Тузувчи : Файзуллаева Н

Introduction

This paper shows that there is a definitive link between world real Gross Domestic Product (“GDP”) growth and world population growth.  As this paper will demonstrate, this link means developed countries, excluding inter-country migration and inter-country trade, could enter into “recessions” in the short term and never come out of them, contradicting current long term GDP forecasts.  Consequently, this paper suggests government focus should shift from the status quo of promoting private consumption that results in GDP growth and avoiding “recessions”.

Background

The word “recession” has been used prominently recently given the financial crisis often referred to as the “Great Recession”.  It is regularly defined as two consecutive negative quarters or declines in GDP[1].  GDP has been described as: a comprehensive measure of the economic health of a nation[2], indicator of living standards[3],[4], aggregate demand[5], output[6], the most important of all economic statistics[7], and the most widely used measure of economic activity[8].  That is to say, it is probably considered the most important economic statistic.

GDP was first proposed by Simon Kuznets in the 1930s but it was not until much later when it first became a key economic statistic.  Kuznets suggested that this type of indicator should not be used on its own to determine living standards as it would also be important to identify the type of growth that is taking place.  In other words, the focus should not be on growth for the sake of growth[9], which is contrary to the focus GDP growth has today.  GDP can be calculated in a number of ways but one of the most commonly used is based on the expenditure approach.  The Organization for Economic Co-operation and Development (“OECD”) world[10] statistics from 2011 show that this approach is made up of private household consumption of goods (63%), government spending (18%), private investment (19%), and a country’s net exports and imports (0% - imports and exports were of similar values)[11].