Do Multinationals Make GDP Obsolete?

Abstract

Multinationals play an increasingly important role in the world economy. Their fiscal optimization leads to bias macroeconomic statistics. This was ignored by statisticians until the Irish CSO published an extraordinary +27% growth number for 2015. This originates most probably from a simple administrative reallocation in Dublin of the intellectual property products of a big American multinational. As royalties are classified as production in national accounts and exports are registered not from where they are physically shipped but from the country that holds their property rights, GDP was massively impacted.
Many economists were thunderstruck. Some concluded that a «national» GDP is now obsolete. Some that only its income approach remains relevant. In this article, the author strongly advocates that a national GDP in volume remains an essential tool for economic policy and that, if necessary, statisticians should reconsider the rules of the SNA 2008, whether to classify royalties as production or to extrapolate the goods for processing concept, in order to recover a sensible measure of growth.