From an excruciatingly long article in The Atlantic from 1995:
Specifically, in 1991 the GNP was turned into the GDP—a quiet change that had very large implications.
Under the old measure, the gross national product, the earnings of a multinational firm were attributed to the country where the firm was owned—and where the profits would eventually return. Under the gross domestic product, however, the profits are attributed to the country where the factory or mine is located, even though they won't stay there. This accounting shift has turned many struggling nations into statistical boomtowns, while aiding the push for a global economy.
Under the old measure, the gross national product, the earnings of a multinational firm were attributed to the country where the firm was owned—and where the profits would eventually return. Under the gross domestic product, however, the profits are attributed to the country where the factory or mine is located, even though they won't stay there. This accounting shift has turned many struggling nations into statistical boomtowns, while aiding the push for a global economy.
"... while aiding the push for a global economy."
Screw it, I'm going back to GNP. Or whatever, some more socially considerate measure, maybe.
2 comments:
Looking at it now, what the Atlantic says about profit being counted or not counted in "the country where the firm is owned" is a big deal. I was joking about "going back to GNP" but maybe I should really do that.
See also
GDP vs. GNP: What's the Difference?
and
The Changeover from GNP to GDP: A Milestone in BEA History
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