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Las Vegas Business Press
Saturday, October 11, 2008
Government tries new GDP numbers

By Ian Mylchreest
April 10, 2006

Economists at the Fed think that the gross domestic product needs some revamping because they have wrongly counted intangibles as expenses rather than capital investment, reports the New York Times. The changes could shift as much as $250 billion from the deductions column to the investment column.

And that would mean that what was once perceived a slight problem with rising inequality for salaried workers would become a gaping hole. That’s because if the GDP is rejigged, it will put as much as $250 million back as corporate profits because the spending created real and valuable benefits for the corporations. And, relatively speaking, that would put employees in a much weaker position.

The intangibles the economists want to include as capital expenses are R&D, brand advertising which generates a permanent benefit for the company and supply chain systems such as Wal-Mart’s state-of-the-art system which gives it a big competitive advantage.

The change makes sense for two reasons, argues Times’ economics correspondent Louis Uchitelle. The use of such intangibles and their value has risen markedly in the last 30 years. And the continued decline of wages shows the lack of bargaining power that labor has, despite the fact that current GDP numbers say 65 percent of the whole output goes to workers.





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