Is GDP the Right Measure of Wealth and Well-Being?

Harvard Business Review

In case you skimmed too fast to get the point, here it is: that favored benchmark of national performance, GDP growth or GDP per capita, is a distortion of reality that guides us to decisions contrary to what people really want. The Legatum people reason that in order for keep the focus on our real priorities, we need to measure the other components of prosperity as carefully as we do GDP, profits, and individual income. Economy Finance Global business NIPA

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The Future of Cities Depends on Innovative Financing

Harvard Business Review

In traditional financing models, it’s just not possible for investors to see their way to a financial return based on some abstract added value of the integrated whole. Today’s mega-cities have a footprint problem.

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Nigeria’s GDP Just Doubled on Paper: What It Means in Practice

Harvard Business Review

Earlier this week, Nigeria ascended to the position of Africa’s largest economy following a recalculation of its GDP by the country’s National Bureau of Statistics. The long overdue exercise (the last one was in 1990) nearly doubled the country’s economy pushing GDP up to $510bn from $270bn. Nigeria’s Finance Minister Ngozi Okonjo-Iweala mentioned the “psychological impact” of the announcement on foreign investors.

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Debt and the Future of the U.S.

Harvard Business Review

During the financial crisis, the world came to the apparently shocking realization that debt financing entails risks. trillion, roughly 10% of gross domestic product (GDP). Gross public debt is $14 trillion, or over 95% of GDP. In total, the estimated liabilities of the federal government are in the range of $70 trillion, over five times annual GDP. Cutting costs Economy Government GDP

Complimentary Resource – Economist: Smart SMBs Fine-Tuning the Engines of Growth

Strategy Driven

In the latest forecasts from The Economist Intelligence Unit, global GDP growth for 2013 has been revised down to 3.1% – only slightly up on GDP growth for 2012 (2.9%). Economist: Smart SMBs Fine-Tuning the Engines of Growth. by Symantec Corporation.

Democracy's Debt Dilemma

Harvard Business Review

And at that time, the United States had a public debt/GDP ratio of around 65% — a number that has since passed 100%. According to The Economist , the world's governments currently hold debts of approximately $45 trillion (relative to a world GDP of $65 trillion ). for example, ran an approximate 10% budget deficit as a percent of GDP in 2011 , with other countries like the UK (–9.4%), France (–5.7%), and Japan (–8.9%) running similar deficits.

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Would You Invest in This Kid?

Harvard Business Review

The GDP of China — the world's largest — in most centuries never exceeded $100 billion. was recording its GDP in hundreds of millions of dollars — not billions. A new America was born and, as this plot shows , the country GDP began to grow in multiples. Entrepreneurship Finance Innovation IPR PDF GWP

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Fighting Inflation, Ruining Economies

Harvard Business Review

debt was 98% of GDP, its deficit 10% of GDP; Spanish debt was 69% of GDP, its deficit 8.5% of GDP. Finance Minister Domingo Cavallo (himself a Harvard economics Ph.D.) To cover this deficit, Mexico had to borrow 7% of GDP a year. Then shocks — the 2008-2009 global crisis, the revelation that Greece had disguised its debt and deficit — sent foreign finance for the exits. Economy Finance Recession EU IMFWhy can the U.S.

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Reinhart, Rogoff, and How the Macroeconomic Sausage Is Made

Harvard Business Review

I couldn''t help but think back to that as controversy erupted this week over Harvard economists Carmen Reinhart and Kenneth Rogoff''s oft-cited three-year-old finding that economic growth plummets when a country''s debt-to-GDP ratio exceeds 90%. growth in countries with debt/GDP of more than 90%, they came up with 2.2% The initial Reinhart-Rogoff research seemed to indicate a sharp dropoff in average growth after debt passed 90% of GDP. Economy Finance Research

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Three Reasons the Euro Zone Deal Won't Work

Harvard Business Review

Once the deal has been done, let's say that the ESM now owns stock in a bunch of banks with no upside assets to speak of in an economy (Spain) with 25 percent unemployment and collapsing GDP growth. The Irish government, with a GDP in 2011 of close to 160 billion euros, has committed at least 64 billion euros to its banks. Economy Finance Global business ESM

China's Impending Slowdown Just Means It's Joining the Big Leagues

Harvard Business Review

to 8% GDP growth rate already is a significant slowdown from the nearly 10% annual pace at which China''s economy had been growing until last year. China Economy Finance China''s era of spectacular economic growth is coming to an end.

