Consider a city, paying two gardeners 25k each per year, and an extra 5k for two month. Spending is 55k+oil+chemicals+tool maintenance (that the gardeners usually do). Let's say the annualized cost is 75k. So this service contributions to GDP is 75k.
Now, the city wants to show GDP/capita growth. Simple : let's pay a company X that will pay the gardeners. It'll cost 95k. Now the GDP is 95k+ 55k (let's say the gardeners are on the same pay and have the same work). But wait, maintenance can be done by the company Y! Now the GDP is 95k+55k+20k (maintenance fixed cost 10k+worker time 7k+ 3k profit). But wait, now during winter, our gardeners have nothing to do! That eat into our profits!
Now the GDP is 95k + 50k (what is paid to the temp company)+20k+45k, and gardeners are both paid 20k/year gor this job, and can do other stuff during winter (I hear a repair shop need temp workers during inter to fix gardener tools).
The GDP grew from 75k to 160k, a bit more than 100% growth, and we optimized the economy as now gardeners can keep specializing and do gardener stuff during winter instead of learning about motors and mechanics. Great!
It doesn't work like that at all. You add GVA (https://en.wikipedia.org/wiki/Gross_value_added) of each entities. Adding more intermediate entities doesn't increase GDP as the GVA of each entities is reduced.
There is an assumption behind GDP: people generally pay production for a fair amount of money. The more untrue this assumption is, the less meaningful GDP is.
For this specific example? Just like any company's 95k. They got the initial capital from investors, they sold things to customers, they got loans from a bank, etc.
Or you're asking generally where money comes from? It's a good (and complicated) question. Google monetary and banking. In multiple senses, money DOES come out of thin air.
City budget or loans. Easy enough if your mayor have a friend who want to start a gardening company !
I'm joking: even without corruption, you can find an ideological reason, as a company will surely be more efficient than public servants!
But more likely because of incertitude: what do we do if a gardener resign? Paying an existing company 95k/year instead of spending 75k/year directly isn't a huge expense increase, and if 20k/year is the price for peace of mind (no new equipment to buy, no HR issues...) it can very well be worth it.
I'm not saying this is good or bad by the way, i'm saying this is how GDP work. It's factual. Yes, there is a left-wing slant about how i presented it, but it wasn't heavy, and a liberal could use the same example in the same way and justifying a better distribution of work and concerns (while still finding that GDP is worthless in this case)
This is interesting as an indicator, it's meaningless as a target.
But borrowing that money has implications for the economy and other businesses.
This is the mistake the OP made. You can't "goose" GDP by borrowing because that money has to come from somewhere. And the money used to "goose" GDP is money that doesn't go to other productive uses.
I'm sure there are nuances but according to this particular source European life expectancy went from 75 to 79, US life expectancy went from 78 to 79 with a period of a decline between 2013 and 2018.
The decline in US life expectancy is more complex than a general reduction in quality of life, and mostly unrelated to the US financial culture to leads to unicorns. The American ideal of huge companies that must take over the entire market can be traced at least all the way back to the railway robber barons, and has existed even during periods of immense growth in life expectancy.
At the same time, a lot of the increase in life expectancy in the EU is due to improvements in medicine that are significantly driven by US-funded research.
Why do you think that actions of these huge institutions are not impactful to the life quality of the Americans?
Also, why do you think that the European live longer thanks to the medicine developed in the USA? Maybe the USA develops medicine thanks to the free and equal opportunity education culture in the Europe? If you look closely to the researchers, you will see that lot's of the people who develop these things have European roots and by roots I don't mean their grandpa was Irish, I mean they were educated in Europe and it just happens that the organisation that develops these drugs is incorporated in the USA.
The tech revolution that changed the world was also developed in Europe, the web was developed by the British in EU institution, Linux was made by a Finnish guy called Linus, Nginx is Russian-made.
Also, we are at a verge of AI revolution and some of the leading researchers are Europe educated people. Just check the bio of the top researchers who were instrumental at Tesla or OpenAI.
Maybe the USA is just the industrial zone of Europe? Maybe the US appears rich and acts poor simply because because the richness comes from the accounting choices? Just kidding of course, the USA is a superpower and is actually rich thanks to many things like its abundant resources and brilliant people but the notion that the Europe is doing better because they just drink smoothies and meditate all day on the American resources and innovation is ridiculous.
I would love for this to be true. Europeans do seem to enjoy a higher quality of life among several axis.
However the US subsidizes European defense (refer to current events) allowing European countries to spend less GDP on their military.
Talent comes to the US from all over the world. That's how it works and has since almost the beginning of the country.
Easier access to capital (and easy bankruptcy, etc), entrepreneurial mindset (less Tall Poppy syndrome), etc etc means business is generally easier in US.
Linus moved to the US. The web was possible bc the internet was funded by the US (arpanet, etc).
Europeans enjoy the Pax Americana without paying tribute to the Amerian empire.
Maybe the US is spending so much in defence in it's own interests? Maybe that's how US can enforce business benefits like copyrights to the American corporations and business decisions on what other countries can invest into? Maybe that's why US can print USD at will but other countries have to earn it?
