atans1

Why S’pore is rich, while S’poreans are poor: Chris Kuan opines

In Political economy on 18/10/2020 at 4:23 am

Why the world’s richest countries are not all rich
The latest international price comparison shows widening gap between material wellbeing and GDP

FT Headline

It goes on

[T]he income from foreign-owned capital is part of GDP, because it originates within the country, but not part of gross national income, because it is not owned by nationals.



FT

Here’s what Chris Kuan wrote on FB commenting on the FT article

“Said this many times before that our high GDP per capita does not really mean Singaporeans are as rich as the numbers say we are. But let’s hear it from Nobel Laureate Angus Deaton – note that Singapore is one of those eleven richest countries mentioned and his concluding paragraph that exclusive focus on GDP per capita or its growth rate makes little sense:

“Eleven of the 12 countries in the list are either investment hubs or resource-based countries. In both cases, consumption is a relatively low share of total GDP, often because profits account for a larger part of national income than wages and salaries.

Over time, profits will contribute to the income of at least some households and, in turn, their consumption. But at any given moment, GDP per capita includes amounts that are not part of people’s current wellbeing, or their own income.

Furthermore, the income from foreign-owned capital is part of GDP, because it originates within the country, but not part of gross national income, because it is not owned by nationals.

This is a reminder that, absent strong redistributive channels, rich resource-based economies are often internally unequal, because the ownership of resources — especially mineral resources — is confined to a few. That GDP tells us nothing about who gets what is another of GDP’s most familiar criticisms. Nor does GDP speak to the sustainability of natural resources or the use of the environment. The problem is not the accounting, but the definition of GDP.

These arguments call not for the abolition of the GDP numbers, which are essential, but for a more intelligent use of the accounts and for measuring what it does not include.

Continuing efforts to integrate environment-economy accounts or to make GDP less oblivious to distributional questions need support. For policymakers, an exclusive focus on GDP per capita or its growth rate makes little sense. To put it bluntly, the top 12 list is not always where a country would want to be.”

  1. eerrrr….. thanks for crediting those comments to me but they are actually written by Angus Deaton himself. I just quoted him on my FB post.

  2. there is a big leakage of $$$ in the local economy because since the mid-80s, locals have been going to jb, johor and spend lots of $$$ over there.

  3. What’s new? Since my JC econs days over 30 years ago, the message constantly drummed into us is that S’pore’s GDP is a reflection of S’pore Inc & not so much the “wealth” of the people.

    Back in the 1980s personal/household consumption barely made up 1/3 of GDP. Today it still barely cracks the 40% level.

    Biz investments + net exports still makes up over 50% …. although it has fallen from the 60% levels a generation ago.

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