Tuesday, February 28, 2006

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.)

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