But I like the Linus argument, however this complicates things further: Are tech becoming European when the tech CEO's are having a vacation in the French riviera?
The American military is paid for by debt. The US can only take on this debt because they have the world’s reserve currency. It’s essentially a flat tax on the rest of the world.
Subsidizes????? You mean selling weapons at highly inflated prices benefitting the US economy while eroding Europes industrial base? Not to forget that Europe and Taiwan supplies many of the sub-systems used in US weapons. The Abraham main battle tank gun is German for example.
I don't think most of what you wrote, almost phrase by phrase. You took an extreme version of what I said and rebutted it. Just because I said that the US had major influence in European medicine and life expectancy, you took it as meaning that Europeans are bad scientists and "just drink smoothies". I think nothing of this sort.
It's very safe to say that US-originated science had a major influence in life expectancy worldwide, including Europe. What's so controversial about it? The increase in life expectancy in Europe, then, was "significantly" influenced by US innovations.
Of course US "originated" science had influence, just like Russia originated one or Korea originated one. Also, Science is not something you dig from the ground to claim it’s origins. Depending on what you want to claim, you can change your definition. You can claim that we are having it so good thanks to the German science from the 1940s. Pick a cut off date and ownership method to suit your argument needs.
> At the same time, a lot of the increase in life expectancy in the EU is due to improvements in medicine that are significantly driven by US-funded research.
Frankly, I don't believe it's true, for two reasons. First, the European Big Pharma is quite strong. It would be more fair - but not precise - to say the rest of the world benefits from the advances made in the West.
As for the second point, it was succinctly put by Dr. Marcia Angell from The New England Journal of Medicine in her famous book. From the blurb: "Drug companies, she shows, routinely rely on publicly funded institutions for their basic research; they rig clinical trials to make their products look better than they are; and they use their legions of lawyers to stretch out government-granted exclusive marketing rights for years. They also flood the market with copycat drugs that cost a lot more than the drugs they mimic but are no more effective."
If the US is funding the research, what is it about the US political system which prevents Americans from enjoying those same gains?
I suggest that perhaps it’s a difference in perspective on rights. In Europe, there is a positive right to healthcare. In the US, there is no such right apart from certain circumstances. We turn our nose up at “handouts”. The US expects the free market to handle it instead, which it has. This has led to large portions of the country with few doctors and even fewer affordable ones.
Research mostly done by underpaid researchers from China, India and Europe coming to the US in the hope to get a better life. The whole system is complex.
This has come up before (searching for ref) but the basic explanation is GDP when adjusted for PPP in eurozone is more or less same as USA over that period (ie both economies grew at much same rate).
Basically things in America got more expensive (gas, health, education being big contributors). There is lots of wriggle room in the numbers but the vast gulf by nominal GDP is surprising and so unlikely .
It's probably a very complex thing and both sides of the discussion can pick something to attribute for. For example, you can say that it's because of the opioid crisis in the USA and pretend that it's happening in isolation - just some bad actors doing bad things that don't have anything to do with anything else.
Hong Kong has one of the highest life expectancy of the world and a major contributing factor is high population density. Paramedics are able (and must) arrive within 12 minutes of an emergency call, which is probably the most important time to keep people alive. Doesn't mean Hong Kong is a decent place to live though.
I would not cite this as a success story. Europe does not seem to be heading in a good direction imo. The consequences are largely unrealized. Even pretending the war never happened and they continued slurping Russian gas.
Please be informed before commenting. Europe has undergone the hardest and most painful decoupling from Russian gas for quite a while. As of 2022 no gas in Europe is imported from Russia.
It's essentially killed the German economy. It's all by design. The Americans don't want Germany and Russia teaming up to be a Regional Hegemon of Eurasia.
It has not. Germany is in technical recession, but people are not dying in the streets, have jobs, and can take care of their families.
In the US the economy is stellar, yet homelessness is peaking, with people unable to afford housing even if they have a job.
Stop calling it “the economy” as if it was a direct translation of the reality of a society. It’s not.
Signed: a business journalist.
But I think your analysis is poor. The homeless rate is higher in Germany than the US for example. Germany isn’t on fire, but I think it’s awkward to color it in a way that implies people are doing better there than the US. It will be a painful economic transition.
Now, the city wants to show GDP/capita growth. Simple : let's pay a company X that will pay the gardeners. It'll cost 95k. Now the GDP is 95k+ 55k (let's say the gardeners are on the same pay and have the same work). But wait, maintenance can be done by the company Y! Now the GDP is 95k+55k+20k (maintenance fixed cost 10k+worker time 7k+ 3k profit). But wait, now during winter, our gardeners have nothing to do! That eat into our profits!
Now the GDP is 95k + 50k (what is paid to the temp company)+20k+45k, and gardeners are both paid 20k/year gor this job, and can do other stuff during winter (I hear a repair shop need temp workers during inter to fix gardener tools).
The GDP grew from 75k to 160k, a bit more than 100% growth, and we optimized the economy as now gardeners can keep specializing and do gardener stuff during winter instead of learning about motors and mechanics. Great!