Submitted by Taps Coogan on the 8th on January 2020 to The Sounding Line.
Enjoy The Sounding Line? Click here to subscribe.
Want to boost your country’s official growth statistics like China? Here are the three basic steps that you can take to claim that your economy is growing at break neck speeds when it is really not.
1.) Game the Calculation
Let’s say that you are the governor of a Chinese province with a GDP growth target of 6% and let’s imagine that your provincial growth rate is currently running below that figure. How do you get it to 6%?
Simplified, GDP is calculated as the sum of consumer spending, business investment, government spending (excluding transfer payments), and net exports. So, if GDP is coming in low, the government can simply build a building, bridge, or train to somewhere (or nowhere) in order to boost GDP. As long as you build something, it counts towards GDP. You’ve probably heard of China’s numerous ‘ghost cities,’ many of which are now crumbling and still very much empty. However, you may not have heard of it’s various unused mega-bridges or how it sends empty cargo trains on its ‘Belt and Road’ network in order to create fake rail traffic.
The other way that you can game the GDP calculation is by incentivizing a trade surplus. This can be done by imposing high import tariffs on your major trading partners (before the trade war started China’s imports tariffs on the US were over twice US tariffs on China). If sufficient cheap labor becomes a problem, turn to your prison population for cheap labor. If the prison population is not large enough, take a page out of China’s playbook and try sending millions of religious and ethnic minorities to work camps.
2.) Round Up
Economists have long noted that China’s official GDP numbers rarely agree with the sum of the components of Chinese GDP or the sum of China’s various provinces. In other words, once you are done gaming the GDP calculation as much as you can, round the resulting number to whatever you want it to be and claim that you were simply reconciling inaccurate regional figures or inflation measures. At the end of the day, people will use the official figure, even if they know that it is wildly wrong, because it is the official figure.
3.) Underestimate Your Past
According to official Chinese GDP figures, China was the 12th poorest country in the entire world in 1980 (per capita GDP). China claims that it’s per capita GDP was less than that of Burkino Faso, Malawi, Laos, Angola, a third lower than that of Sudan, and 78% lower than that of Papua New Guinea. While China was undoubtedly very, very poor in 1980, it probably wasn’t vying with Sub-Saharan countries in the midst civil wars for the title of poorest country on the planet.
The difference that underestimating the past makes is massive. According to China’s official numbers, it’s per capita GDP has increased 4,687% since 1980, the second biggest increase in the world (after the Maldives). If however, China was only as poor as neighboring Laos in 1980, its growth number since 1980 plunges by more than half. Put differently, half of China’s growth (in percentage terms) in the last 40 year can be explained by getting to the level of poverty of Laos in 1980.
Despite the reportedly breakneck pace of China’s economic growth, it’s per capita GDP is barely above the global average and it’s dollar value increase in per capita GDP since 1980 is actually lower than the average in East Asia. Indeed, China neighbors two formerly autocratic countries which have become wildly more wealthy than China on a per capita basis in the last 40 years: Taiwan and South Korea. We don’t hear about the Taiwanese economic miracle for a number of reasons, not the least of which is that Taiwan doesn’t claim to have been the poorest country on Planet Earth 40 years ago. Nonetheless, Taiwan’s GDP per capita has increased by over $29,000 per person since 1980, compared to China’s $14,500 per person.
Using these three steps: gaming the GDP calculation, rounding the resulting figure to whatever you want it to be, and overstating your past poverty, any country can claim to have experienced the greatest economic miracle in the history of humanity while simultaneously barely achieving world average GDP per capita levels.
Would you like to be notified when we publish a new article on The Sounding Line? Click here to subscribe for free.