You're talking about the GDP in national income terms, where does it come from, consumption and investment, where does it go, wages or profit. My analysis is GDP by industry, which is a completely different way of looking at the economy, although less used, and allows one to look in gory detail at the inner workings of the economy (you can get gorier in input-output accounts). So if you look at the BEA accounting you see all dollars accounted for, by industry.
At the good ol' Bureau of Economic Analysis, their publication "Survey of Current Business", last year's "Annual industry accounts" which shows in Table 1 the breakdown by industry (meaning services and industry), and table 2 the breakdown percentage-wise (in PDF format, pages 6 and 7 if you're using Adobe's reader)
The components of GDP Each of the variables C (Consumption), I (Investment), G (Government spending) and X-M (Net Exports) (where GDP = C + I + G + (X-M) as above) (Note: * GDP is sometimes also referred to as Y in reference to a GDP graph) C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing. I (Investment) is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products. Buying financial products is classed as 'saving', as opposed to investment. The distinction is (in theory) clear: if money is converted into goods or services, it is investment; but, if you buy a bond or a share of stock, this transfer payment is excluded from the GDP sum. That is because the stocks and bonds affect the financial capital which in turn affects the production and sales which in turn affects the investments. So stocks and bonds indirectly affect the GDP. Although such purchases would be called investments in normal speech, from the total-economy point of view, this is simply swapping of deeds, and not part of real production or the GDP formula. G (Government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. X (Exports) is gross exports. GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added. M (Imports) is gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic.
But that still leaves $6 trillion to go- in investments. If we're investing $6 trillion in working durable goods every year to make a mere $920 billion in finished goods, I'd say we've got some incredibly bad investments on our hands (oh, and remember above, this excludes "paper" investment- strict financial products). Especially given the Software engineering idea that any investment that does not pay for itself in 4 months, is a bad investment.
Well, services are production and one of the best cases that you are aware of is STEM, IT, Tech related areas. Those are all (I believe all), are labeled services, yet obviously software is a product.
Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
If you want to get to the problem with GDP and the miscalculation of imports, here is a Business week article, that's very good highlighting a study on Phantom GDP where due to global sourcing, offshore outsourcing, they are attributing goods and services domestically when they really are imports.
Like there's a huge mismatch between the reported GDP and manufactured goods- and another huge mismatch between the amount of "phantom GDP" and the subtraction of our consumption from the total GDP is huge. As in around $9 trillion. Where is the rest of the money going? Is the free market so incredibly inefficient that it supports $9 trillion in phantom GDP that can't be accounted for by consumption + exports - imports?
You say you don't like a fictional economics- but there's a huge hole here that even the services economy can't cover.
I don't know where that $9 trillion went- maybe to paying for our military in Iraq and other sweetheart deal bailouts- but it's a huge mismatch that I've personally never noticed before.
You might argue that this isn't a fair comparison, because I'm not counting the $507 billion (2003 figures) that are exported. Although in Robert's article Michael Mandel, I belive, calculated that 40% of goods consumed were imports, so I think I'm in the ballpark.
It's tricky figuring out imports as a percentage of consumption. The figures I show in the post, and the best ones for understanding the economy, are in value-added dollars, that is, how much did a particular sector contribute to the economy by itself? When you get an import (or export) you're bundling all of the services that were value-added on top of the manufacturing value-added, so it's a little like apples and oranges -- but again, I think 40-50% is a good ballpark. And scary.
That our actual production/consumption in the United States is only $2 Trillion.
And that 54% of those goods are imported.
Leaving 46% of those goods domestically made.
Thus the GDP, excluding (and now I see my error, but I'll continue my original thinking anyway) services *and exports* is $920 billion.
Thanks, for making me show my math and pointing out my error. Having said that, are we really exporting $12 trillion, give or take, in goods? Or is MOST of what we do services, and thus not really "production" in the classic sense?
but on a more serious note, we had long arguments over at Grist with an OECD economist about the WTO, so I sort of promised myself not to be totally knee-jerk against the WTO; what I think I learned was that it's pretty malleable. However that may be, I would agree that, at the least, if the US threatened to withdraw from the WTO they would probably move pretty fast to allow whatever we wanted.
