I agree. PPP is such a hollow measure. It is a self-aggrandizing veneer solely to flatter one's vanity.
We live in a global world where no country is self sufficient. We depend on oil from a few countries, clothes from some other, electronics from some more, so on and so forth. In such an interdependent and connected world, all payments are made in global currencies and PPP in isolation doesn't really cut it.
India pays the same in $ for oil, as does let's say the UK. Similarly, when an Indian travels abroad, they pay the same in $/£/€ as let's say another globe-trotter from Europe.
PPP in such cases becomes a facade, to stoke their egos and to justify to the nationalists that their nation is doing well.
In very general term, you either use GPD to compare countries' "economic strenght", or GDP per capita (PPP) to compare how it translate for their potential for each citizen.
I feel like GDP per capita (non PPP) or GDP (PPP) are not very useful unless you want to make the numbers say whatever your story claims.
In general people are more interested in real gdp growth (ie the year-on-year change) than the number itself as it gives a sense for whether the economy is expanding or contracting either on an absolute basis or relative to population if you're looking at per capita numbers. Both are useful for different things.
It really depends. Economic comparisons are more complicated than can really be distilled down to one number that'd work for ranking all countries.
GDP comparisons in USD work really well when a large percentage of a country's economic activity is anchored to USD-denominated trade.
For some random heterogenous examples, if you want to look at Canada, China, or middle-eastern petrostates, comparing GDP in terms of the US dollar is probably your best metric, because their economies really are highly sensitive to changes in their currency's exchange rate to the USD, either due to the things they are reliant on buying from the USA (Canada), or the things they are totally reliant on selling to international markets (China, middle east petrostates)
On the other hand, for places like the European Economic Area, comparisons in terms of USD are quite a bit harder to justify, and this is where PPP can come in as (highly imperfect) alternative. The reason is that while they obviously are plugged into the global economy, they also do a much higher percentage of their economic activity in their own little economic bubble that's not as sensitive to their exchange rate to the USD. For example, European countries have had highly stagnant GDP in USD terms since 2008, and that does strongly affect things like multinational corporations, tech purchases, and energy prices, we're not really seeing any of the indicators on everyday life you'd expect from such a longterm stagnation, and that's because their economies really are growing, it's just that their currency is also losing ground against the USD even as they grow.
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TLDR: I'd compare Canada versus the USA in terms of USD, but I'd compare France versus the USA in terms of PPP. This decision really needs to be done on a per-comparison basis, and neither is really great, but for some comparisons one is much more appropriate than the other.
> it's just that their currency is also losing ground against the USD even as they grow.
USD/EUR is pretty much where it was back in 2015 despite of the swings (in both directions) since then.
The Euro crashed in 2014 there was no real gradual decline which would explain this stagnation/growth.
even in inflation adjusted PPP, France was at around ~51k per capita back in $55. There is very little growth (of any kind) outside of Central/Eastern European EU countries and a small few pockets.
Nearly all other non-US currencies have a lower value, according to this metric. I’m wondering if this means the US dollar is overvalued? Alternatively, the US dollar is valued for reasons other than purchasing power.
The actual value of a currency is not all that relevant. The Japanese Yen is worth less than the Indian Rupee, but the cost of living in India is a lot lower.
When talking about currencies being over or under valued, we're usually not referring to the value of 1 unit of each currency being equal, more the exchange rates themselves. See the Big Mac index for example, for a real life illustration. You can buy a Big Mac in the US for $X, and a Big Mac in India for INR Y, but $X doesn't necessarily buy you exactly INR Y in the market right now. Might buy you more or less, and if you're using the Big Mac as a standard you would say one of the currencies is over or under valued.
Currency exchange rates matter for tourism, buying foreign goods, foreign investment, working in a different country, businesses that rely on international trade, and so on. International trade matters in just about every country, as we can see in countries suffering from trade sanctions.
> The World Factbook is prepared by the CIA for the use of U.S. government officials, and its style, format, coverage, and content are primarily designed to meet their requirements.[3] It is also frequently used as a resource for academic research papers and news articles.[4] As a work of the U.S. government, it is in the public domain in the United States.[5]
It is in the interest of the CIA to be an authority on comparisons between countries, especially when it comes to metrics that are of interest to economics.
