Why Is GNP So Much Higher Than GDP?

Image by AFP via @day life

Everybody already sort of knows that political risk factors have

surpassed traditional quantitative risk factors in comparative weight, but

very few have updated their models for this new reality.  Investors have

pushed the pause button, sitting on virtual mountains of cash, while

sensing that the current environment is inhospitable to capital

accumulation. It’s time to admit that economic freedom and other

metrics of a healthy social order are not merely ideological point

makers, but serious valuation metrics.

So what about the United States? We’ve gone from being the leader of

the free world to being the leader of the mostly free world.  This did not

start under Obama; it started under the Bush presidency when the former

president “threw out (his) free market principles in order to save the free

market.”  But one cannot make a nation less free in order to make it

more free, any more than one can destroy a village in order to save it.
 Furthermore, you don’t support principles by throwing them out.

“Principles” is the word we use to describe things we will never throw

out.

The data support what many Americans intuitively already know: We

are losing the competitive advantage which came from long-term

adherence to free market principles. Gross national product has been

outpacing gross domestic product for several years. The difference is not

merely in a technical definition of the statistic. GDP measures the sale of

goods and services which are made here, hence the word “domestic.”

GNP measures what we as a nation make, not just here, but overseas as

well.

Multinational corporations are increasingly producing more elsewhere

than they are here.  The difference between the “N” and the “D”, while

small to any but the nicest economic eye, may signal the difference

between ascendency and stagnation. Our domestic output lags our

national output to the degree that our domestic policy environment

incents American know-how to be employed on non-American soil. And

 all of this has happened despite intense political pressure placed

on corporations to not expand production overseas. It has intensified

under Obama.

Some may interpret this as a message of American decline. That would

be an oversimplification.  I see what is going on in the world today not

as America declining, but as America going viral. Like American culture

and the English language, the American growth model is universalizing.

The fact that America herself has taken a momentary break from sanity

and strayed from her foundation is beside the point: Billions of people

across the globe are becoming more American, and they’re staying home

to do it.

The more that the nations of the world move toward freedom, the more

capital will move toward them. The more that capital moves from here

to there, the more the collar tightens around our fiscal windpipe, and the

more jealous America will become as nation after nation begins to look

more like we used to, and we begin to look more like they used to.