If memory serves, the main thing they do is keep everybody "honest", at least in some respects, to obey their own trade laws and not discriminate against particular countries.
Unfortunately, for very practical reasons you couldn't discriminate for domestically owned companies, in the case of high-speed rail and subways, for a very simple reason -- there aren't any. You could borrow from the Koreans/Chinese/Japanese and demand that foreign contractors train domestic engineers, and even sell the factories to locals (yes, Korea did that), although I won't hold my breath.
Remember, one of the things we do not want on EP is economic fiction. If you want to claim this, you need to back it up with real statistics, references.
I don't get anything even remotely close to that number from his post.
One of the major drawbacks to the Articles of Confederation was that they allowed foreign Heads of Atate to play off one US State against another, for favorable trade deals.
This is a drawback? Seems to me it would give the governors the ability to be protectionist- a big plus.
Subtract out the services, and given the numbers in this post, the US GDP isn't $13 Trillion- it's a mere $920 billion, a little less than 1/13th the true amount.
Tell me again how money is a measure of PRODUCTION?
Most of those negotiation tax incentives, pitting states against each other trying to attract industry, after the deal, corporations plain do not honor the agreements.
IBM for example was supposed to create jobs. They did not. They outsourced even more jobs.
The Neilson ratings company literally forced U.S. citizens to train their H-1B replacements before being fired, after they received millions and millions in tax incentives from Florida to....create jobs.
I believe the local government in Neilson's case pulled some of the tax breaks but I know in IBM's case, nothing happened.
That's pretty sad when states give all of these incentives, infrastructure and don't even pull the deal when they get screwed over by these corporations.
One of the major drawbacks to the Articles of Confederation was that they allowed foreign Heads of Atate to play off one US State against another, for favorable trade deals.
Tax incentives nowadays have the exact same effect. It may be that Congress can prohibit those by legislation, but it is interesting to note that the evil of this State vs. State competition (a race to the bottom) is nothing new.
So, we simply need preferred stock, controlling interest or some method?
Of course Hanky Panky isn't bothering to get preferred stock. We could have bought Citigroup outright and had a lot of left over change by now. I think the total cost was less than $15 Billion recently yet the government gave Citigroup $45 Billion and guaranteed $300 Billion in toxic assets.
What did the U.S. get in return? $7 billion worth of preferred shares.
We could have outright purchased 3 Citigroups by now with that money.
Unf**king Believable!
And this slides right by the press!
So why not outright get voting as well as preferred shares in the big 3, end of story.
On state tax incentives U.S. states give both domestic corporations as well as FCDC (foreign controlled domestic subsidiaries) massive tax incentives to say build a factory in some state. Right now, the FCDCs (Toyota, Honda, VW) are getting greater subsidizes than the big 3 for various factories in the U.S. Japan has bought and planned some advanced FABS (high tech chips, microprocessors) in the U.S., also with huge tax incentives and other breaks.
I've not heard of any of those being challenged via the WTO.
and frankly if the WTO rules against the United States, when every other nation is subsidizing major industry, case in point, Airbus, then piss on 'em.
Honestly, I think the United States is absurd to have ever joined this organization at least without veto power and so far it seems the WTO is completely biased against the United States, never mind the other issues.
Can you define domestic content via whatever the WTO is claiming it is and if this is true, how does China with it's 50% state owned JVs or things like Airbus not be deemed illegal?
Working around it in the interim, sounds like a plan. Hell man, the United States needs a big honking battery manufacturing facility smack dab in the middle of Detroit for aesthetic reasons. ;) It's an architectural wonder, really I swear.
THAT finally makes more sense, in combination with your other post.
In fact, the services do account, based on the BEA accounting, for the missing $6 Trillion, thanks.
Darned scary, but thanks.
Jon, I formatted your signature and all, you can use signatures on EP and format them as well. Basic Formatting is enabled on signatures.
--your friendly neighborhood anal admin
You're talking about the GDP in national income terms, where does it come from, consumption and investment, where does it go, wages or profit. My analysis is GDP by industry, which is a completely different way of looking at the economy, although less used, and allows one to look in gory detail at the inner workings of the economy (you can get gorier in input-output accounts). So if you look at the BEA accounting you see all dollars accounted for, by industry.
