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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Tightrope Walking Masked by Statistics

23 March, 1999 - 00:00

What was the real GDP fall last year?

By Viktor PETROV, former People's Deputy of Ukraine
More and more our fellow countrymen have become interested in statistics,
hoping to understand what tomorrow has in store for them.

One can immediately notice that with every year statistical materials
decrease in volume, important sections disappear, and incompatible figures
are presented.

Analysis of such an aggregate index as the volume of the real GDP (gross
domestic product) evokes sad thoughts. As is widely known, in any country
the absence of GDP growth, to say nothing of its fall, would cause great
concern, but not here. They present the GDP drop by 1.7% in 1998 almost
as an achievement, and the best index in the years of independent Ukraine's
existence. Hence, they conclude that there are positive trends in the development
of the nation's economy. Let us just analyze the GDP structure. Comparing
the data for 1997, when GDP fell by 3.2%, to the data for last year, a
question arises: how can this be so with constituents of the GDP substantially
worse last year?

Compare changes in GDP structure (% of the previous year):

 1997 1998

Industrial production -1.8 -1.5

Agricultural production -1.9 -8

Revenues -1.8 -30

Exports +1.9 -13

Imports -1.5 -15

Real individual incomes +8.8 -4.7

In addition, a substantial share of products made were never sold, arrears
of wages and pensions, and amounts overdue to the state budget grew. Without
questioning the qualifications of the authors of the calculations, one
could well ask them about their methodology. In fact, the result is that
white begins to look black.

Obviously, our statistics intentionally suppress such important indices
of public welfare as the ratio between the income and the cost of a minimal
package of goods and services, as well as food product consumption per
capita, and the provision of families with domestic appliances. If earlier
statistical reviews contained data on important goods expressed in units
and tons, the new ones mostly present relative figures - this makes it
easier to mask its utterly dismal character. For instance, what a pleasure
it is to write that car production has risen 13 times! But will there be
much of this optimistic reference left after you tell the reader that back
in 1993, 150,000 cars were produced, and last year ten times fewer. And
even half of those cars were not sold.

Our anonymous statisticians put all their effort into finding what does
not exist: positive trends. That's why the reviews contain glowing reports
on such achievements as shampoo production growth without a single word
on the dramatic fall in the technological level of production and catastrophic
obsolescence of fixed assets in the key high-tech sectors. Once the truth
is revealed, the price of declarations about the prospects of stabilization
and growth become obvious.

Despite all the attempts, it is impossible to conceal the actual economic
degradation. And one should not try to convince oneself and others that
slowing down the decline (and according to individual indices at that)
is a sign of growth. The issue is that all this develops according to typical
mathematical laws of the extinction of processes, and in the existing system
of economic coordinates this trend cannot be stopped with discredited methods.
The same can be said of the popular references to the world and Russian
crises as the cause of our failures. No, gentlemen: without understanding
our own fatal miscalculations it is not worth even hoping that the situation
will somewhat improve, either this year or in the period up to 2010.

 

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