GDP And You
Things That Matter, By Dennis Rizzo
A new survey from the Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data shows that rising costs for housing and everyday essentials are reshaping how Canadians think about their financial futures. Two-thirds (66%) of unretired Canadians now expect they will have to continue working after retirement to make ends meet. Nearly half (49%) are worried about outliving their savings, while 59% believe they will never be able to retire.
Approximately a third of households across Simcoe County cannot afford to properly feed themselves, whereas across the province, it’s a quarter of households. Currently in Simcoe County, 30.7 per cent of households are affected by food unaffordability, according to data from the Simcoe Muskoka District Health Unit. That’s a sharp increase from 20 per cent in 2022, reads the report from the City of Orillia’s food access and sustainability working group.
Many of us are facing reduced buying power and increased reliance on credit. The population of Simcoe County (and Canada) has had to tighten it’s belts for a long time just to stay afloat. Politicians waste our money on spurious and self-serving projects. Corporations gouge the consumer with impunity (e.g., bread pricing). Decades of systemic effort to siphon off community resources and whittle down family economic stability has approached a level not seen since King John.
But economists say our GDP is in good shape. Does this matter to the average person?
In our daily news programs, podcasts, or other sources of information about the world around us, we see the daily business report. A central piece of this report is the “market watch” – or other titled report on stocks and industrial activity. The DOW, TSX, etc. are detailed with the loss or gain for the day, as though this has meaning to the average working stiff. Once a month or so we get the Gross Domestic Product report (GDP) and other standard indicators of our economic health. The GDP is often used by banks and others as one way to determine whether investing in a country has merit.
These are measurements of success for the few, not the many. They are red herrings in the overall picture of how the average person is faring.
Why?
Harvard Business School Online (a respected think tank) said “When evaluating how productive a country or nation is on the macro scale, few numbers are more important to understand than GDP, or gross domestic product.”
And:
“GDP stands for gross domestic product, which represents the total monetary value, or market value, of finished goods and services produced within a country during a period, typically one year or quarter. In this sense, it’s a measurement of domestic production and can be used to measure a country’s economic health.”
Is productivity a measure benefiting all of the population? Is economic health something applying to all of the population? Let’s take a look at some indicators of GDP.
Consumption – Consumption represents the sum of goods and services purchased by citizens—such as retail items or rent—and it grows as more is consumed. Typically, professionals view a steadily increasing consumption as a sign of a healthy economy because it signifies consumer confidence in spending versus uncertainty in the future and lack of spending. (Harvard Business School Online)
With the measure of consumption being a significant, if not critical, piece of determining a country’s economic health it has become critical for banks, business, and others to increase the consumption capacity of the population. This has been done in a number of ways, and according to Made In Canada few points of measure benefit the consumer:
- The average Canadian household debt, not including a mortgage, is almost $41,500.
- In September 2024, Canadian household debt surpassed $3 billion.
- Half of all Canadians earned less than the median yearly income of $37,899 in 2019.
- Mortgage borrowing increased by 41% in 2021.
- Canadians aged 46-55 owe the most money and have an average household debt of $72,482 excluding mortgage.
Charge It
According to TransUnion, credit card balances in Canada hit a new milestone of $124 billion and delinquency rates rise even as average monthly card spend declines.
We are using credit to cover our daily expenditures more than ever before. Why?
Could it be that our incomes have not kept pace with the pricing of goods and services? Could it be that we are offered more and more credit, and the more credit we acquire the more we are encouraged to use it? Might it be that we have not educated ourselves on simple money management skills? Could it be that the banks and corporations are fully aware of this and have created an economy where consumption of goods and services by delayed payment keeps the Canadian GDP high enough to attract investments?
Investment – Investment refers to any domestic speculation, or capital expenditures, in new assets that will provide future benefits. To invest in business activity, companies spend money on purchasing equipment, inventory, and building new establishments. Investment is important because higher levels of it increase productive capacity and boost employment rates. (Harvard Business School Online)
Does investment lead to higher employment opportunity for you? What if the investment results in the need for fewer workers (as with robotics). If we measure productivity wherein much of that is achieved through robotic effort, does that equate to a healthy workforce? Does that really show a better living situation for you – or – does it demonstrate a greater percentage of profit for the investors and owners? And, if we continue with the Mulroney/Harper/Pollievre trickle down theory and lower corporate tax rates while also losing the tax revenue from well-paid workers (robots don’t pay taxes), we have a double-whammy.
The Bank of England offers another perspective:
“GDP … does not tell us anything about how evenly income is split across the population. Growth could mean everyone becoming better off or just the richest segment getting even richer. In reality, it usually lies somewhere between the two.
… there are things that raise GDP but do not make the country better off. War is one example (a lot of money is spent, so GDP goes up). Or if a large chunk of the Amazon rainforest was cut down in one week, then you would get a sharp rise in GDP from the sales of timber but at huge environmental cost.”
The Happy Planet Index, “is a measure of sustainable wellbeing, evaluating countries by how efficiently they deliver long, happy lives for their residents using our limited environmental resources.” This focuses on how well the population is doing in health, income, housing, education, and other non-GDP indices.
With this measure we see Sweden (and Europe in general) score highest with the World Bank at around 55.0. This is still not optimum, but in the overall picture they are doing better for their citizens than the average. By comparison, Canada has a score of 37.2 and the USA a score of 32. GDP measures for these same countries show the USA as 26% of world GDP, Canada at 2% and Sweden at 0.55%. While these are simplistic, it shows GDP is not a good indicator of how well a population is doing overall.
It is a good indicator of how well the upper 1% is doing.
The trickle down theory of Mulroney, Thatcher, and Reagan proposed if government taxes business at lower rates, the business will invest the money saved into productivity and create jobs. This has patently failed the average Canadian (and other nationalities). Business simply pays higher dividends to investors and continues to send jobs overseas.
On the other hand, investing fair tax revenues collected from business and individuals into areas that increase human capital raises the literacy, health, energy, and real productivity of workers. This healthy, educated workforce posits a strong argument for investment by business.
The boogieman “deficit” seems to be played long and hard to convince voters borrowing is bad and tax cuts are good.
So, corporate taxes are cut. Did your tax rate go down? Why not? Did your income go up because your employer got a tax break? Why not? Did your employer borrow money secured with future production and sales? If so, why is that bad for government to borrow funds secured by future tax revenues?
(Images Supplied)
Dennis Rizzo joins SUNonline/Orillia as a columnist writing on big issues affecting ordinary Orillians. He is an ex-pat Yank from New Jersey. Orillia, Ontario. Canada is his adopted home, but he has brought along a degree of puckishness and hubris. Dennis spent more than 30 years working in the field of disabilities, with some side trips to marketing and management. He presented and keynoted for many conferences and served on a President’s advisory committee. Dennis is the author of several journal articles and booklets in the field of disabilities and work and five non-fiction books, including “A Brief History of Orillia – Ontario’s Sunshine City.” He recently republished a novel set in 1776 and a mystery set in 1860. He also enjoys sitting in on music sessions around town when he can.
