Damned Lies And Statistics

Damned Lies and Statistics Official government statistical agencies are akin to the ratings agencies. They have their own version of Triple A ratings as published in their monthly digest of statistics; however, these statistics are political constructions with only tenuous connexions to the real world, writes Frank Lee. Over the tannoy system came the latest announcement from the Ministry of Plenty (miniplenty). The chocolate ration was to be raised from 30 grammes to 20 grammes a week. (George Orwell - 1984) The notion that permanent state institutions - e.g., the judiciary, Bank of England and various statistical agencies - are somehow immune from and above political manipulation is sadly misguided. Those state departments who are charged with collecting and collating politically sensitive data form a new template for contemporary practise. The compilation of economics statistics underwent a profound change when the way that unemployment was measured changed in 1982. A re-definition of unemployment resulted in a fall in unemployment statistics; but this was not the same as changes in the real level unemployment. It simply resulted from the way in which unemployment was measured. Most governments are keen to minimise the appearance of unemployment, not only for political reasons but also for the economic signals it sends out. Over the last 25 years, numerous revisions to the official definition of "unemployment" have been made, which have almost universally revised it downwards. Labour frequently accused the Conservatives during the 1980s of moving unemployed people on to sickness benefits - classifying them as economically inactive rather than unemployed - as a strategy for cutting the unemployment figure. One Tory wet, Sir Iain Gilmour, then a member of Mrs T's cabinet, made the sarcastic comment, that 'now we have succeeded in lowering the unemployment figures perhaps we can now make a start on reducing unemployment.' He was duly sacked from his Cabinet position. More recently the definition of unemployment has, again for reasons of political expediency, undergone change. One of the current wheezes of statistical manipulation in this area is to count part-time jobs - even zero contract hours - as full time jobs. It should be understood that there are some 8 million of these workers most of whom would like full-time jobs, but sufficient full-time jobs are not available. These workers belong to the reserve army of the 'hidden' unemployed, along with seasonal and temporary workers, both of which tend to drift in and out of work. Additionally, 2.26 million people of the 9 million currently deemed 'economically inactive' have told the Office of National Statistics they would like a job, but are not counted in the official unemployment figures either because they have not looked for work in the last four weeks, or would not be available to start work immediately. But of course it is the 'headline' figures which count and which get prime exposure - figures moreover which are regarded by nearly all media commentators as being beyond dispute. On the other side of the pond The US Bureau of Labor Statistics (BLS) is, if anything, even more adept at its own version of objectivity. Headline figures for US unemployment are currently 7.6% in 2013, compared to a figure in excess of 10% at the nadir of the great depression (2008/2009) which stood at more than 10%. It is commonly believed that this figure is an objective assessment of the level of unemployment in the US -even on the left - and shows what a good job President Obama and Mr Bernanke (chairman of the Fed) are doing. Or so we are led to believe. However, there are no less than six ways that unemployment in the US is actually measured. These methods are arranged from the least inclusive (U1) to the most inclusive (U6) calibrations. The US government's favoured measurement is U3, 'based upon total unemployment as a % of the labor force' the figure comes out as 7.6%. However, U6 which is total unemployed plus 'all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force, plus all persons marginally attached to the labor force.' Further the BLS states. 'Persons marginally attached to the labor force are those who currently are neither working nor looking for work, but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data. ' If these 'dead souls' are included then the actual unemployment rate in the US as of May 2013 is 13.8% (BLS figures) of the total workforce. In this way in vast swathes of the unemployed are simply disappeared off the official statistics by definitional fiat. It is a fact that US unemployment is falling not because of the creation of new jobs, but due to workers dropping out of the labour market. Now we have the Orwellian situation where both labour force participation (that is numbers of the US labour force in work) and the figures for unemployment are both said to be falling at the same time. That's going to take some Jesuitical reasoning, but, hey, it's not going