The economy was invented in WW2. It is the unknown driver for the reason why the Allies won the war. The Americans figured out how to calculated a rough GDP for all the countries fighting in the war and came to the conclusion that the Allies would win if they joined the war. Economically, the Axis powers would not be able to keep up the amount of production of goods necessary to win a war.
This was obviously proven true.
Fast forward to current day, and the most critical calculation in economics – GPD – feels severely flawed. This was created a time when we were measuring products being produced and sold. But little else. Since that time, the world has shifted to a time when the strongest companies are in tech.
GDP = private consumption + gross investment + government investment + government spending + (exports – imports)
Where does the importance to the tech economy, data, get stored in this equation? Is it included in the imports and exports? Certainly not… data isn’t typically traded between firms unless there is a buyout. Would it be considered part of private consumption? Nope… data is stored within the company itself. Others do not consume it.
The markets have accounted for this shift in company power years ago. With Microsoft, Facebook, Google, and the like sitting on top of the S&P 500, it’s easy to see that. But the numbers that power our economy and understanding of world powers have not caught up.
Numerous articles are discussing the slowing of American productivity. But those articles don’t take data into account. They only are looking at the antiquated calculation of GDP which doesn’t take any concept of the power of data into account.
We need to add a new variable to GPD to compare the economic wellbeing of countries.