Political Expediency Distorts GDP Gains

Tue, Nov 10, 2009

Should we be cheering the recent positive GDP of 3.5% for the third quarter? Hardly. With unemployment now hovering at 10.2%, it is clear that any recovery, let alone a sustained one, is not around the corner. Nor it is clear that GDP growth is even connected with the true strength of the "domestic" portion of the American economy. What do I mean by that?

For purposes of this article, I am dividing the American economy into its domestic and international components. The domestic portion includes the sales and revenues generated by sales to businesses or consumers geographically located in the U.S. as opposed to that portion generated outside of the U.S.

By way of example, in 2009, Apple Inc. (AAPL) generated 46% of its revenues from international sales and 43% in FY 2008 and 41% in FY 2007. While this is a testament to Apple’s success and ability to expand it markets, it also reveals that American multinational companies are becoming less dependent on the domestic sales to generate its revenues and profits. Also, as more business is generated internationally, a disproportionate number of the new jobs created by Apple’s success are outside of this country.

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