DEFENDING THE LEFT….Dan Drezner complains of unfair economic comparisons from us lefties:
An old warhorse of political economy/anti-corporate types, for example, is to say that the sales of multinational corporations exceeds many countries GDP. This is true but irrelevant — GDP measures the value-added that an economy generates per year, so the proper and correct comparison is between a firm’s profits and GDP. When using that metric, corporations suddenly don’t look so big.
Hold on a second. This isn’t true, is it? Leaving aside trade deficits, GDP is basically consumption plus investment. If I buy a Ford Taurus for $20,000, that adds $20,000 to GDP even though Ford makes a net profit per car of about $3 these days. (In a good quarter, that is.) I don’t know if sales revenue is precisely comparable to GDP, but it’s pretty close. Right?
UPDATE: Right, GDP includes only sales of final goods and services, not intermediate sales. But sales revenue is still a more apt comparison than profits, isn’t it?