JR on Grist
At the good ol' Bureau of Economic Analysis, their publication "Survey of Current Business", last year's "Annual industry accounts" which shows in Table 1 the breakdown by industry (meaning services and industry), and table 2 the breakdown percentage-wise (in PDF format, pages 6 and 7 if you're using Adobe's reader)
JR on Grist
From Wikipedia:
The components of GDP Each of the variables C (Consumption), I (Investment), G (Government spending) and X-M (Net Exports) (where GDP = C + I + G + (X-M) as above) (Note: * GDP is sometimes also referred to as Y in reference to a GDP graph) C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing. I (Investment) is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products. Buying financial products is classed as 'saving', as opposed to investment. The distinction is (in theory) clear: if money is converted into goods or services, it is investment; but, if you buy a bond or a share of stock, this transfer payment is excluded from the GDP sum. That is because the stocks and bonds affect the financial capital which in turn affects the production and sales which in turn affects the investments. So stocks and bonds indirectly affect the GDP. Although such purchases would be called investments in normal speech, from the total-economy point of view, this is simply swapping of deeds, and not part of real production or the GDP formula. G (Government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. X (Exports) is gross exports. GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added. M (Imports) is gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic.
Ok, so what I've left out of the classic is Investment and Government Spending. According to this website, another $3 Trillion of my missing $9 Trillion is indeed government spending (additional consumption neither you nor I took into account).
But that still leaves $6 trillion to go- in investments. If we're investing $6 trillion in working durable goods every year to make a mere $920 billion in finished goods, I'd say we've got some incredibly bad investments on our hands (oh, and remember above, this excludes "paper" investment- strict financial products). Especially given the Software engineering idea that any investment that does not pay for itself in 4 months, is a bad investment.
Well, services are production and one of the best cases that you are aware of is STEM, IT, Tech related areas. Those are all (I believe all), are labeled services, yet obviously software is a product.
Econ Stats has GDP and the rest of it.
GDP is much more than just manufactured goods.
It's consumption, Government spending and imports are already subtracted from GDP. wikipedia
From investorwords:
If you want to get to the problem with GDP and the miscalculation of imports, here is a Business week article, that's very good highlighting a study on Phantom GDP where due to global sourcing, offshore outsourcing, they are attributing goods and services domestically when they really are imports.
http://gristmill.grist.org/user/Jon%20Rynn
government is 12.7% (again, in 2003)
http://gristmill.grist.org/user/Jon%20Rynn
Like there's a huge mismatch between the reported GDP and manufactured goods- and another huge mismatch between the amount of "phantom GDP" and the subtraction of our consumption from the total GDP is huge. As in around $9 trillion. Where is the rest of the money going? Is the free market so incredibly inefficient that it supports $9 trillion in phantom GDP that can't be accounted for by consumption + exports - imports?
You say you don't like a fictional economics- but there's a huge hole here that even the services economy can't cover.
I don't know where that $9 trillion went- maybe to paying for our military in Iraq and other sweetheart deal bailouts- but it's a huge mismatch that I've personally never noticed before.
You might argue that this isn't a fair comparison, because I'm not counting the $507 billion (2003 figures) that are exported. Although in Robert's article Michael Mandel, I belive, calculated that 40% of goods consumed were imports, so I think I'm in the ballpark.
It's tricky figuring out imports as a percentage of consumption. The figures I show in the post, and the best ones for understanding the economy, are in value-added dollars, that is, how much did a particular sector contribute to the economy by itself? When you get an import (or export) you're bundling all of the services that were value-added on top of the manufacturing value-added, so it's a little like apples and oranges -- but again, I think 40-50% is a good ballpark. And scary.
http://gristmill.grist.org/user/Jon%20Rynn
That our actual production/consumption in the United States is only $2 Trillion.
And that 54% of those goods are imported.
Leaving 46% of those goods domestically made.
Thus the GDP, excluding (and now I see my error, but I'll continue my original thinking anyway) services *and exports* is $920 billion.
