Publication: Monitor Volume: 3 Issue: 221

It is widely assumed that, with the collapse of central planning, the padding and manipulation of economic statistics is a thing of the past. Alas, that is far from the case, according to World Bank economists Misha Belkindas and Olga Ivanova, who spoke at the annual conference of the American Association for the Advancement of Slavic Studies in Seattle on November 22.

In some respects, the statistics available today from the State Statistics Committee (Goskomstat) are even less reliable than in the Soviet era. Dr. Ivanova noted that the statistical agencies in Russia and most of the other new states still use the same national income accounts as in Soviet times. They have not adapted their categories to reflect the standard practices of Western market economies. Industrial producers supply gross output data, measured in physical terms, with no effort to calculate value added (that is, allowing for changes in inputs). These gross output figures from different sectors are then aggregated using highly dubious relative prices, to come up with composite figures for national production. For example, different types of farm crops are counted up in tons and then added together using the relative price indices that were fixed for the entire USSR as of 1983! No allowance is made for the difference between output and sales, or changes in stocks. About one-third to one-half of economic activity is hidden from the statisticians, and even some major plants appear to have simply disappeared from the data reporting exercise.

In the past, there were incentives for managers to over-report output (to win plan bonuses). Now, the main incentive is for firms to under-report output (to evade taxes). However, it still pays for some managers to over-report output — to help get bank loans, for example. Similarly, loss-making firms that are not paying taxes will tend to over-report in order to show how important their factory is, in an effort to win more subsidies from the center. No one can be sure in which direction the cheating is taking place. Economist Alec Nove used to argue of the Soviet system that one could at least assume the rate of cheating does not change over time. However, the wrenching transformations of market reform make obsolete this "law of equal cheating." Still, Ivanova concluded that "cheating is peanuts compared with the gross mistakes done in collecting the data."

It took two or three years for Goskomstat to come up with reasonable deflators to allow for price inflation, which meant that the huge reported GDP drop in 1991-93 was exaggerated. But nobody can say by how much. Dr. Ivanova was skeptical about analysts who try to use raw electricity output to "correct" the GDP data. Despite the comforting image of men in white coats watching dials, electricity output data is in reality hardly more accurate than any other data being reported to Goskomstat. The household surveys that Goskomstat conducts are equally unreliable: data on investment, government spending, and foreign trade are even less trustworthy. According to Dr. Belkindas, only a handful of countries (such as Lithuania and Armenia) have adopted new economic categories and more reliable survey methods. It is not really in the interests of any government in the region to spend money on collecting accurate economic statistics: they prefer to pretend not to know what is happening.

Macroeconomic data are compiled by Goskomstat only for the purposes of reporting to international financial agencies, and are not based on systematic collection of economic data. Dr. Ivanova suggested that, while the IMF is fond of publishing "official statistics," it is often not able to produce detailed breakdowns to show where its numbers came from. All of this makes the hoopla generated by a reported 0.2 percent rise in Russian GDP in the first nine months of this year a little dubious.

The bottom line? After six years of market transition, the former Soviet economies still do not have a bottom line. Anybody who makes confident assertions about whether the Russian economy is rising or falling is indulging in a leap of faith.

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