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Invest in Tomorrow’s Workforce, and World

Harvard Business Review

And we need to focus on the aspect of the situation that surprises me the most: the lack of innovative financing mechanisms to allow investors (companies, individuals, or governments) to channel much needed funds to where we all know they will reap a reward. So what can the rest of us do to spur the development of better finance, and take investment and corporate involvement to the next level? higher GDP per capita than countries with average literacy scores.

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Are the government falling into the short-termist trap?

Chartered Management Institute

I'm sure many of you will have read the news that the Olympics this summer have caused the UK economy to grow by 1% in the third quarter of the year, thus ending three quarters of declining GDP and, officially at least, taking us out of recession. The parallels with the finance industry are stark. Just as with the finance industry the boom years were fuelled by excessive debt and a resultant abandon of sensible attitudes towards risk.

The (Postponed) End of the Dollar Era

Harvard Business Review

current account deficit, which measures the gap between what the country takes in from export income, investment income, and cash transfers and what it pays out, peaked at nearly 6% of GDP in 2006 and was down to 3.1% of GDP in 2011. is a big shortfall — one that takes hundreds of billions of dollars of new foreign capital every year to finance — and the gap shows no signs of shrinking further. Economy Finance Global businessRemember "global imbalances"?

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Stock Buybacks Aren’t Hurting Innovation

Harvard Business Review

In fact, private capital investment, an even larger ticket item than R&D, has also been increasing and is at historically high levels of GDP. National competitiveness Finance & Accounting Research & development

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Jeff Henderson – Catalyst 2013

Ron Edmondson

Charitable giving in US has remained at 2% of GDP since 1970. Finances handcuff non-profits. Jeff Henderson was one of my favorite speakers at this year’s Catalyst Conference. His talk was on what non-profits can learn from for profits. One reason I identify with Jeff is because of his background in the business world. Here are a few thoughts Jeff shared: The solutions non profits are trying to provide aren’t keeping up with the problems they are trying to solve.

History Rhymes in the Greek Debt Crisis

Harvard Business Review

That Greece with a population of a mere 11 million and a GDP of $300 billion (only 2% of the Eurozone economies) can create systemic risk for the world speaks volumes about the downside of global interdependence. On August 13, 1982, when Mexican Finance Minister Silva Herzog met with officials of the U.S. Economy Finance Government

The United States of Europe or Bust

Harvard Business Review

Spain ran a surplus in 2007, and its total debt to GDP ratio was lower than Germany's. What got Europe into its current mess was pretty much the same thing that slammed the US economy: a real estate bubble financed by profligate private banks. Economy Finance Government

Financial Fears, Flows, and Globalization

Harvard Business Review

Our current problems stem, in part, from the special characteristics of finance, which as Keynes noted , is highly dependent on sentiment and, as Hyman Minsky emphasized , therefore particularly susceptible to crises. For capital flows, the historical data suggest that policymakers should start paying attention when the absolute values of capital accounts add up to 3% of GDP and start getting worried when they exceed 4%. Economy Finance Global business

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The Libor Scandal and the Price of Prosperity

Harvard Business Review

To the long, dismal list of fatally broken institutions — GDP, governments, schools, corporations — we can add the mysterious Libor , and its conveniently comfortable calculation. Now, let me couch this for you in the human terms of political economy — the terms in which you and I should rightly conceive of an "economy" as the sum of the enduring human good; not merely as a set of pipes for the grease of finance to be injected into. Economy Ethics Finance

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Spain Is Now Making Ireland's Mistakes

Harvard Business Review

Just like Ireland, Spain had a credit boom financed mostly with external debt, which meant that the balance sheets of their banks are now stuffed with bad debts as asset values collapse. And yet in the run up to the collapse in 2007, the combined asset footprint of the three main Irish banks was around 400 percent of GDP. Economy Finance Global businessSpain is now heading down the same path that bankrupted Ireland.