Thanks, for making me show my math and pointing out my error. Having said that, are we really exporting $12 trillion, give or take, in goods? Or is MOST of what we do services, and thus not really "production" in the classic sense?
but on a more serious note, we had long arguments over at Grist with an OECD economist about the WTO, so I sort of promised myself not to be totally knee-jerk against the WTO; what I think I learned was that it's pretty malleable. However that may be, I would agree that, at the least, if the US threatened to withdraw from the WTO they would probably move pretty fast to allow whatever we wanted.
If memory serves, the main thing they do is keep everybody "honest", at least in some respects, to obey their own trade laws and not discriminate against particular countries.
Unfortunately, for very practical reasons you couldn't discriminate for domestically owned companies, in the case of high-speed rail and subways, for a very simple reason -- there aren't any. You could borrow from the Koreans/Chinese/Japanese and demand that foreign contractors train domestic engineers, and even sell the factories to locals (yes, Korea did that), although I won't hold my breath.
http://gristmill.grist.org/user/Jon%20Rynn
I just wrote Obama Promises to Create 25 million jobs, but in what countries, where I have a few quotes on the percentage ratios of imported goods versus manufacturing.
If you haven't checked out Tonelson, who tracks manufacturing, that's one of the economists where I got the numbers from.
Remember, one of the things we do not want on EP is economic fiction. If you want to claim this, you need to back it up with real statistics, references.
I don't get anything even remotely close to that number from his post.
One of the major drawbacks to the Articles of Confederation was that they allowed foreign Heads of Atate to play off one US State against another, for favorable trade deals.
This is a drawback? Seems to me it would give the governors the ability to be protectionist- a big plus.
Subtract out the services, and given the numbers in this post, the US GDP isn't $13 Trillion- it's a mere $920 billion, a little less than 1/13th the true amount.
Tell me again how money is a measure of PRODUCTION?
Most of those negotiation tax incentives, pitting states against each other trying to attract industry, after the deal, corporations plain do not honor the agreements.
IBM for example was supposed to create jobs. They did not. They outsourced even more jobs.
The Neilson ratings company literally forced U.S. citizens to train their H-1B replacements before being fired, after they received millions and millions in tax incentives from Florida to....create jobs.
I believe the local government in Neilson's case pulled some of the tax breaks but I know in IBM's case, nothing happened.
That's pretty sad when states give all of these incentives, infrastructure and don't even pull the deal when they get screwed over by these corporations.
One of the major drawbacks to the Articles of Confederation was that they allowed foreign Heads of Atate to play off one US State against another, for favorable trade deals.
Tax incentives nowadays have the exact same effect. It may be that Congress can prohibit those by legislation, but it is interesting to note that the evil of this State vs. State competition (a race to the bottom) is nothing new.
So, we simply need preferred stock, controlling interest or some method?
Of course Hanky Panky isn't bothering to get preferred stock. We could have bought Citigroup outright and had a lot of left over change by now. I think the total cost was less than $15 Billion recently yet the government gave Citigroup $45 Billion and guaranteed $300 Billion in toxic assets.
What did the U.S. get in return? $7 billion worth of preferred shares.
We could have outright purchased 3 Citigroups by now with that money.
Unf**king Believable!
And this slides right by the press!
So why not outright get voting as well as preferred shares in the big 3, end of story.
On state tax incentives U.S. states give both domestic corporations as well as FCDC (foreign controlled domestic subsidiaries) massive tax incentives to say build a factory in some state. Right now, the FCDCs (Toyota, Honda, VW) are getting greater subsidizes than the big 3 for various factories in the U.S. Japan has bought and planned some advanced FABS (high tech chips, microprocessors) in the U.S., also with huge tax incentives and other breaks.
I've not heard of any of those being challenged via the WTO.
and frankly if the WTO rules against the United States, when every other nation is subsidizing major industry, case in point, Airbus, then piss on 'em.
Honestly, I think the United States is absurd to have ever joined this organization at least without veto power and so far it seems the WTO is completely biased against the United States, never mind the other issues.
Can you define domestic content via whatever the WTO is claiming it is and if this is true, how does China with it's 50% state owned JVs or things like Airbus not be deemed illegal?
Working around it in the interim, sounds like a plan. Hell man, the United States needs a big honking battery manufacturing facility smack dab in the middle of Detroit for aesthetic reasons. ;) It's an architectural wonder, really I swear.
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