Praying for Growth at the GDP Altar
The Perils of Confusing GDP Growth Figures with the Real Economy
Would "Marshall Plan" -type fiscal stimulus help Greece's economic woes? In a new report, Matthew Melchiorre of the Competitive Enterprise Institute refutes such claims put forward by economists:
"Pumping money into the Greek economy may boost GDP and even spur hiring for a short time, but it will not lead to self-sustaining growth driven by private investment over the long run. Only fundamentally reforming the Greek economy can accomplish that.
"When economists treat GDP as the be-all end-all metric to evaluate economic performance, they often propose ways to improve GDP figures, rather than the actual economy. Although GDP may be the best of limited measures in assessing total economic output, it is only a proxy, and proxies are imperfect.
"If Greek policy makers really want their country’s economy to recover, they should pursue austerity and market reforms with zeal."
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