Tuesday, September 29, 2009

If you can't compete, change the scoreboard

Gross Domestic Happiness by Brian Domitrovic in Wall Street Journal

French President Nicolas Sarkozy recently said he wanted the nations of the world to stop using GDP, or gross domestic product, as the main measure of their economic performance. He wants them instead to work up another metric that takes into account not only economic production but such things as environmental quality and even time not spent in traffic—a sort of gross national satisfaction index.

France has excellent reason to suppress GDP statistics. Since 1982, among developed nations, France has been a clear laggard in GDP growth. In the quarter century following 1982, France's GDP growth rate was a mere 2.1% per year in comparison to the U.S.'s 3.3%. Thus the U.S. grew at more than a 50% premium to France per year during that span. When the quarter century elapsed, Americans were one-third richer than the French. . .

France's poor GDP showing over this period was in stark contrast to the 1950s and 1960s, when it had long stretches of GDP growth at 6% per year. By the early 1980s, its GDP per capita was nearly that of the U.S. In other words, France achieved prosperity equal to what was enjoyed in America and then lost it.

There is a clear reason the inflection point was 1982. At that time, France chose not to participate in an international wave and transform its economy with a free-market revolution. In the early 1980s, Margaret Thatcher in Britain and Ronald Reagan in the U.S. shed governmental regulations on the economy, cut taxes, committed to not manipulating their currencies, and encouraged global trade. Their economies boomed, as did the economies of countries that followed their lead, such as South Korea and Taiwan.

In contrast, countries of "old Europe" such as France and Italy that were content to stand pat with an overregulated private sector and tax rates well above 50% were left in the dust. . .

The oldest and most pathetic trick in the book when you lose a contest is to try to move the goal posts. GDP statistics of the past quarter century have shamed France but flattered the U.S., Britain and East Asia. Mr. Sarkozy's gambit to paper over this real difference will be lucky to find any takers.

1 comment:

  1. *In Extremly flamboyant accent,* "Vê âve zê èiƒƒel Towàr, you stupid Ämericon." - François Fillon.