GDP per capita: Is It A Useful Idea?

Often, the twin concepts of the GDP and GDP per capita are impressed upon us as if they represent accurate and objective measures of well being. One common mistake has us refer to GDP per capita as a meaningful measure of income.Is it? The obvious answer is no, if for no other reason but its utter inability to say anything meaningful about income distribution.A cursory investigation of the data reveals that the average income for the bottom 20% of families in the US is around $10,000.00 while that for the top 20% stands at over $142,000.00 per annum.

Income distribution is a reflectionon of who we are and what we value. We cannot claim to be opposed to it and yet not take any action against it. Acquiesence does not provide an escape mechanism from being held accountable for injustice and unfairness, it is in reality an indictment.

GDP per capita has become a useless measure of income because it allows us to pretend that all is well when in reality distribution of resopurces has become more polarised. It is currently estimated that the top 1% of families in the US own around 45% of the wealth , they own just as much as the bottom 95% of the populace.

(For more on the above please read the Op-Ed by Paul Krugman in the NYT of February 27, 2006.)

Corporate Responsibility?

I have been wondering recently whether the term "Corporate Responsibility" is an oxymoron similar to some other common terms such as "sustainable growth" and "military intelligence".

If we are to judge the car manufacturing giants by their recent advertising campaigns then we must conclude that they have all become converted to the virtues of small cars, efficient engines and alternative fuels. Ford uses the Muppets to show their environmentally sensible offerings, GM touts it 20-30 gas sipping engines, Toyota is very proud of its hybrids and Daimler-Chrysler of its commitment to innovation.

Sadly, though, none of the above manufacturers practices what they preach. The new Ford pick up is almost as large as a bus, GM's Trailblazzer has a vette engine, Chryslers new Grand Cherokee goes from zero to 60 mph in 5.0 seconds and is not meant for the offroad and Toyotas new pick-up trucks are designed to be as large and powerful as their dreaded American counterparts. Maybe it is about time that we teach these corporate giants a lesson. What if they throw a party and no one shows up? Do you think that we have it in us to boycott these products? Fat chance.

Corporations that Do Good

Corporations vie with each other , just like the Hollywood denizens on Oscar night, to find out how they are judged by their peers on a large number of different issues.
Although we all know that such rankings are purely subjective, yet it is interesting to find out how many of the largest corporate giants rank against each other. Arguably, the most interesting rankings are not the general cumulative ones but the ordering of large corporations according to their "socially responsible" behaviour as good, productive, efficient and yet responsive citizens in their respective communities. The following is the list of the top ten most admired socially reponsible corporations as tabulated by Fortune Magazine:

1 United Parcel Service

2 International Paper

3 Exelon

4 Chevron

5 Publix Super Markets

6 Weyerhaeuser

7 Starbucks

8 Walt Disney

9 Herman Miller

10 Altria Group

Note: Do you find it paradoxical that almost half of these firms are engaged
in activities such as tobacco, paper and non-renewable energy?

Why Is The Income Gap Widening?

Income distribution has been on a downward spiral in the US for quite sometime. The gap between the rich and the poor has progressively widened, the gully has become an abyss!!! Up until the 1960's the top 20% of US households earned ten times as much as the bottom 20% of households. This relatively high ratio has become larger still. The increasingly inequitable distribution of income has produced the current gulf where the top quintile (20%) of US households earn 14 times more than their counterparts at the bottom.

And yet the present administration in the White House is committed to making the tax cuts permanent or at least extending them until 2015. So what is wrong with a tax cut you ask? It is estimated that if the law is extended until 2015 then the average tax payer in the bottom 20% can expect an annual benefit of $23.00, yes that is not a misprint the benefit will amount to 6.3 cents a day for those that belong to the bottom 20% of the income earners. On the otherhand the top one tenth of one percent will each save $196,000.00 each year. A quick back-of -the-envelope calculation shows that the 20 million tax payers will share $460 million while the richest 100,000 tax payers will get a downpour of $19.6 billions. Now that is a trickle down effect in action!

Where is the Beef?

The latest figures released by the Federal Reserve demonstrate again that a major problem facing the US economy center around distributive justice , fairness and equity.

Average family income in the US; $70,700; has declined by 2.3percent between 2001 and 2004. The only solace in this figure is the fact that it is not as bad as what had occured during 1989-1992; a drop of 11.3%. ( For those that are too young to remember that was the era of Bush Sr!!!! Like father like son).

In all fairness though it must be noted that median family income; 43,200 saw a slight increase of 1.6% during the 2001-2004 time period. Interestingly median family networth witnessed also a small increase of 1.5% in the same period ; $93,100.

But what is most important and discouraging is the data about wealth gap. Those who are lucky enough to belong to the top 10% of households saw an increase in their net worth to an average of $3,110,000.00 when the bottom 25% experienced a decline in their networth to the level whereby they are in debt , on the average, to the tune of $1400.00.

"Clearly , the gains in wealth are going to the top end" said David Wise, the chief economist at Standard and Poor's.