WASHINGTON – Newly elected Argentine President Mauricio Macri wasted no time to create a new, pro-growth business climate. He immediately abolished foreign exchange controls, and took other measures to inspire confidence among business leaders. The era of price controls, exports controls, and other types of government mandated economic manipulation is over.
Produce reliable statistics
Obviously this is not enough to turn a battered Argentine economy around. But it is a start. At the very least, from now on business people will respond to real market incentives, and not to government orders and threatened sanctions.
Interestingly enough, one of the key early targets of Macri’s reform campaign is Indec, the national statistic agency. And why is that? Because under President Cristina Fernandez Indec had become an instrument of state power. Far from gathering and publishing real economic data, Indec was ordered to publish only sanitized figures that would show a prosperous economy, low inflation, and so on.
We know now that Indec managers who refused to publish false data were harassed, humiliated and fired. The others got the message and complied with government wishes.
Now President Macri stated the goal to recreate independence, professionalism and credibility at Indec. And for good reasons. In a modern, market driven capitalistic economy business people, workers and policy makers as a minimum have to be able to rely on real data. Real facts about economic trends will influence critical decisions about investments, hiring workers, buying and selling assets.
A bigger story
That said, the Argentine example of exposed manipulation for political purposes tells us a bigger story. Certainly the former Peronist government is not an isolated case. We can rest assured that all dictatorship and authoritarian states, from China to Russia, publish doctored economic data. And they do this for exactly the same reasons that drove the Peronists in Argentina. They want “positive facts” that show how successful their enlightened policies really are.
And even when negative trends cannot be hidden, (witness Russia and China today), at least the extent of a down turn can be minimized. For these reasons, we can rest assured that all statistics about GDP growth, per capita GDP, industrial output, unemployment, income growth, and more produced by authoritarian governments are false or at least distorted.
Passive Western media
And yet Western media in most cases report official data released by these governments without any commentary, this way implicitly endorsing the truthfulness of these doctored figures.
For instance we constantly read that China’s slowdown has reduced GDP growth to 6.9% in 2015. Well, the calculations produced by most Western private economic forecasting companies indicate that real GDP growth is much lower: probably between 4% and 6%. This is a huge difference. And yet in most cases this discrepancy is not reported by Western media. They usually quote only the official figures.
Translation: because of their monopoly on official information gathering and distribution, the autocracies still win. Thanks to Western media passivity, their propaganda becomes reliable information.
The critical importance of real data
True capitalism needs a lot of things in order to succeed. But for sure those who operate in the market place as a minimum need to know what’s going on. If they are fed distorted or completely false data, they cannot make intelligent business decisions. The same applies to policy-makers.
Defend integrity, expose manipulation
So, here are two lessons. Number one: in a true market-oriented democracy the independence and professionalism of all public entities that produce official economic statistics has to be upheld and protected. Number two: all official economic data produced by autocratic governments has to be openly dismissed by Western media as self-serving propaganda.
De facto dictatorships should not be allowed to get away with lies.