The healthy positivist scientific mind prefers to rely on facts, facts, facts – and nothing else. But pure bean-counting is questionable because, especially in economics, it is not certain that the beans being counted even exist. The most primitive form is, of course, the direct falsification of balance sheets, which neither corporations and banks nor governments shy away from, especially in times of crisis, as we have seen again recently. And as far as official statistics are concerned, Churchill famously said that he did not trust any that he himself had not falsified. But the distortion of empirical truth usually goes on quite legally. All that is needed is to change the criteria for collecting the figures.
It was not only in the U.S. that the accounting rules during the financial crisis were designed in such a way that banks could conveniently outsource their toxic paper to so-called special purpose vehicles. What the U.S. economist Roubini called the “shadow banking system” and blamed in part for the crisis was not dismantled, but actually expanded. The same goes for public finances. A considerable mass of debt is hidden in “shadow budgets” that are not accounted for. A similar trick has long been used in unemployment statistics. Every year the methods of recording are reformulated. For example, part of the labor market miracle in the FRG can be attributed to the fact that, as of recently, the unemployed served by private placement agencies are simply no longer counted.
But even if the numbers are correct, they can be colored nicely by interpretation. When it comes to gross domestic product, neither absolute figures nor relative percentages of growth tell us anything if the reference variables are ignored. What matters about growth is the starting point. In Eastern Europe, high growth rates of 7 percent and more have been celebrated. This was accomplished after the collapse of the Eastern Bloc had led to devastating deindustrialization. Moreover, post-crash growth was largely fueled by debt in foreign currencies (euros, dollars, Swiss francs) and is now proving extremely fragile.
The notion of China as a new economic world power is also based on distorted interpretations. The impressive growth rates are not only due to deficit structures (export one-way streets, now credit-financed government programs), but also to a low starting level. Experience shows that growth declines sharply during the transition from extensive to intensive industrialization. Despite the increase, China’s GDP of $4.6 trillion is still far below that of the U.S. and the EU of $14 trillion each, with a much larger share of the world’s population. It is doubtful that China can serve as a global growth engine for the FRG, for example. Here, too, the 1.4 percent growth forecast for this year must be seen in the context of the lower starting level after last year’s 5 percent slump. Everywhere and in every respect, the lazy magic of numbers stands on feet of clay. The apparent facts should be taken with a grain of salt, because ultimately the objective logic of capital valorization cannot be fooled. This was already true of the financial crash of 2008, which was not apparent from the official facts.
Originally published in Neues Deutschland on 07/23/2010
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