So McDonalds is bigger than Rhode Island, is it?

We are, of course, supposed to react in horror to this factoid as presented:

These days burger giant McDonald’s – surely the country’s most famous export – contributes as much to America’s GDP as the entire state of Rhode Island.

Umm, well, yes.

There are always problems when people try to compare the GDP or GVA of an area - the value added in it - with a company. All too many think that the turnover of the company is the equivalent of the GDP (or GVA). Which, of course, it isn’t. The most useful little rule of thumb would equate the profits plus the wages paid by the company to the GDP (or GVA) of an area. For we can indeed measure GDP (or GVA and let’s stop doing that) by incomes.

But even then. Rhode Island appears to have a GDP of $63 billion or so. McDonalds a turnover - the thing we shouldn’t use - of $25 billion. But that’s not what people really mean - Maccy D’s is a franchise operation, so perhaps we should include the turnover - or the wages and profits - of the franchisees and, OK, perhaps we’re getting to about the same number.

But then why wouldn’t this be true? Rhode Island is 1.1 million people. Of whom about 50% work - yes, yes, 70% and more of working age population work, add retirees and children and half of all isn’t far off - and McDonalds is 1.7 million workers (including all those in the franchisees).

We’d expect 1.7 million workers to have a higher gross value add than 550,000, wouldn’t we? Even, we’d hope they would?

Also, perhaps we’d expect feeding 70 million people a day in 119 countries to have more value add than a city the size of Birmingham (which is about what Rhode Island is, even if that is a state)?

But, still, we’re supposed to be going “Eeeew!” Because as the headline says “The Americanisation of” and that’s just not polite, is it? anything American.

It’s as if feeding the world a nutritious and balanced diet of bread, beef, cheese and salad is an activity that has something wrong with it.

Tim Worstall