Wednesday, March 16, 2005

Country Economic Rankings

The latest (2003) statistics for Gross Domestic Product (GDP) show the UK as 4th largest. But if you adjust for something called Purchasing Power Parity (PPP), it slips to 7th. Which is right?

Pure GDP
1 United States 10,881,609
2 Japan 4,326,444
3 Germany 2,400,655
4 United Kingdom 1,794,858
5 France 1,747,973
6 Italy 1,465,895
7 China 1,409,852

GDP Adjusted for PPP
1 USA 10,871,095
2 China 6,435,838
3 Japan 3,582,515
4 India 3,096,239
5 Germany 2,279,134
6 France 1,632,119
7 United Kingdom 1,606,853

The PPP hack jumps China and India up and pushes the others down.

PPP attempts to adjust for the fact that exchange rates are often screwed. For example, here in Southern Europe, it's cheaper for me to get books from Amazon.com than it is from Amazon.co.uk, because the Euro and £ are way too high. The PPP guys build on this by taking a standard basket of products and equating its local costs in different countries.

The problem is that different nations buy completely different stuff. The Chinese eat cute little cats, for goodness sake, how do you figure them into the shopping basket? And what about quality? I've had bad experiences with Chinese products. They look the same as Western stuff & cost less, but they break. Some Chinese stuff is fine, but you'd need to know exactly what was in the PPP basket to see if you were comparing like with like, and I can't do that.

So in this blog I'm mostly going to stick with raw GDP, with the occasional nod toward PPP.