Economic Miscalculations & Ramifications

Tom Peters picked up recently on a great article which appeared in Business Week claiming that the economy is not actually as poor as pessimistic economists woud have you believe:

"Business investment in intangibles such as product development and training is critical for long-term profitability, but it doesn't get counted in GDP." The unreported annual sum was most recently $978 billion, almost as much as the reported investment in physical capital. Re-calculate, and "investment as a share of the economy is rising rather than falling."

Household outlays for education, the most important investment in the future of the next generation, are improperly counted as consumption." Re-calculate, adding in this uncounted $224B, and "personal savings were positive, not negative."

This is just one way in which outdated calculation methods are giving misleading signs about the health of economy in perspective of the new architecture of the "Knowledge Economy".

What is more worrying however is how much we may be miscalculating the growth rates of countries such as China and India, however. Look again at the above examples: how much investment in training, product development, and education can one reasonably posit is taking place in these economies as opposed to the gross investment in real estate, developing traditonal business "value chain" partnerships etc.? Seen like that it looks like we may have hugely overstated the imminence of the Far East's economic supremacy, as well as misunderestimated the U.S.'s.

Comments

[Superanders]

But, isnt this a case of same shit new wrapping? I am reffering to how Good-Will used to be accounted for in financial statements?
And how much of a countries economy is hurt by the fact that so many major contracts are signed with frinds and (former) "business partners" of those in power? Im not nescesarily thinking of the US (bush/cheny - haliburton) here.