PPP (Purchasing Power Parity) is something of very little use. The price we pay for food in developed countries include the additional food safety
they don't get in India. The price we pay for housing include the additional quality of housing and location they don't get in Russia.
On the less serious parts of the Internet it's only Indian and Russian nationalists who bring up GDP adjusted by PPP to cope. Less serious people reply by calling it "Poor People's Points".
PPP IMO is very useful when comparing quality of life for example when considering moving. However, in that case you also want look at median PPP income, not even PPP GDP per capita and especially not total PPP GDP.
Can confirm. I lived for a substantial amount of time in Russia, Israel and Argentina, and in a lot of other countries for about a month. Food price comparisons at sites like Numbeo don't take quality into account at all. May be they can be used to compare heavily pre-processed foods like Doritos, but “block of Parmesan”, “a cheap bottle of local dry white wine” or “1kg of beef” can mean radically different things I'm practice.
Reminds me of the "Milky protests" in Israel when people were outraged that a Milky (some sort of processed whipped cream/chocolate milk product) in Germany was cheaper than in Israel (presumably exported from Israel to Germany but cheaper to buy in Germany).
And, to elaborate, it's those pre-processed foods like Doritos whose prices don't scale with "cost of living". They're expensive imports, luxuries. There's an entire genre of YouTube video in which expats go to grocery stores, and it's instructive. If you want to live cheap, you need to eat like a local, not like a Westerner. (The good news is, that "foreign" diet probably has more whole foods and is probably healthier, so long as you can avoid pathogens.)
Of course it does. Most of these processed foods are produced locally by a license. Do you think Coca-Cola ships the bottles from US all over the world?
If you're the CIA, the Pentagon, or the government I think ot does tell you something about other countries' capacity for production and procurement.
Perhaps it costs x billions to build so many missiles in the US so you might think that, say, India can't afford that. But on the other hand it is much cheaper for them to build a missile so all in all they might be able to build as many as the US.
This is true and one of the known limitations of PPP.
Having lived in 6+ countries (rich and poor) there is no “equivalent” across many countries.
“Shelter costs” in say the US and Laos have no equivalent. The shelter in the US is unobtainable in Laos, so saying “$30,000 spent in the US is equivalent to $1,000 spent is in Laos” is not possible.
I was wondering how to interpret the statistic for Russia. My guess is that Russia produces a lot of oil and gas, but it trades at a heavy discount. PPP is a way of ignoring the reasons for the discount. So maybe it’s saying that if the reasons for that discount were fixed (say, Russia makes peace) then they would get much better trade terms. But that’s a hypothetical scenario. In the real world, the geopolitical situation matters.
For China, I believe the government controls the exchange rate, which results in intentionally selling Chinese goods at a discount? Hypothetically, if they let the currency rise then they’d have higher GDP, measured using actual exchange rates.
My comment is literally asks "how do you measure that?" and then I put out two statistics that you would assume would be correlated with food safety (along with maybe IQ, which China also does better in)
What I'm saying is that this purported food safety isn't manifesting itself through superior life expectancy, burden of disease or IQ measurements. Why do you think that is?
Well.. it depends what you but with that money. If you only buy Russian goods (lol) then PPP makes sense. Foreign imports? Not so much. Of course Chinese cars and some goods presumably would be quite a bit cheaper than in Italy due to no tariffs.
Russia has 40% larger GDP (PPP) than Italy according to these figures. Purchasing power parity includes the fact that Russia has a small purchasing power, which makes this figure larger than the real dollar GDP.
So you are saying that PPP adjusted GDP is not real and that you believe that Italy actually has larger GDP than Russia (which it does if we measure it in actual non-adjusted money/$)?
Wars are very good at pumping GDP, but from reports, someone linked an FT article in this thread, the increase or sustain in GDP is all down to war time spending by the Russian government.
Economically they're in very rough shape, but GDP is doing well because of that war time spending.
What does this even mean? I would have expected it to mean "can't wage war", "people are starving and storming the palace". Obviously not. So? Other than numbers, what does it really mean? If it's just "they have less luxuries", maybe it does not matter that much.
