I actually believed that unlike the mainstream financial outlets in The States or elsewhere in Europe, my country would have a more grounded and unbiased picture of the state of the economy.
Unfortunately, I was mistaken. In a recent article in business.hr, there is an article named: “Do Croatian citizens have more purchasing power than their neighbors?”
“Gross domestic product (GDP) per capita in Serbia according to the criterion of purchasing power is 35 percent of EU average, it is evident from the data that was presented this week by the European statistical office Eurostat.
Among the countries of former Yugoslavia, according to Finance, Slovenia passed with 84 percent of EU average.
Lower standard than the Serbian, according to the criterion of purchasing power in Europe, were the only two countries - Bosnia and Herzegovina, with a GDP per capita last year reached 31 percent of the EU and Albania, whose GDP per capita was 34 percent of the EU average.
Among the countries of former Yugoslavia, Slovenia recorded the best result with 84 percent of EU average. This is followed by Croatia with 61 percent and better than Serbia, also last Montenegro and Macedonia.
The richest country in terms of purchasing power is Luxembourg. Luxembourg's GDP per capita in purchasing power of the criterion was 274 percent of the EU average. Followed by the Netherlands (131 percent), Austria (129 percent), Ireland (127 percent), Sweden (126 percent), Denmark (125 percent) and Germany (120 percent).
From countries outside the EU, Norway has reached 189 percent of average, 151 percent of Switzerland, Iceland 110 percent, which is considerably less than before the crisis.”
The first error in this analysis is comparing a meaningless holistic concept such as National Income and dividing it by the citizenry. It is impossible to grasp the concept such as subjective wealth, nor does it take in consideration of any discrepancy between the various differences between the groups of individuals who actually contribute to growth in societal welfare.
Second of all, it uses an ideologically bankrupt national accounting metric, called the GDP. In my view, any increase in GDP has to be incorrect because it accounts for the rise is nominal money supply that somehow adds to the nations productive structure. It doesn’t. Some would then argue, that the nominal number is deflated (removing inflation) to represent real growth. But again, this is wrong because as Ludwig von Mises stated nearly a century ago, it is the productive structure of the economy that matters, not the stock nor flow of money in the economy.
GDP is also a term that has the word “gross” in it. Because it counts the differences in inventory growth from quarter to quarter. But this is in no way gross, because it doesn’t include the nominal values of intermediary goods which are used up in the productive structure. This is omitted because it would amount to double counting. But, adding in this value would get a picture of the capital stock of the economy and the total “capital buffer” in case of rampant consumption.
The government likes to use these numbers because they can point at discrepancies between per capita GDP among nations and neighboring countries and rationalize intervention as a prelude to boosting nominal GDP. The tarnished GDP metric is closely used with the “Gini coefficient” to measure income inequality. Government sees that any discrepancy from a solely chosen arbitrary number is a pretext for meddling and redistribution. If that doesn’t work, they try to figure some other holistic form of gauging the wealth of nations, such as the HDI or the “happiness” index. Trying to correlate happiness by weighting certain variables in a model such as the number of vacation days in a year, number of children in the family or the marginal difference in taxation between different income groups is futile. According to the HDI, Ireland was called developed because it had a 0,959, which is excellent, until their economy crashed and it fell to 0,908. Even though it is a high number, how does a bailout of the banking system funded by taxpayer austerity amount to a high HDI?
Maybe if the government would stop deficit financing through monetary expansion and wasteful resource allocation, it would see that the market in its own virtue, distributes income to individuals who are rewarded serving the consumer.
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