to stop them trying. Better get the boys from the Ministry of Truth (minitru) on the case! It is the same with inflation. In the UK the calculation of inflation changed with the introduction of Consumer Price Index (CPI) for the older measure of Retail Price Index (RPI). Predictably this change, brought in by Gordon Brown, led immediately to a fall in the rate of inflation. Without going into the tedious minutiae we can summarise as follows: The best known coverage difference is that the CPI excludes most owner occupier housing costs while the RPI includes mortgage interest payments and house depreciation. But this is not the only factor. Council tax, vehicle excise duty, TV licences are among elements excluded from the CPI which also includes spending by overseas residents while visiting the UK. The result of this, since CPI was introduced 15 or so years ago, has been a cumulative inflation rate since 1996 is 53.6% (RPI) while that for CPI is 35.6% 2. A notional private pensioner who retired in 1996 and whose pension had been uplifted by RPI would today be 13% better off than a notional person starting on a similar pension uplifted by CPI. What amounts to an ongoing reduction in the incomes of those on pensions, benefits, and now wages, is now exacerbated further by these income groups' increases not even matching the fraudulent CPI inflation figure. The BLS is even more blatant in its manipulation of what it is won't to call 'core inflation'. At the present time this is estimated to be slightly less than 2%. However this figure excludes both fuel and food costs - both big items in American household expenditure. There are also various other scams used to reduce the inflation figure: hedonic pricing, cost of living index, substitution effects, and so forth. Suffice it to say these changes have, just like the UK figures, attracted a lot of controversy. Critics like John Williams, Shadow Government Statistics and US economist David Ranson argue that real inflation in the US is somewhere between 5 and 8% annually. But one characteristic at least seems fixed: every time a new definition is used the inflation figures go down. As with unemployment inflation is whisked away by changes in definition. It is not beyond the wit of these people to change the definition to exclude all items which rise in price. And this brings us on to the next item: GDP growth. GDP growth measures the increase (in expenditure terms) of the level and size of an economy over a given period: usually quarterly or annually. But this growth has to be adjusted for inflation. All investment and consumption expenditures are aggregated into one figure called GDP. If this figure is larger from one time period to the next then economic growth has taken place. Care must be taken to exclude inflationary increases. Inflationary price increases are not real growth and have to be excluded from the calculations. This is carried out by a deflator. Growth is adjusted for inflation and the real figure for growth established. The CPI plays a role in the determination of the real GDP; therefore, manipulation of the CPI could imply manipulation of the GDP because the CPI is used to deflate some of the nominal GDP components for the effects of inflation. CPI and GDP have an inverse relationship, so a lower CPI - and its inverse effect on GDP - could suggest to investors that the economy is stronger and healthier than it really is. In short: Under-estimated inflation figures lead to over-estimated GDP growth figures. Of course this was precisely the method of statistical compilation used by GOSPLAN the Soviet economic statistical service, which was basically a type of mass propaganda, but now nominally democratic governments seem to be countenancing the same approach. And for its part, the media, with some noble exceptions, is taking all the official bullshit figures at face value, and going along with this mass deception. The fact that so many otherwise intelligent people in positions of power and responsibility seem unable or unwilling to challenge the spurious orthodoxies of officialdom and the ubiquitous corporate culture represents a sad state of affairs in western civilization. Once described as the Trahison de Clercs the great counter-revolution of the late 70s seems to have insinuated its way into the ideological bone-marrow of our political and cultural elite. ''Where is the intelligentsia that is carrying on the big discourse of the western world and whose work as intellectuals is influential among parties and publics and relevant to the great decisions of our time? Where are the mass media open to such men? Where are those who are in charge of the two-party state and its ferocious military machine are alert to what goes on in the world of knowledge and reason and sensibility? Why is the free intellect so divorced from decisions of power? Why does there now prevail among the men of power such a higher and irresponsible ignorance?'' (C Wright Mills - The Sociological Imagination) Where and why indeed.