As a means to an end, GDP has never been short of criticism. It has always been a political invention to serve the interests of governance. Its principal components are assessments of consumer purchases, business investment, government spending and net exports. These are made by statisticians who ignore the grey economy of cash transactions. Consequently, GDP scores highly when used as a factor for measuring the financial health and growth of industry but is low when the social health of the community is considered.

Values which should be attributed to activities such as housework, the care of children and the incapacitated, casual employment and the pursuit of culture are important for calculating the worth of societal development. This silent sector cannot be accurately calculated but its exclusion from GDP could be fairly represented as being in the region of 25% of all human economic activity.

The balance of statistical information available for the calculation of GDP has been drastically altered in the 21st century by the exponential growth in the use of crypto currency for blockchain transactions. Although movements may still be recorded in public ledgers, such “pseudonymous” activity is a boon for the concealment of gains from criminal activities, gambling and secretive operations where there is an intention to reduce or negate liability for the payment of taxes.

However, this evasion is small in comparison to the amount by which the profitable income from the digital economy is being distorted on a global scale to deprive host countries from accurate assessments of revenue produced within their sovereignty.

The demise of geographical borders for industry can be directly attributed to the growth of Cloud computing which places its Intellectual Property assets (such as data bases, AI algorithms and proprietary software) in an environment which is without physical definition. Multinational companies can with a click transfer their ownership of IP to jurisdictions which have low-tax, unregulated economies. Subsidiaries can then invoice massive licensing fees for the use of Cloud software in the host countries which have aided the infrastructure for data centres, fibre optic cable links and necessary hardware.

In the early stages for the development of a digital industry, national GDP is boosted because practically all of such hardware needs to be imported and is thus registered at Customs control. Additionally, this applies to replacement for machinery such as Nvidia Blackwell processors, chips and servers which have a notoriously short service life of three to five years. VAT is also generated by construction of local supportive amenities, connection to the grid for power and water-cooling devices.

However, once these have been completed and the digital cuckoo has settled comfortably in its cyber-nest, taxable income for the hosting nations from the investment in capital assets dwindles until it becomes almost negligible.

By the end of the 20th century, the OECD had persudaded its 35 member countries and 85 associates to adopt various indexes and measures to correct the anomalies caused by the grey economy in the calculation of conventional GDP. This august body has also achieved limited success in relation to the encroachment of crypto currencies into financial transactions.

However, with the sudden advent of AI as the dominant factor in global economics, the OECD shows little sign of being able to cope with the new regime which has been introduced by the “magnificent seven” U.S. corporations. These boast a present valuation of US$ 37 trillion and a combined power to dictate the Way to Financial Stardom (or Oblivion).

The problem is paradoxical. The OECD is using all the skills of its economists, and their AI assistants, to define new locations for market jurisdiction where a minimum global tax rate of 15% will apply. However, the seven cyber masters are developing a superior form of AI which will be able to defeat any such endeavours to regulate their autonomous activity or to tax the new economy which they have created.

Ireland is often compared to Portugal as being a digital gateway to a new European economy which is being reorganised to meet the exigencies of AI in its promised superior form. In this 21st century, the Irish initiative captured the interest of Google, Apple, Meta and Microsoft in establishing their European headquarters for the importation and distribution of IP assets within the EU.

Initially, massive US$ investment was made in infrastructure such as data centres and housing but the resultant income from the export of financial services and intangible IP within the EU was largely invoiced through off-shore centres which offered even lower rates of tax than the Irish 12.5%. The resultant prosperity boosted the U.S. investors wallets but very little trickled back to Irish citizens who had partly funded through their taxes a phantom increase of around 40% in economic output.

The Portuguese strategy has learned something from the Irish example. Instead of surrendering sovereignty by becoming a digital colony which serves largely as an administration centre for American foreign investment, Portugal focuses on the physical side of building irremovable infrastructure on its soil. It will rely on the EU´s NIS2 directive operating through the National Cybersecurity Centre to impose conditions for auditing the tech titans intention of monopolising European digital markets.

In this, European authority will be challenged by the colossal American apparatus which well knows how to adapt the bureaucratic systems of individual nations by using sophisticated networking techniques and massive capital resources to exploit the weaknesses of the public sector and thus achieve its economic aims.

European Unity is fragile; threats to its economy are growing due to the global fragmentation of old alliances and the creation of new allegiances to control vital resources. These factors prevent the realistic assessment of GDP as a guide to the economic health of a world already beset by the perils of a rapidly changing climate.