I had a conversation this weekend with some friends at a dinner party. I'd like to think the topic was an intellectual one so at least give me a minute to explain. I studied Finance in college and tooks lots and lots of economics courses. The most important number my professors would tell me about a country was always GDP, or Gross Domestic Product. This is the sum of all goods and services a country produces in a year. And according to today's economist, the meaure by which countries are ranked in our global economy.
Back to the conversation we were having at dinner, the topic was ranking economies by country. The interesting part falls where most economists look to their textbooks and to where we did not. We started to speak of a world where countries were ranked based on quality. What does this mean exactly? Well just because a country has the highest GDP in the world, doesn't mean that it should be ranked number 1. Data that we were taking into consideration included basic things like education, cost of living, and purchasing power. We also included, however, things that some economists leave out. For instance, access to affordable healthcare and cost of higher level education. These types of things in out-weighed how much sugar a country exported per year and how many bananas they consumed in our rankings.
Things that should be basic to human beings took priority over products and prices. Oddly enough, one of the people that was at this dinner sent me an article, titled The Real Wealth of Nations, that was featured in The Economist recently.
“WEALTH is not without its advantages,” John Kenneth Galbraith once wrote, “and the case to the contrary, although it has often been made, has never proved widely persuasive.” Despite the obvious advantages of wealth, nations do a poor job of keeping count of their own. They may boast about their abundant natural resources, their skilled workforce and their world-class infrastructure. But there is no widely recognised, monetary measure that sums up this stock of natural, human and physical assets.
Economists usually settle instead for GDP. But that is a measure of income, not wealth. It values a flow of goods and services, not a stock of assets. Gauging an economy by its GDP is like judging a company by its quarterly profits, without ever peeking at its balance-sheet. Happily, the United Nations this month published balance-sheets for 20 nations in a report overseen by Sir Partha Dasgupta of Cambridge University. They included three kinds of asset: “manufactured”, or physical, capital (machinery, buildings, infrastructure and so on); human capital (the population’s education and skills); and natural capital (including land, forests, fossil fuels and minerals).
The article goes on to quote various people from the UN that conducted the study and determines that the country with the most "comprehensive" or "inclusive wealth" is Japan. Due to its high capital, its ranking turns out better than both the United States and China. Now, before you go on to ask "There is no way, Japan is just an island in the Pacific" think about the technology that Japan has produced in the last 60 years and how investing that technology into infrastructure, manufacturing, and education, can have a huge multiplier effect that outweighs the benefit of natural resources from a country like Saudi Arabia.
It's time to start thinking. Stretch your brain. Don't think outside the box because there is no box. There are no limits. And there sure as hell isn't a right or wrong, just a "best way" that we can continue our lives and have the best possible future as the outcome of our actions.
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