SOME INACCURACIES IN FIGURES
IAN McGORIAN’s argument (Business Report, November 22) that “free market works” is primarily based on gross domestic product (GDP) growth and comparisons in GDP growth refers.
While I agree with the gist of his column, there are some significant inaccuracies in the figures he quotes.
His second sentence should, I assume, be GDP per capita. There is a huge, huge difference between GDP and GDP per capita.
The World Bank and The International Monetary Fund (IMF), which I suggest are more reliable sources than the ILO, rank Luxembourg only third in the world with a GDP per capita of $109 192 (R1.5 million) and $103 662, respectively, less than half of the figures quoted in his article. They rank South Africa as 89th and 90th, respectively, with GDP per capita of $13 403 and $13 498, respectively. This is considerably lower than the $43 590 quoted. His article should also consider the following, which only add to the complexities of determining GDP growth. An IMF investigation estimates that circa 40 percent of global foreign direct investment flows, which heavily influence the GDP of various jurisdictions, are described as “phantom” transactions.
A stunning $12 trillion – almost 40 percent of all foreign direct investment positions globally – is artificial: it consists of financial investment passing through empty corporate shells with no real activity. These investments in empty corporate shells almost always pass through well-known tax havens.
The eight major pass-through economies – the Netherlands, Luxembourg, Hong Kong SAR, the British Virgin Islands, Bermuda, the Cayman Islands, Ireland and Singapore – host more than 85 percent of the world’s investment in special purpose entities, which are often set up for tax reasons.
Most of the countries singled out in the IMF investigation feature in the top 10 when measured on GDP per capita. I agree with all the points he made, but in addition, population growth versus GDP growth also plays a significant role in determining GDP per capita. South Africa falls further and further behind because our GDP rises more slowly than our population.