Gross domestic product (GDP) is a commonly used go-to metric for comparing the size of national economies. Defined as the total value of goods and services produced within a country over a specific period of time —typically a year, GDP offers a snapshot of an economy’s size and opportunity for international comparisons. In this regard, the U.S. has long been a leader, consistently followed by China. Rounding out the top five economies[1] in 2023 are Germany, Japan, and India, each demonstrating comparable performance.
At first glance, these numbers seem to offer a clear ranking of economic power. But does a higher GDP automatically mean a stronger, more efficient economy? Is the U.S. economy inherently “better” than China’s? Is Germany outperforming India?
A closer examination of GDP reveals a more complex reality. While this widely used metric measures the total value of goods and services produced within a country, it does not account for population size. Take China and India, for instance. With populations exceeding 1.4 billion each, [2] their economies produce significantly less than the U.S. with a population of just 335 million. Specifically, China’s GDP (in current US$) is about 1.6 times smaller than that of the U.S., while India’s is 7.7 times smaller.
Source: The World bank
At the same time, another situation may be observed in the South Caucasus: Azerbaijan’s total GDP, as well as its population number is significantly higher than that of Armenia and Georgia. However, when adjusted for population size, a different picture emerges.
Here comes GDP per capita - a more telling measure of economic performance. Despite leading in overall GDP and population, Azerbaijan, for example, stays close to its neighbors when measured on a per capita basis. If we look at that indicator, the U.S. is far from being the global leader. Interestingly, India, despite ranking as the world’s fifth-largest economy, has a GDP per capita of just $2,480 [3]—far lower than that of Armenia ($8,053), Azerbaijan ($7,125), and Georgia ($8,283). Furthermore, China’s GDP per capita is only about 50% higher than in the South Caucasus countries.
In a word, these figures underscore the importance of looking beyond GDP alone to truly understand economic realities.
Source: The World bank
GDP per capita offers a more refined perspective on economic performance, moving beyond raw output to provide qualitative insights into productivity. If India, a country with 4 times more population resources than the U.S., generates 7.7 times less output, it signals inefficiencies within the system. In other words, size alone does not guarantee economic strength—what truly matters is how effectively an economy utilizes its resources.
Nevertheless, while GDP per capita allows for more meaningful comparisons between economies, it comes with its own limitations. Since this metric is typically expressed in U.S. dollars for international comparisons, it is partially influenced by exchange rate fluctuations, which can distort the true picture of living standards and economic capacity. Hence, to gain a deeper and more accurate understanding, it is essential to consider GDP per capita adjusted for purchasing power parity (PPP), which accounts for differences in price levels across countries. This approach provides a more realistic measure of economic well-being and productivity, allowing for a fairer comparison between nations.
When viewed through the lens of PPP, the economic landscape becomes even more intriguing. The three relatively small economies of the South Caucasus—oil-rich Azerbaijan, with a population of just over 10 million, landlocked Armenia, home to about 3 million, and Georgia with about 4 million populations—demonstrate a level of economic performance comparable to China, the world’s second-largest economy, and outperform India, the world’s fifth-largest economy.
Source: The World bank
This underscores a fundamental truth: the size of an economy alone is not what defines its strength—productivity does. Productivity measures the efficiency with which inputs, such as labor, capital and technologies, are converted into economic output. In the end, a country’s true economic standing is not about how much it produces in absolute terms, but how effectively it utilizes its resources to generate wealth and improve living standards.
Although to compare labor productivity GDP per capita is often used as a measure,[4] more precise productivity indicators are GDP per person employed and GDP per hour worked.[5] So, to take a step forward in our analysis, let’s take a look at GDP per hour worked indicator, based on the statistics provided by the International Labor Organization (ILO).[5]
These statistics reveal even more compelling insights. Labor productivity, measured as GDP per hour worked, is higher in the South Caucasus countries than in China and nearly three times higher than in India. Meanwhile, in the United States, this indicator is almost on par with Germany, highlighting similarities between two of the world's most advanced economies.
GDP per hour worked (GDP constant 2021 international $ at PPP) in 2025
Source: ILOSTAT
Of course, labor productivity—and economic efficiency in general—is a highly complex phenomenon influenced by a wide range of factors. It cannot be fully captured through a single metric. However, one fundamental truth remains clear: a larger economy does not automatically equate to a more productive or efficient one, nor does it guarantee greater prosperity for its citizens. To sum up, while GDP remains a widely used metric for comparing national economies, it presents only a partial picture of economic strength and prosperity. A deeper analysis, incorporating GDP per capita and labor productivity, reveals that size alone does not determine economic success. The key takeaway is that true economic strength lies not in absolute GDP figures but in how effectively resources are allocated and utilized. By shifting focus from economic size to productivity and efficiency, a more accurate and meaningful understanding of economic well-being emerges—one that better reflects the prosperity of nations and their citizens.
