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Thursday, January 21, 2010

Sometimes the Gross Domestic Product is GROSSLY Insufficient

Did you know that United States is one of the eight wealthiest countries in the world? This nation's gross domestic product last year alone was over $14 TRILLION.  Depending upon the source--World Bank, IMF, or CIA Factbook--the United States' economy is ranked as high as #4.  The GDP (PPP--purchasing power parity) per capita for this land of abundance is about $47,000.

What does this mean?  How can this be useful to understand poverty?  Let me try to explain.

  • GDP is the gross domestic product, which measures the total value of all of a country's goods and services that were produced in a year.  This number gives economists a means to rank a nation's economy.  You add up the value of all the hamburgers sold at Wendy's, co-pays paid to doctors, tickets bought to a Yankees games, each haircut given at Super Cuts, and everything else and you have the GDP (more or less).
  • per capita = per person
  • Purchasing power parity (PPP) "allows you to compare the standard of living between countries by taking into account the impact of their exchange rates (Go here for an example.)"
  • Basically, if you take the total vaule of all the goods and services produced in a single year and divide by the total population, this will be a nation's GDP per capita.  The larger the GDP per capita, the more developed the nation--translation:  wealthier.
  • If we divided the American GDP (PPP) of $14 TRILLION by our 300 million people AND if the government were to cut a check for the the amount of our little math problem, every man, woman, and child would receive $46,000.  WOW.
Let's put this into perspective.  Zimbabwe has a population of 11.3 million people with a total GDP (PPP) of not even $2 billion, making the GDP per capita only $200.  That is less than half of one percent of the American GDP (PPP).  

Yes, you saw correctly.  The United States produces so many goods and services that the nation of a one-third billion has a GDP per capita in the tens of thousands of dollars. That is garishly wealthy.  A true gap between the rich and the poor.

Over the next few days I will highlight some of the poorest countries in the world.  One of the reference points will be the GDP (PPP).  Just to give you a sneak peak...

  • Did you know that the entire African continent of over 50 countries only produces 1% of all manufactured goods in the world?
  • Did you the know the ten poorest countries in the world (GDP per capita) are in Africa?
  • Did you know that Africa, the poorest continent in the world, is also the fastest growing continent?  and it's population will double in about 20 years?   even with the deaths from preventable diseases, malnourishment and starvation, and the HIV/AIDS pandemic? 

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