Posted by: Claudio Carbone | 17 January 2011

Is Italy still a real member of the G8?

Reading this article on the Financial Times (registration required), sprouted some thoughts: is Italy really the seventh economy in the world?
I have pulled some data from Wikipedia (living to the reader to check the relevant sources cited in the articles).
According to the List of Countries by GDP (nominal) Italy is really the 7th economy in the world.

Italy position in GPD (nominal) chart

Italy position in GPD (nominal) chart

But economic indicators are there to be criticized, and so I will do.
The GDP does average the product on the population base, does not take into account the ownership of the industries, does not take into account the servicing of debts. For such things a different indicator (GNP) has been devised.
So let’s take a look at a different index: GDP PPP. Which is to say the GDP equalized to the Purchasing Power Parity. A series of complex calculations made sampling all kinds of values: food prices, service prices, good prices and many more. All to try to read the numbers under an equal light for all. That’s because 100 USD are different in the USA or in Guadalupe.

Italy chart 2

Italy charted by GDP PPP

Already Italy rank gets lowered to 10th. Put simply that’s because prices are high so the real economic product, once in the hands of normal people, gets them less goods, foods and services, then the equivalent amount in other countries does. Essentially 100€ get you less things in Italy then in France. But those figures are still overall national figures, let’s see what happens when dividing them over the population.

Italy chart 3

Italy charted against GDP PPP per capita

When charted against GDP PPP per capita, Italy gets ranked 27th by the Inernational Monetary Fund in 2010. It has to be remembered that Italy is pretty small (294000 square Km of land, 71st country by land area) but has a comparatively huge population (58 million, 22nd country by population), so even if the GDP seems high, it has to be remembered that it’s produced by a population similar to that of United Kingdom and Germany (both of them way ahead in every chart).
Since it’s available, I’d like to show you another chart, this time depicting the previous values divided by hours worked.
This is tasty.

Italy chart 4

Italy charted by GDP PPP per capita per hour

As you can see this time the dragon rises its head a bit: up to the 20th position from the previous 27th. This is not bad at all considering the fame of the northern Europe, but tells a different story when seen in the light of the EU and G8: of the founders of the EU, only Greece is behind Italy as the average of the EU15 is 48.7; while of the G8 just Russia is outside of this chart, while all the others are way ahead of Italy. Even Spain, traditionally seen quite like Italy in many aspects, is far to the north.

Quite a different picture can be drawn at this point: all the usual laments coming from the Italian population may well hide some thruths. They have a habit of lamenting, that’s historically known, but maybe something is really stirring under the table. A table laid out by barons of the italian economy, as the actual government has roots dug deep in the economical world rather then in the political one. In looking at the redemensioning of the GDP when population is taken into account, a very simple assumption can be made: when a great number of people, produces a great amount of value, the very same people do not benefit from a great value as it is divided by the great number thus producing a moderate (if lucky) value for everyone. That’s to say that, when you take all the numbers into account, the general population wellness does not seem as high as a G8 member country should have.
But to clear the picture even more from possible artifacts, let’s take other numbers into account: the Gross National Income which is similar to the previosly said GNP (which was not available).

If charted against a nominal GNI per capita, Italy ranks 32nd. When the numbers are modified to reflect the purchasing power, Italy becomes 20th, very near to Spain. This position is starting to seem quite the (bitter)sweet spot.

Italy chart 5

Italy charted by GNI PPP per capita

Wikipedia numbers and the source numbers differ quite a bit in this case: Italy position in the GNI PPP per capita is reported as 20th by Wiki, and 42nd by the World Bank source. Although the original chart is missing positions, and it is not clear why or how.

For your knowledge you can also play around with the List of Countries by Income Equality (wikipedia), a dynamic page that lets you play around and sort the chart by different indicators.

Last of all I would like to show you another two charts.
First: list of sovereign states by public debt.

Italy chart 6

List of countries by public debt

Second: list of countries by external debt.

Italy chart 7

Italy charted by external debt

In both the previous charts, Italy ranks 7th. But I would debate whether these chartes represent positive values.
At the end of this article you can find all sources and some articles I choose not to use, but that are important nontheless.
A last mathematical/statistical exercise more aking to a game then to a scientific endevour: if we average the ranks in all charts, where does Italy end up? Let’s try. We have a 7th, a 10th, a 27th, a 20th, another 20th place, for a total of 5 charts. That makes 16,8. That is to say that, with our simple math, Italy ranks 17th when all the factors are accounted for.
Now is Italy really the 7th (or even 8th) economy in the world?

Sources:
Economic Lists by Countries
List of Countries by Employment Rate
List of Sovereing States by Public Debt (chart 6)
List of Countries by External Debt (chart 7)
List of Countries by GNI per capita (Atlas method)
List of Countries by GNI PPP per capita
List of Countries by nominal GDP (chart 1)
List of Countries by GDP PPP (chart 2)
List of Countries by GDP PPP per capita (chart 3)
List of Countries by GDP PPP per hour worked (chart 4)
List of Countries by GNI (World Bank)

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