Page 495 - The Principle of Economics

CHAPTER 22 MEASURING A NATION’S INCOME 507
REAL GDP PER LIFE
PERSON, 1997 EXPECTANCY
ADULT
LITERACY
Table 22-3
GDP, LIFE EXPECTANCY, AND LITERACY. The table shows GDP per person and two measures of the quality of life for 12 major countries.
COUNTRY
United States
Japan 24,070 80 Germany 21,260 77
years 99% 99
99
90
84
99
85
83
53
41
39
59
Mexico
Brazil
Russia
Indonesia
China
India
Pakistan
Bangladesh
Nigeria 920 50
$29,010 77
8,370 72 6,480 67 4,370 67 3,490 65 3,130 70 1,670 63 1,560 64 1,050 58
Source: Human Development Report 1999, United Nations.
IN THE NEWS
Hidden GDP
Measuring a nation’s gross domestic product is never easy, but it becomes especially difficult when people have every incentive to hide their economic activities from the eyes of government.
The Russian Economy: Notes from Underground
BY MICHAEL R. GORDON
If you want to know what is happening in the Russian economy, it helps to think about bread. Government statistics show
that people are eating more bread and bakeries are selling less. Or consider vod- ka. Distillers are able to produce far more vodka than is officially being sold. But giv- en the well-deserved Russian fondness for vodka there is every reason to think the distilleries are operating at full capacity.
The Russian Government’s top number crunchers say the contradictions are easy to explain: high taxes, govern- ment red tape, and the simple desire to sock away some extra cash have driven much of Russia’s economic activity underground.
For the last six years, the Russian economy has been going down, down, down. But as President Boris N. Yeltsin tries to deliver the growth he has promised, economists are taking a clos- er look at the murky but vibrant shadow economy. It includes everything from small businesses that never report their sales to huge companies that understate their production to avoid taxes.
Government experts insist that if the shadow economy is taken into account, the overall economy is finally starting to grow. In turn, Mr. Yeltsin’s critics com- plain that the new calculations are more propaganda than economics. . . .
There is no question that measuring economic activity in a former Communist country on the road to capitalism is a frustratingly elusive task.
“There is a serious problem with post-socialist statistics,” said Yegor T. Gaidar, the former Prime Minister and pro-reform director of the Institute of Economic Problems of the Transitional Period.
“Seven years ago to report an increase in the amount of production was to become a Hero of Socialist Labor,” he said. “Now it is to get addi- tional visits from the tax collector.”
SOURCE: The New York Times, May 18, 1997, Week in Review, p. 4.