Question

1. If GDP is a good measure of well-being, why is Switzerland’s GDP so much lower than India’s GDP or China’s GDP?
2. What measures would be better to compare the well-being of different countries?
3. How do you expect these direct measures to correlate with per capital GDP?
4. How or does this impact the trade war issues with China

Answer 1

Hi there, thank you for asking this question.

GDP is the money value of all finished goods and services made within a country during a year. It provides an economic picture of a country and can be considered to estimate the size of an economy and its growth rate.

Now coming to the questions.

If GDP is a good measure of well-being, why is Switzerland’s GDP so much lower than India’s GDP or China’s GDP?

Comparing the population of  Switzerland with India and China, its population is very less. People in Switzerland lives in high standards and their is a fairly small country than India and China. However, GDP also depends on how much a country exports and imports in a year. India and China exports and imports more than Switzerland as there are large population.

But in real sense, GDP cannot show the true and complete picture of any country.

What measures would be better to compare the well-being of different countries?

Per capita income can be considered as a better option. Considering India and Switzerland, the GDP per capita PPP in India is $3,355.94 whereas in Switzerland, it is $41,725.72 which is roughly 12 times more than India. This shows clearly that Switzerland is more developed than India.

How do you expect these direct measures to correlate with per capital GDP?

We cannot catch a clear correlation between GDP and Per capita GDP. Per capita GDP depends on how much an individual earns a year and GDP shows the total monetary value of goods and services produced in a year. There is a clear 16 times difference in Per capita GDP between India and Switzerland.

How or does this impact the trade war issues with China?

Definitely, China will be losing a lot in GDP as people in majority of the world start boycotting Chinese goods and stopping the production there.  Major companies are planning to shift from China to places like India, Vietnam etc. Foxconn who produces iphones had planned to shift to India. Samsung is about to start a display factory in India. Japanese govt. is funding  $536 million to their companies to leave China.

However, considering Per Capita GDP, China will not be affected that much as the standard of living of people in China is much better than most of the other countries in the world.