GDP ought to have been higher, Scottish Greens co-convener Patrick Harvie was critical of the measure itself.

Harvie said: “GDP gives a very limited insight into our economy, when the real figures we should be focusing on are stagnant wages, persistent poverty and the failure to promote low-carbon capital investment.

“More equal societies have successful economies, so if we’re looking for a brighter future, we should be prioritising investment in local services, fully funding an inflation-based pay rise for frontline workers and bringing forward infrastructure spending on sustainable transport, housing and energy projects.”

Picture courtesy of Tee Cee

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Comments

John Stuart Wilson

Wed, 01/17/2018 - 16:35

Sturgeon's Brexit "study" released on Monday revolves around different GDP scenarios. Therefore, it, too, is "nearly meaningless".

My_Opinion

Wed, 01/17/2018 - 19:16

Unbelievable. Are the nationalists going to rubbish every statistic available just to be able to claim independence is a good idea?

What evidence will they use to make the financial case for indy?

Mike McMonagle's picture

Mike McMonagle

Wed, 01/17/2018 - 19:40

1. Read the article. It's not "rubbishing every statistic" it's recognising the statistics while correctly stating that economic growth means nothing if it's not inclusive. The man in the street is not concerned by a healthy economy which keeps poor poor and wealthy wealthy.
2. The evidence for a viable and successful independent Scotland is all around. Even the staunch and vociferous unionists among us will openly agree that there is no reason Scotland would not survive as a separate economy.

rosspriory

Wed, 01/17/2018 - 19:53

I am interested in Norway as a wee nation. It only has 6 million of a population. A real "wee" country.

Would John Stuart Wilson and My Opinion please redirect me to the British equivalent of the sovereign fund that Norway has?

Would both these persons care to explain why Norway have £2trillion in its sovereign fund and we have.....in our sovereign fund?

John Stuart Wilson

Wed, 01/17/2018 - 20:34

Because Norway needed to quarantine its oil income to prevent it from coming on shore and giving the rest of the economy a fatal case of the Dutch disease. The UK, having a much larger economy and a much smaller stream of oil income, was never at the risk of such contagion, so did not need a fund, and kept taxes low instead. Across the water, a generation of Norwegians have lived and died under a high-tax regime, never having had any benefit from the fund.

I hope you benefit from this new knowledge.

What it has to do with matter at hand is a complete mystery...

rosspriory

Wed, 01/17/2018 - 20:18

John, would you just answer my question. Where is our sovereign fund and how is the UK benefitting from it? Ross

interest1707

Wed, 01/17/2018 - 21:06

Scotland does not benefit from oil,all revenue down South little or nothing coming back,why they gloated when oil revenue down actually effectively the revenue that England collects.£400,billion and wastes it on what ??Debts £2,trillion how come ??,Vanity projects !! Secrecy,lies,lying vows ,hipocracy stealing resources.Independent Norway oil fund £1,trillion.

rosspriory

Wed, 01/17/2018 - 21:07

John?

Hello? John,

Another question; what percentage of the sovereign fund is the Norwegian Chancellor of the Exchequer allowed to draw down to balance his/their budget?

There is another question coming........

rosspriory

Wed, 01/17/2018 - 21:15

John,

when the oil price crashed in 2014 and the SNP government were made to look fools in their ridiculous "Scotland's Future" white paper what percentage of their sovereign wealth fund was the Norwegian Chancellor of the Exchequer allowed to draw down to balance their budget due to the fall in the price of oil?

Wee Norway...what do they know.

rosspriory

Wed, 01/17/2018 - 21:23

John Stuart Wilson at 8.34 pm

Never read such garbage in all my life. Lets start with...

Because Norway needed to quarantine its oil income to prevent it from coming on shore and giving the rest of the economy a fatal case of the Dutch disease.....utter garbage. Plain English for this guy please.

The UK, having a much larger economy and a much smaller stream of oil income, was never at the risk of such contagion, so did not need a fund, and kept taxes low instead. Utter garbage again.

Can you inform us why Norway has a £2 trillion sovereign wealth fund and why we, the UK , had a "smaller stream" of income?

You are a hoot John.

rosspriory

Wed, 01/17/2018 - 21:26

. Across the water, a generation of Norwegians have lived and died under a high-tax regime, never having had any benefit from the fund.