They are spending all of their cash on war production, which actually (combined with workforce shortages leading to higher wages) has resulted in unexpectedly high GDP growth.
However that's mostly fuelled by Russia spending all of their reserves (effectively they are literally burning money) to fund the war. There are actual reasons why they had to raise their interest rates to 21% despite inflation supposedly being below < 10%.
When that money runs out? Who knows.. Russia can hardly borrow in international markets. They'll have to either start printing money or the economy will crash. Well hopefully before they actually "win" the war. On the bright side their economy might crash anyway if the war is over (due to extremely high government spending propping it up, a bit like the situations immediately after WW1/2 in Britain or even the US).
It means that they have a very low debt-to-GDP ratio of 16.9%, a limited amount of natural resources (due to the small size of their country), plus they have been forced to switch to producing a lot domestically after the western sanctions in 2022.
The same Economist that was embarrassingly wrong in all their previous "predications" about that economy (you know, the one with their own space program, ton of natural resources, very low external and internal debt and neighbors/best buds with the worlds largest factory)?
The very same. Half of what you read in the Economist each week is insightful analysis you won’t find elsewhere; the other half is nonsense. The fun bit is figuring out which is which.
To be fair they seem to be somewhat accurate and objective. The Russian economy has proved to be unexpectedly resilient. Western countries continued buying Russian oil/etc. while restricting the exports of goods and services which lead to a massive current account surplus in 2022. They also have enough reserves to run comparable deficits to their current one for at least several years.
Of course having to raise interest rates to >20% while claiming that inflation is actually ~9% is not a good sign. Current account surplus is also going down and is pretty much where it was before the war.
Funnily enough the Russian government seems to be "fighting" the central bank by giving out mortgages and loans at a >50-80% discount. Which would indicate that (hopefully) their are forced to chose between inflation going our of control or most of the economy (at least the faction not directly dependant on government contracts) griding to a halt.
I think more importantly we may have failed to identify the bigger threat . China is #1 in many of these financial metrics and on track to take us down economically. They’re also ramping up to invade Taiwan which would bring us into a military conflict as well. Imagine if we allied with Russia and had China’s neighbors ready to pounce on them when that happens. War makes strange bedfellows, in WW2 we allied with Russia against the greater Nazi threat.
Imagine if nobody had any incentives to do stuff like that? As long as Chinese leaders remain reasonably rational and US/Taiwan maintain a high level if deterrence China won't invade.
Russia invaded Ukraine because (supposedly) Putin et al. believed that it will be a repeat of 2014. Quick invasion/coup and their in control of the country before US/NATO can react. As long as Winnie the Pooh doesn't think he can somehow that off in Taiwan why would he invade?
Russia will never be on US/EU's side in any conflict vs China. Maybe short-term they might make some concessions if we let them have most of Eastern Europe to...
> WW2 we allied with Russia against the greater Nazi threat
Only because the Nazi's backstabbed the USSR. Until that very moment they were affectively allied to Germany and they even bankrolled their invasions of France and Norway (Germany would have run out of oil a few months after Poland without the Soviets). France and Britain has almost serious plans to attack the USSR in Finland and Azerbaijan before the Battle of France.
No, their have their own homegrown (objectively) fascist government. They also seem to be very happy about that government deciding to needlessly kill or cripple hundreds of thousands of Russian men for who knows what reason...
Must be fun coming up with imaginary scenarios and basing your "arguments" and claims on them?
That's just a bizarrely absurd thing to say... Under what circumstances or what chain of events could lead to millions of Russians dying for American interests?
US was/is perfectly fine with ignoring Russia as long as it didn't go overboard with its imperialist ambitions and engaged in (mutually beneficial) economic relations with most of European countries.
Bush, Obama and Trump tried pursuing a policy cooperation/appeasement for years. Where did that get us?
According to Worldbank https://www.worldbank.org/en/programs/icp/brief/VC_Uses and OECD https://www.oecd.org/en/data/insights/data-explainers/2024/0... this metric is a poor choice when trying to establish some sort of strict country ranking.