The Last Days of the Dollar Era

Harvard Business Review

Our current deficits are mostly the product of the economic downturn, we can easily finance them, and, when the economic recovery gains stronger footing (as it might have by now if it weren't for the impasse in Washington), they will shrink. This isn't just a spending problem; the tax cuts of the early 2000s also brought revenue down (as a percentage of GDP) to what appears to be an unsustainably low level. Economy Finance Global business

Interview with Sramana Mitra on 1M/1M Program

Rajesh Setty

One Million by One Million is a global initiative that aims to nurture a million entrepreneurs reach a million dollars each in annual revenue and beyond by 2020, thereby creating a trillion dollars in global GDP and ten million jobs. Our community has successfully established a culture of bootstrapping as a counterforce to the compulsive rush to financing that entrepreneurs mistakenly often engage in, only to be rejected over and again by investors. 1M/1M Program has a bold mission.

What Alan Greenspan Has Learned Since 2008

Harvard Business Review

I tried to get Greenspan to talk me for my November HBR article on economics and finance since the crisis , but he said he’d promised his publisher to keep mum until the book was out, which was too late for my purposes. It’s true of GDP. The dot-com boom when it collapsed, you can’t find it in the GDP figures in 2001, 2002. The 1987 crash, which was really the most horrendous thing, I defy you to find that in the GDP numbers.

A Six-Step Extreme Makeover for the Economy

Harvard Business Review

That's pretty much the state our economy's in: industrial age metrics like GDP are giant slabs lipstick, massive swathes of eyeliner, and gigantic dollops of foundation on the proverbial pig — they perpetually let us overstate real prosperity, as it matters in authentic human terms. Economy Finance RecessionWhy is this mysteriously reluctant so-called non-recovering recovery , at this point, as persistent as the proverbial psychotically obsessed ex from hell?

The End of Economists' Imperialism

Harvard Business Review

Meaning that you can never get truly scientific answers out of GDP or unemployment numbers. Two recommendations I've gotten from Harvard government professor Dan Carpenter : Capitalizing on Crisis: The Political Origins of the Rise of Finance , by Sociologist Greta Krippner, and The New Global Rulers: The Privatization of Regulation in the World Economy , by political scientists Tim Büthe and Walter Mattli.). Decision making Economy Finance

What’s Driving Superstar Companies, Industries, and Cities

Harvard Business Review

The superstars tend to be more involved in global flows of trade and finance, more digitally mature, and they dominate the lists of the most valued companies, the most valued brands, the most desirable places to work, and the most innovative companies. Apexphotos/Getty Images.

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Does Standard & Poor's Deserve a Downgrade?

Harvard Business Review

still remains the largest economy within a single national border (the EU is about the same size but includes 27 States) with a GDP that is 200% larger than that of China. Economy FinanceThose who live outside Los Angeles may or may not have heard of "Carmageddon." Carmageddon was the temporary closure of a 10-mile stretch of freeway running through the heart of Los Angeles, a closure that was expected to create an artery blockage on the scale of a massive heart attack.

Why the U.S. Is Still Richer Than Every Other Large Country

Harvard Business Review

In 2015 real GDP per capita was $56,000 in the United States. The real GDP per capita in that same year was only $47,000 in Germany, $41,000 in France and the United Kingdom, and just $36,000 in Italy, adjusting for purchasing power. has a more developed system of equity finance than the countries of Europe, including angel investors willing to finance startups and a very active venture capital market that helps finance the growth of those firms.

The Economic Impact of the Japanese Disasters

Harvard Business Review

Analysts have already reduced forecasted GDP growth rates for Japan by 0.5% Bold recovery plans would seem to be in order, but how that response is financed holds great import for Japan's economic future. With government deficits equaling 10% of GDP, and national debt at 200% of GDP, funding the recovery plan with still more government debt would be imprudent. Human suffering is certainly our main concern in the immediate aftermath of Japan's 3/11 tragedy.

