Jacob Assa & Ingrid Harvold Kvangraven,Published online: 07 Jan 2021
ABSTRACT
What are the implications of changes in measurement standards of GDP for global convergence debates? What are the political economy implications? To answer the former question, we examine the changes in national accounting standards from the early 1990s. Revisions to the System of National Accounts (SNA) – the international standard for constructing GDP – include several major changes to how production is measured, including the reclassification of financial intermediation services, R&D, and weapons systems as productive activities – all areas in which countries in the West has had an advantage in recent decades. In addition, there has been an increase in the proportion of imputations in the 1993 and 2008 revisions, which privileges the economic structures of the West. Overall, we find that these changes have had the effect of boosting the GDP of the West relative to the rest of the world and thus to an underestimation of global convergence compared to previous measures of GDP. To answer the second question, the paper unpacks the political economy implications of national accounting standards favouring Western economies along several axes, including the impacts on voting shares in international institutions, domestic policy incentives and epistemological debates about sustainable development.
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Disclosure Statement
No potential conflict of interest was reported by the author(s).
Notes
1 This also echoes Jerven’s (Citation2012b) observation that the way we measure economic output tends to be in line with the Eurocentrism that pervades our field.
2 Ha-Joon Chang (Citation2002) argued that countries in the West used a variety of development policies to get to where they are, but once there, preached the opposite policies to poorer countries. While we do not claim that developed countries deliberately manipulate the SNA in order to outpace developing countries, we use this analogy to illustrate how the changes have in fact moved the developmental goal-post beyond the sectors originally associated with industrialisation, such as manufacturing, mining, utilities and transport.
3 We are aware of NMVA’s limitations, including its limited acceptance and various critiques. However, the other option for a counterfactual – using existing series of SNA 1968 data – is severely limited by data availability, which makes any cross-country comparisons at the aggregate level impossible. We thus use NMVA as an imperfect proxy for a measure of value-added which has less imputations than GDP.
4 However, if we exclude China, the ratio per capita income in the West actually increased in the 1900s (Wade Citation2014).
5 Thus far, the debates in English academic literature on China’s growth have largely been about whether Chinese growth statistics are plausible or not (e.g. Rawski Citation2001, Klein and Özmucur Citation2002, Holz Citation2004, Mügge Citation2016), rather than studying the politics of measurement of China’s economic output on its own terms. This is an important gap for future research.
6 Such overlap in years for which data is available under multiple SNA systems is limited. This is especially the case for countries which have never used SNA 1968, including many countries previously dubbed as being ‘in transition’ from command economies to market-based economies. The list includes the former USSR, other east-European countries, as well as China and Cuba. Even for non-Communist countries, data is limited, especially for developing countries.
7 It is important to bear in mind that the difference between any two numbers in the SNA accounts is the combination of changes to the methodology, which is the focus of this paper, and other changes, including improvements in the underlying raw data, changes to the series’ base year, etc. In practice it is difficult to disaggregate all these changes, and as a result, comparisons of growth in constant prices in this paper (those using MADT tables 102 and 202 as a source) should be interpreted with caution. This is less of an issue with the current price comparisons in this paper (using MADT tables 101 and 201) since there is no change of base year to affect the results.
8 This is based on the (implicit) market-centered assumption that where there is income there must be production. As Mazzucato (Citation2018) demonstrates, this logic is circular. Income is earned from productive activities, and activities are considered productive since they earn income. This not only leaves-out unpaid activities, but also lets in unearned income, or what the classical political economists thought of as rentier income (earned from ownership, control or even monopolistic power).
Additional information
Notes on contributors
Jacob Assa
Jacob Assa holds a Ph.D. in economics from the New School for Social Research, and his dissertation on the financialization of GDP has been published as a book by Routledge in 2016. He is currently a policy specialist with UNDP, and previously worked for 14 years in UN-DESA’s statistics division, in the areas of national accounts, development indicators, and as chief of the statistical dissemination section. Jacob has published in several peer-reviewed journals, and his research interests include the political economy of national accounting, financialization, inequality and growth, composite indicators, and sustainability.
Ingrid Harvold Kvangraven
Ingrid Harvold Kvangraven is a Lecturer in International Development at the University of York, UK. Her research fields include development finance, African debt markets, heterodox economics, decolonizing economics, international institutions, and history of economic thought. She holds a PhD in Economics from The New School for Social Research
