INACCURATE ECONOMIC STATISTICS AND REPORTS
Many measures of economic activity are incomplete or false. Accordingly, reported
statistics may not reflect the true extent of global economic activity. This has implications
for businesses that contemplate investment in these nations.
Important factors are not counted in GDP and GNP
There are several impediments to measuring GDP and other global economic activities.
First, many activities that reflect a nation's economic health are not counted. For
example, trillions of dollars in annual unpaid labor is never included in economic
analyses. Additionally, valuable goods such as information acquired via the Internet are
not reported. Were these and other data included the size of both the global economy and
many national economies would be much greater than currently reported.
Conversely, national GDP is inflated by activities that do not necessarily increase
the standard of living. For example, the cost of criminal defense is counted among U.S.
GDP calculations. Although the present costs of consuming natural resources are counted
as part of GDP, costs for nonrenewable resources, e.g., polluted rivers or land erosion, are
not factored into GDP. The absence of these inputs in economic figures understates the
actual cost of production.
Averages mask internal variations
Per capita GDP can be a flawed measure of a nation's internal prosperity. According to
Ibbotson and Brinson (1993), per capita gross product calculations are averages that
cannot reflect internal variations such as richer and poorer regions within nations.
Additionally, these authors argue that money income may not be the best indicator of real
wealth, which for some is an ability to enjoy life. We will return to the latter point after
looking at other ways GDP can be inaccurate.
Another challenge for measuring global economic activity is that nations and economic
actors provide inaccurate data to attract FDI or to save "face" if real figures are low. For
example, accurate figures may be unavailable when activities occur in the "shadow"
economy. This is particularly likely when they are part of the crime economy, but other
reasons apply. For example, Serbian unemployment is hidden because many state-owned
companies kept workers on partial wages rather than fire them. Further, the Serbian
government does not track its shadow economy which is estimated to be about 40–50%
of GDP (Regime change brings, 2003).
Reporting data in different ways tells different stories
GDP and other economic data can be massaged to tell different stories. For example,
absolute GDP shows the U.S. is the strongest economy, but if the comparative measure is
per capita GDP, then Saudi Arabia emerges as the GDP leader. Finally, it is difficult to
track the global economy because nations prepare and report economic data in different
ways. This makes comparisons difficult even when reports are accurate.