CAPITALISM'S ACHILLES HEEL Dirty Money and How to

216 CAPITALISM’S ACHILLES HEEL
it’s very difficult to come up with a basket of commodities that forms a reliable
picture of prices between countries.
Enter the United Nations. In the 1950s and 1960s, the UN participated
in developing a System of National Accounts (SNA) forming a common basis
by which nations could compile data on their economies. The wellknown
scholar Simon Kuznets was instrumental in this work, receiving an
early Nobel Prize in economics. The SNA format for national accounting is
now used by most UN members. While standardizing pictures of national
economies at a point in time, SNA does not by itself readily facilitate crosscountry
comparisons. To accomplish this, more detailed purchasing and
pricing correlations between states are needed.
In 1968 the UN and the University of Pennsylvania, with funding from
the Ford Foundation and the World Bank, set up the International Comparison
Program (ICP) to facilitate purchasing power measurements. Benchmark
price data have since been collected in 10 countries in 1970, 34
countries in 1975, 60 countries in 1980, 65 countries in 1985, and 117
countries in 1993/1996. A survey begun in 2004 will cover even more countries.
Indices based on assembled price information are then applied to each
country’s standardized SNA accounts, in order to come up with valid estimates
of GNP and GDP and details on the composition of national income.
Reams of data emerging from these studies have been extremely useful in analyzing
income, growth, poverty, and inequality within individual countries,
regionally, and globally.
The data are also controversial and subject to widely varying interpretations.
A basic criticism is that the ICP’s collection of price data is primarily
designed to fit into the SNA. This serves the purpose of measuring GDP in
terms of purchasing power parity. It does not serve particularly well to measure
poverty and inequality within a country or globally. To accomplish this
effectively would require a different survey with a different set of questions,
not to mention additional funding.
As recently as 1995, an IMF working paper concluded the following:
“[B]ecause of unresolved data and methodological issues, the use of PPPadjusted
estimates would seem inappropriate for the Fund’s operational
purposes at this time. Although it is generally agreed that PPP rates are appropriate
conversion factors from a conceptual viewpoint, their practical
implementation has been hampered by the uneven quality of the PPP indices
currently available.” 7 While improvements in coverage of countries