Incidentally, even if workers in China do receive reasonable wages, there’s an argument that the high levels of Chinese private saving are just a disguised tax. I wonder whether the average Chinese citizen will get any kind of reasonable return on the 40-50% of their income that is saved on their behalf.

GDP does take this into account. It measures “value added”, so if someone sells you $30m of raw materials and you sell manufactured products for $70m, your contribution to GDP is only $40m. The $30m has already been counted in the GDP contribution of your supplier (if they’re in the US, it’s in US figures, and if you bought them from China, it’s in the Chinese figures).

But in your example, you also need to think about where the “net margin” comes from. The Chinese may make a margin of $5B on their $50B of shoes, but where did the $45B of costs go? Most of it was probably spent within China, so it’s likely that there really is close to $50B worth of GDP generated. Similarly most of the $30B of airplanes is spent in the US. The profit margin of the final supplier doesn’t really matter, though it does affect the distribution of GDP between wages and profits – in your example, Chinese workers get nearly all of the Chinese returns while US investors get a high proportion of the returns compared to US workers.

It would also take a number of years to bring smaller more fuel efficient cars to the market so it wouldn’t just be a matter of shifting workers from making big cars to small cars.

Fiat bring the technology to make these smaller efficient cars, and their management have also successfully turned Fiat around (whihc was dying a painful death).

Thanks much for your comment.In my view, the disadvantages of a Chrysler takeover by a foreign a company like Fiat is that we need to maintain s strong position in our own market. Yes, there will be downsizing, but there are good vehicles at both Chrysler and GM, and they can build smaller, more fuel efficient vehicles just as Ford is doing. It is not a “victory” for us to establish another foreign “transplant” here and do it by turning over
the factories, dealers, etc. while supplying all of the initial $8 billion of funding. If Fiat has such good cars for our market, why haven’t they don’t well here on their own.The Chrysler/Fiat deal is very bad
“industrial policy”.
Ken Davis

“More people unemployed than ever in the history of the US” makes a great headline, until you consider that there are 50% more people in the US than in 1982.

“Note that this is all in 2000 dollars, so inflation has been taken out.”

An odd way of stating that the GDP numbers are adjusted for inflation. How are we to interpret the GDP numbers when we know they are adjusted by an intentionally falsified CPI-U?