Limitations of GDP

Limitations of GDP

1. Limitations of GDP

2. An environmentally damaging practice that can diminish a natural resource thus negating the continued use or availability of that resource. E.G 1. China fishing industry- One of the largest fishing industries in the world. 2005 – Aquaculture harvest was 32.4million tonnes. Exports valued at $7.7billion US. UN FAO – estimated 70% of the fish population is fully used or in crisis. 1. Unsustainable practises

3. E.G 2. Fossil fuel consumption Limited supply Mass consumption of cheap fossil fuels Saudi Arabia – worlds largest oil producer approaching end of production Replenishment rate of fossil fuels takes millions of years 1. Unsustainable practises

4. 32,400,000 -22,680,000 9,720,000 tonnes China fishing industry 7,700,000,000 -5,390,000,000 $2,310,000,000 US -70%

5. The sum of all goods and services which are produced by a country in a given period of time. Bad composition of GDP – how diversified the production within an economy is. E.G 1. Saudi Arabia 2009: Agriculture – 3.2% Services – 36.4% Industry – 60.4% Petroleum & petroleum products made up 90% of total exports. 2. Bad composition of GDP

6. E.G 2. Mozambique 2007: Industry – 8% Services – 15% Agriculture – 77% 2. Main exports include: Cotton, sugar, cashews and citrus. 2. Bad composition of GDP

7. Transactions which producers provide to people for free or at economically insignificant prices. E.G 1. Second hand sales – old equipment, vehicles, un-used stock. E.g. Bus van = €25,000 – annual depreciation 20% Value after 3 years = €10,000 Sold for €9,500 Non-production transactions

8. E.G 2. Transfer payment – social welfare, unemployment benefits, pension. 2012 – 1.469million people in receipt of a weekly welfare payment. 2012 expenditure - €20.774billion Decrease of 0.9% over 2011 Not counted as it is money transferred rather than paid for products or services.

9. The unequal distribution of household or individual income across the various participants in an economy. E.g. 70% of the total income is controlled by 20% of the population. Overall wealth of a country is primarily determined by the larger income of the minority of the population. Income inequality

10. E.G 1. Gini coefficent - measures degree of inequality in distribution of income in a country. 0=perfect equality, 1=perfect inequality 2011 EU average = 30.7 2011 – Ireland rank 20 – 31.1 Norway rank 1 – 22.9

11. E.G 2. Saudi Arabia Oil industry 2012 - $300billion Population – 28million ¼ of population on or below poverty line Estimated 2-4million natives live on less than $530 a month - $17 a day King Abdullah's personal fortune at $18bn

12. Population China 2012 Population – 1.351 billion GDP – 8.227trillion (USD) Per capita – 6,091.01 Switzerland 2012 Population – 7.997million GDP – 632.2billion (USD) Per capita – 79,052.34

13. Underground economy – any economic activity that takes place outside of government control. Annual cost Ireland - €6.1billion E.G 1. Construction industry – cash only/cash in-hand, no VAT Legitimate contractors- €250m to €500m back into the industry 6. Black economy

14. E.G 2. Tobacco industry - €3 million per week from illegal tobacco . 2011- 15% of smokers consuming illegal cigarettes 2012- 95.6 million cigarettes seized valued at €43.3 million 6. Black economy

15. Unemployment Ireland 2013 – 13.3% 2012- 1.469million people in receipt 2012 social welfare - €20.774billion Budget 2014 – Job seekers allowance 14 Jan: - No children, aged 18-24 = €100 per week -No children, aged 25 = €144 per week -Aged 26 increase = €188 per week B. ii)Economic effects of black market in Ireland

16. High unemployment benefits – beneficial to remain unemployed and continue to claim benefits, rather than work for a lower wage. Nixers- people working off the books, cash in hand, continue to claim unemployment benefits. B. ii)Economic effects of black market in Ireland

17. Lost tax revenue Cigarette smuggling Annual government loss - €937million lost tax revenue. Retailers - €537million, job losses. 32.8% discarded cigarette packs are non-domestic. Ireland – largest smoker of smuggled cigarettes in entire EU 2012 B. ii)Economic effects of black market in Ireland

18. Ireland 2013 – most expensive price per pack of 20 cigarettes in Europe. Retail price - €9.50 per pack Collected tax - €7.72 Illegal cigarettes purchased - €0.50c per pack Selling price - €4.50 Difference - €5.00 B. ii)Economic effects of black market in Ireland