A ghost wanders about the world, a ghost of capitalism: the GDP
Gross Domestic product is an indicator created for measuring income of a country. It is sometimes used for estimation of standards of living and quality of life in a given country. Some limitations of the GDP create difficulties when used for these purposes. The aim of the first part of this essay is to identify some of these difficulties and to suggest solutions.
The question of whether or not to outsource and invest abroad arises frequently today. The second part of the essay is an attempt to put aside moral and ethical issues of the matter and to try to give the answer from a strictly pragmatic, economic point of view.
The idea of GDP is to indicate income of any given country, it's standards of living and to compare this data with other countries. The indicator itself is usually seen as rather subjective for these purposes, and in order to address this issue GDP is frequently used with other instruments.
Counting GDP as “per-capita” can give a more realistic idea of average resident's income, taking into account country's population. The concept of PPP is important as well due to different level of prices in different countries – although a price for Big-Mac is usually used for counting PPP, which makes the whole idea rather pointless (example – Big-Mac in New-York costs almost the same as a Big-Mac in Moscow; a very average American APC (“Stryker”) costs over $ 6,000,000 to the Pentagon, while a most commercially successful modern tank (“T-90A1”) costs $ 2,200,000 to the Russian army).
Moreover, the GDP is criticised for not taking depreciation into account (how much of the income was used just to support the existing system). Income of foreign residents and incomes of citizens working abroad (both tending to send part of their incomes home) is also not taken into account (however, to overcome this some instruments such as GNP could be used). Moreover, GDP does not take...