Poor Norway. They have a sovereign wealth fund that makes us in the UK a financial non entity when it comes to looking after its people. They have a £2 trillion wealth fund. We have a £2 Trillion deficit.

rosspriory

Wed, 01/17/2018 - 21:29

Next load of garbage;

hope you benefit from this new knowledge.
What it has to do with matter at hand is a complete mystery...

I hope you better understand now the place that Norway has in world economics. They may well be the richest country per something -capita, in the world. We in the UK have a "£2trillion deficit.

rosspriory

Wed, 01/17/2018 - 21:32

So John,

Lets get back to basics;

can you redirect me to the UK/British web site that defines the sovereign wealth fund for the United Kingdom achieved through 40/50 years of tax ?

And please no more garbage....

rosspriory

Wed, 01/17/2018 - 21:53

John

Please forgive me if I have not mentioned.....

STATOIL

Who the hell are they?

Go on John......

What ids the UK equivalent of STATOIL?

MauriceBishop

Thu, 01/18/2018 - 00:56

Ross has done a fine job demonstrating he should be ranked alongside Murphy and Dalzell in the roster of separatist economic experts.

Mike McMonagle's picture

Mike McMonagle

Thu, 01/18/2018 - 10:23

Seriously?

Link 1:

So Murphy's economic expertise is a sham because he pointed out that Lord Ashcroft is a tax avoider on an epic scale and sells his expertise in that area, then donates some of that substantial avoided tax money to the conservative party? Murphy may have jumped to conclusions about aspects of Ashcroft's dealings but only because Ashcroft would rather run and hide in public toilets than answer the questions himself. Is Ashcroft an innocent victim?

On this basis you are also debunking the work of Panorama, BBC News, Daily Telegraph, Financial Times, Daily Mail (they are shit though) and the Evening Standard all of whom made the same allegations minus one particular aspect and all of whom are Conservative and Union supporting media.

Link 2:

It's Guido Fawkes for goodness sake. He's an uncorroborated gossip columnist and a rabid Tory attack dog. His opinion carries less weight than his ample pie-eating frame.

Link 3:

It's Tim Worstall prematurely celebrating the demise of Murphy's blog after a small hosting issue resolved within a few hours.

If that is the extent of your attack on Murphy I would suggest he can relax. Nothing to see here

noelscoper

Thu, 01/18/2018 - 10:09

Link 1:

Note "Murphy, of Downham Market, Norfolk, appeared to have based his allegations on his understanding of what he had read on a third party’s website, but that in fact that website said no such thing and its owners had subsequently confirmed that they were not making any such allegations nor were they even referring to the claimants."

He assumed something, was wrong, and paid for it.

Link 2:

Ritchie fell out with Labour as they wouldn't give him a peerage. A man above his station you would agree. He'a also fallen out with TJN, two wives, unions, and charities.

Link 3:

Richard Murphy is not a tax expert (no qualifications), an economist (just an accountant), a Professor (by job title only, he has no PhD), he's not even got a good grasp of UK tax law. He has dodged tax by setting up companies in Ireland, dodged council tax on an annexe and is a hypocrite of the highest order.

Mike McMonagle's picture

Mike McMonagle

Thu, 01/18/2018 - 10:39

Link 1 - Only deflects from the point. Ashcroft is a large scale tax evader. Murphy jumped the gun but my point remains. It does not discount his views.

Link 2 - Gossip column trivia. A personal uncorroborated attack. Does not reflect upon his findings only his person. In the race for morally bankrupt political figure of the decade he would be lapped several times by around 50% of political figures who spring easily to mind.

Link 3 - Thanks for your opinions as that is all they are. I have read and trust Murphy's findings. I have never read any of your's (to my knowledge) apart from ad hominem attacks on a man because of his political views.

geacher

Thu, 01/18/2018 - 11:35

"GDP figures nearly meaningless"
Dear God in Heaven.
"ECONOMIC EXPERTS Professor Richard Murphy and Dr Craig Dalzell"
This is desperate stuff, it really is.

Centurious

Thu, 01/18/2018 - 13:39

Who would you recommend as a good separatist economic expert? Maurice

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