Not all GDP numbers are made alike


My latest over at Foreign Policy’s Transitions blog.

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  1. Chamo, that econ teaching gig is taking over your brain. I’m sure the post is right and all, but let me tell you, out of 100 readers who hit this patch…

    “Productivity growth helps explain why some countries grow faster than others over long periods of time, and why some countries are wealthier than others.”

    “There are various ways for policymakers to have a positive impact on productivity. For example, increasing capital generally raises productivity, for the simple reason that capital allows workers to add more value to their production processes. Similarly, better infrastructure has a positive impact on productivity, as do education, greater access to technology, and simplified bureaucracy for businesses.”

    you’ve lost 98 to a boredom-induced stupor before the end of the quote…

    N24 knows how it’s done…you need a girl in a bikini in there somewhere!

    • As much as I appreciate Juan’s writing, I have to agree with Quico, here. Maybe not on the exaggerated call for a girl in a bikini, but the article could use more spark, particularly, since the photo recalled an earlier one, used to highlight traffic congestion.

      Meanwhile, speaking of productivity, traffic delays, and scarcity of broad programming on the radio, ‘en el interior’, when are Harold and Kumar going to do another roadtrip in Vz?

    • I know Quico did a post about how bad N24 has been. But seriously what has happened to it? I mean it might as well change its name to Playboy24! If you open it up today you actually see 3 pictures of totally bare woman as headlines and then some boobs…Could it be that N24 would rather have just a male following… cause really I find it so awkward to go to its home page, being from the opposite gender, and let’s not mention how intimidating and inappropriate visiting the site is in the office. What happened? One thing is to lower the quality of journalism and another is to become an x rated porn site!

      • I don’t know about calling it X rated, but definitely “Censura D”

        I stopped going to N24 because of the boobage as well as the definitive slant towards the Chavernment.

        Not that I’m against boobs (some of my best friends are boobs), but they have their time and place and a news site is not in that definition.

        I disagree withyou Quico, there is NOTHING you can do to ANY paper on economics to keep it from being boring (to me), no matter how many bikinis you throw in there.

    • Boredom-induced stuor, you say? I’ve been asked to translate the thing for Prodavinci!

      Productivity is not an easy topic to talk about, since as a concept it is kind of vague. But it is crucial – Venezuela’s future development depends on us understanding it, and making it grow.

  2. Good read. I don’t know what terrifies me more, the prospect of getting a bullet at any random moment, or watching my life slowly drain away in a line to conduct some routine transaction. It can be better than this, vale.

  3. A populace on life support?
    drip, drip, drip,
    and before we know it,
    it’s DVT, clots in the leg,
    or in this case,
    lack of a free currency exchange policy
    leading to the inevitable Thrombosis.
    Re: Canucklehead says:
    watching my life slowly DRAIN away in a line to conduct some routine transaction.

  4. Juan, great article! Perhaps you know this, but I wonder if one could make a “normalized” indicator of productivity. Specially for economies highly dependent in commodities (Venezuela = Oil, Chile = Copper) that have gained so much value in the last decades. GDP is so misleading to measure productivity in such cases.

    It would be great to be able to normalize things to a production unit, then divide that over population and get a productivity per capita indicator.

    If Venezuela’s economy was just oil then one could say that productivity per capita was the number of barrels over population. If one plots that, our productivity per capita has gone down hill. I wonder how Chile is doing comparatively. It would be interesting if one could extend this some how.

    • Believe me, there is a large body of literature that deals with the right way to measure productivity. Basically, what (some) economists do is try to measure the value of production as a function of the amount of labor, capital, and other factors of production involved. The residual – all the stuff that is not explained by the factors of production – that would be productivity. It is not as easy as it sounds, in part because it is difficult to correctly measure the amount of capital in a production process. There are also serious endogeneity issues.

      But now I’ve lost 99.99% of my readers…

    • While the Lancet article deals with indices of physical inactivity (and its consequent poor health outcomes), I think there’s a bit of stretch between physical inactivity and poor economic productivity. Reason being, there is a sector of any economy that demands “sitzfleisch”, and with cell phone use, at least some productivity-related communications can take place while waiting in traffic for abnormal periods.

      But maybe laziness does underpin so many other problems in Vz, as follows:
      The widespread preference for choosing the easy way out (the bluff begins), the widespread preference for patronage over merit-based systems (the bluff continues), people in jobs for which they have no “escuela” or inadequate training (the bluff increases), and the widespread unwillingness to embrace proven standards of excellence, leading to repetitive time inefficiencies and the half-assed recreation of the wheel.

  5. Well Juan, I thought the article was quite good. The bit where I lost you was:

    For example, increasing capital generally raises productivity, for the simple reason that capital allows workers to add more value to their production processes.

    While increase in capital may raise productivity -when said increase goes to improve processes, infrastructure, worker training, etc.- I just don’t see how “increase capital” a secas can “allow workers to add more value to their production processes”, for it is not the workers who will improve processes, not will they be the ones improving methods geared at increasing their own productivity, nor will they be ones spending capital for improvements mentioned… I reckon you should have left out that bit, or qualify it better, so people ignorant about such economic principles can come away with a better understanding of it.

    Good piece nonetheless IMO.

  6. JCN, Good article. I think it’s begging for the use of the word “efficiency” somewhere in there. After all, it’s not about productivity alone, but rather productivity at lower cost that makes for competitive results. All your spot on examples point to it, especially those indicating wastes of time, traffic being my biggest peeve.

  7. “The secret to economic growth in the Chávez era is simple: Sit on top of something the whole world wants, sell it at an ever-increasing price, and spend your earnings generously. It has nothing to do with being better at your job.”

    High inflation causes all numbers associated with the GDP to increase just by virtue of everything costing more than it used to. Of course, the actual calculation of the official GDP takes this into account and adjusts the final numbers to reflect the GDP growth as if there had been no inflation.

    But what happens in a country with a very high inflation rate, where the government lies about how high the inflation actually was? Wouldn’t that distort the adjustment made on the GDP and make it look higher than it really is? What would happen with Venezuela’s GDP in the last 10 years if it was adjusted with the real inflation numbers instead of the fake ones invented by the government.

    • No, that’s taken into account in the calculation. However, in *some* GDP calculations they don’t take it into account properly. Since they are counting the value of goods and services produced, they have to translate that value into dollars, and if they use only the official rate … well, we would appear to be much wealthier than we really are.


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