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Fixing the Euro Zone and Reducing Inequality, Without Fleecing the Rich

Harvard Business Review

So one solution suggested by a growing number of economists in Europe is for central banks to “helicopter drop” money , and directly finance private sector spending. A payment of cash to Eurozone households of 3-5% of GDP would probably suffice to generate a recovery.

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Fixing the World's Infrastructure Problems

Harvard Business Review

of GDP (PDF) is necessary to raise infrastructure in the region to the standard of developed East Asian countries. Just to keep pace with anticipated global GDP growth, the world needs to spend $57 trillion , or on average $3.2

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Will Germany Leave the Euro?

Harvard Business Review

With Greek public debt already at more than 140% of GDP even before the bailout, it's reasonable to ask if the strategy can even work. Italy's public debt to GDP ratio is close, but the economy is far more diverse and resilient; its unemployment rate, around 9%, is not disastrous (though a youth unemployment rate of around 29% is socially worrying). Spain's unemployment rates are worrying, but at around 60% its debt-to-GDP level is less burdensome.

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When America Was Most Innovative, and Why

Harvard Business Review

The chart below illustrates a strong relationship between patenting activity and GDP per capita at the state level. It predicts that an innovative state like Massachusetts, which from 1900 to 2000 had four times as many patents as a less innovative state, like Wyoming, would become 30% richer in terms of GDP per capita by 2000. The competitiveness of the U.S.

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The Real (and Imagined) Problems with the U.S. Corporate Tax Code

Harvard Business Review

companies don’t pay taxes on debt-financed investments, which amounts to a subsidy. After-tax profits are at historically high levels; they were more than 50% higher as a share of GDP in the years 2010-2015 than they were over the prior 20 years. collects less corporate tax revenue than peer countries, by about 1% of GDP. In addition, certain types of investments are tax-preferred, and the system encourages debt-financed investments over equity-financed investments.

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How Bad Leadership Spurs Entrepreneurship

Harvard Business Review

their companies account for over $3 trillion of GDP (for the sake of comparison, that's 40% of China's entire GDP). What do 70% of successful entrepreneurs have in common? They all incubated their business ideas while employed by someone else.

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Why Greece and Cyprus May Be Better Off Without the Euro

Harvard Business Review

Although the Eurozone’s 19 finance ministers recently threw Greece a much-needed economic lifeline , and the latter repaid the first of four loan installments that it owes the IMF in March 2015, there’s no long-term relief in sight for the troubled economy.

Greece Needs to Be Honest About the Numbers

Harvard Business Review

Georgiou’s crime was that back in 2009, he strictly applied globally accepted international rules in reporting the Greek government’s budget deficit, which had the effect of increasing it by just under 3% to a whopping 15% of GDP. What makes this charge especially ironic is that applying the rules gives us a relatively rosy picture of the current state of Greece’s public finances.

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If Greece Embraces Uncertainty, Innovation Will Follow

Harvard Business Review

This helps to explain why Greece has one of the lowest license and patent revenues from abroad as a percentage of its GDP, as well as one of the lowest contributions from high-tech product exports to its trade balance.

The 4 Types of Cities and How to Prepare Them for the Future

Harvard Business Review

Implications for city leaders: Leaders should loosen restrictions so that private finance can invest in improvements to physical infrastructure, to better use what already exists. From The New York Public Library. The prospect of urban innovation excites the imagination.

Promoting Entrepreneurship in Vulnerable Economies

Harvard Business Review

Foreign aid, which can account for to up to 97 percent of a nation's GDP, is neither a long-term nor a sustainable solution to help the citizens of these fragile countries. Small- and medium-sized companies currently account for nearly 30% of formal GDP in low-income countries [ PDF ], but they often struggle to compete against larger firms for contracts and clients. They advise entrepreneurs on areas including finance, marketing, customer service, and human resources.

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Why Germany Dominates the U.S. in Innovation

Harvard Business Review

has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter. by 66%, manufacturing in Germany employed 22% of the workforce and contributed 21% of GDP in 2010.

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When Will the U.S. Finally Act Boldly on Paid Family Leave?

Harvard Business Review

Today, more than 43 million Americans provide unpaid caregiving for elderly parents, ill spouses, new children, and other loved ones — often to the detriment of their household finances. sandy millar/Getty Images.