GDP by country

Many performance indicators of the countries' economies. Of all, the best available indicators are based on total annual production of goods and services of a country and economic services or, as some call it, its added product.

This is measured by the gross domestic product (GDP) or total market value of all final goods and services that are produced in a country during a year. GDP includes the goods and services that are produced within the borders of a country, with resources provided by its citizens.

Thus, Spain's GDP not only includes the value of all Seat cars produced at the Martorell factory, but also the Renault factories, even if the brand is French and Spanish, respectively.

El GDP measures the market value of annual production, that is, in its monetary measure. This must be the case if we want to compare sets of goods and services that are produced in different years and have an idea of ​​their relative value with a meaning for all.

If a country produces three sofas and two computers in year 1, and two oranges and three apples in year 2. Which of the two years was more productive? It is necessary to put a standard value on each product and compare the productive value of each year to know if the GDP decreased or grew in year 2. We will see this a little later.

The need to avoid multiple accounting in the GDP of the countries

To accurately measure the GDP of the countries, it is necessary to count only once all goods and services during a specific year.

Most products go through various stages of production before reaching the market. For that reason, some pieces may already have a tour, and at least one occasion has been resold. To avoid duplication in the counting of goods and services, GDP only counts final goods and omits intermediate goods.

The Final goods are the goods and services that the buyer acquires for their final use and not for reselling or subjecting them to an additional manufacturing or manufacturing process. They are goods that are bought to use.

Intermediary goods are the goods and services that the buyer acquires to submit them to a production process or to be resold.

El value of final goods are those that are accounted for in GDP, while intermediate goods are excluded from the computation of the country's GDP. Why? Because the values ​​of the intermediate goods are already included in the value of the final good. If they were not excluded, it would be counted an indeterminate number of times, inflating GDP, and making its computation useless and inaccurate.

The two faces of countries' GDP: spending and income

Let us now see how the market value of total product, or for our purpose, a single unit of product. Let's recall the example from a few paragraphs ago: how do you measure the value of a computer?

We can establish how much the consumer or end user pays. Or we can add the income: wages, rent, interest and profits generated during the production of the computer.

The end-product and value-added approaches they are two ways of seeing the same thing. What is spent on a product is received as income by those who contribute to its production.

For example, if € 350 is spent on the computer, that sum of € 350 is the total income obtained from its production. Thus, if you break down the companies that provided the parts and services, plus the manufacturer, it will add up to € 350.

Obviously, if the final price of the computer is higher than the expenses, there is a profit, and if the price is less than its production expenses, there is a loss. The same happens with the GDP of the countries: there are two ways of looking at it.

One is to see it as the sum of all the expenses of a total product, what is known as the 'spending approach'. The other views GDP in terms of the income that is obtained or generated from the production of goods and services, known as the 'remuneration or allowances approach', or 'income approach'.

Well then We can measure the GDP of the countries in two ways: adding everything that is spent to buy the computer, or adding all the income obtained by the seller from whom you bought the computer, for example.

But both are part of an equation of equality, that is, what is spent is an income for those who have manufactured the product, either with your human resources, real estate or investment capital.

To be reliable in measurement, countries obtain a great deal of information from national statistical agencies, which collect, organize and measure everything from a large number of sources, and then make calculations according to international criteria.

The international criterion to measure the GDP of the countries is in the System of National Accounts, prepared by the International Monetary Fund, the European Commission, and the Organization for Economic Cooperation and Development, the United Nations Organization and the World Bank.

In Spain, who is in charge of measuring nominal and real GDP (next point), is the Statistics National Institute.

The real GDP of the countries

One thing people want to know about their economy is to know if the The country's GDP has grown or decreased. But because GDP is calculated in nominal terms, that is, the current market, two periods cannot be compared without properly adjusting each period. This adjustment is made with inflation.

For calculate "real" GDP, its nominal value must be adjusted taking into account price changes in order to really know if the country has grown or not, and by how much. A widely used tool or technique is the so-called 'price deflator', to adjust the Nominal GDP at constant prices.

The GDP of the countries is very important, because it gives us information about the size of the economy and how it is behaving. The growth rate of real GDP it is used very frequently to determine the general health of a country's economy. Generally speaking, if GDP grows, it is interpreted as a sign that the country's economy is doing well.

When the GDP grows strongly, employment is likely to increase as companies are more in demand, have to create more factories and people have more money because they have jobs.

On the other hand, if the GDP contracts, normally employment decreases because the country's industry must reduce its supply. In other cases, GDP is growing, but not fast or solid enough to create enough jobs for the people who seek it, as is the case in our country today.

Some experts in economics assure that the Real GDP moves in cycles over time: Economies are experiencing boom periods, at other times growth is slow, such as the famous "economic slowdown" suffered by the United States after the invasion of Iraq, and at others, economic recession occurs, which happens when GDP falls for two consecutive semesters.

Spain, for example, has experienced different periods of recession since the transition:

1. From the second quarter of 1992, to the third quarter of 1993, when it grew 0,9%
2. From the first quarter of 2008 to the first quarter of 2010
3. From the second quarter of 2011 to the third quarter of 2014, when it grew 0,1%. This has been the longest recessionary period for democracy in Spain.

What the GDP of the countries does NOT tell us

Finally: it is important to know what the GDP of countries can not tell us. GDP is not a measure of the standard of living or well-being of a country.

Although changes in the production of goods and services per person (GDP per capita) is normally used as a measure of whether the citizen of a country lives better or worse, does not capture the things that are considered important to the general well-being.

For example: the increase in GDP may mean a greater number of pollutants and environmental damage, or the level of noise in the capitals of the countries, the reduction of free time or the impossibility of combining professional and family life, the exhaustion of non-renewable natural resources, etc.

The quality of life also depends on how distributed the GDP is among the residents of a country, not just at the general level.

To adjust these factors, the United Nations calculates the Human Development Index, which classifies countries not only based on GDP, but also based on: life expectancy, literacy level, equality between men and women, child labor exploitation, wage inequality, etc.

There are more indices to adjust all this together with the GDP, but it has not been possible to establish an internationally accepted measurement factor.