GKHAN – Statistical credibility and the government’s reliability

Statistical credibility and the government’s reliabilityRelevant literature on Greeceand#39s economic collapse always refers to statistical credibility as a major cause. According to these sources, Greek officials either distorted economic calculations or they did not publicly report them in time.

On Feb. 3, 2010 the European Commission recommended that the Greek government provide reliable statistics.

In the same report, the commission underlined that andldquoreece has failed in its duty to report reliable budgetary statistics.andrdquoThis is not specific to Greece.

Many countries fail to report credible statistics. For example, a similar debate is taking place in Argentina According to a recent Financial Times report, the Argentinian government has been underreporting inflation figures for years.

In this vein, there are two questions. Why does a government distort statistics? For two reasons: First, to mislead its public.

Though the public doesnand#39t comprise only economics experts, rates of inflation and unemployment are critical barometers by which the average citizen can interpret the economy. By distorting these major economic indicators, the government falsely wins or maintains the trust of the nation, as well as interested parties abroad, mainly foreign investors.

The second question is different: How does a government distort statistics? It happens in two ways, first by simply lying. The second route is more sophisticated.

Governments apparently prefer to use unconventional methods to calculate data such as inflation, while the public expects their economic statistics to be determined using orthodox methodology.So what about Turkey? As in other countries, the Turkish government and its relevant agencies want only to present a positive view of the Turkish economy.

Because of pressure the government applies to the the media, the media cannot report true data More critically, it is argued that Turkey has long employed unorthodox ways of calculating economic statistics. Recent claims that government agencies are deviating from conventional International Labour Organization (ILO) methods of determining unemployment rates is just one example.

Experts also take issue with the governmentand#39s employment of a highly unconventional method of calculating inflation.On the brink of a serious economic crisis, Turkey should be very careful about its statistical credibility.

This is not merely a technical issue. Statistical credibility determines whether the public is informed correctly or not.

Because the government controls the media, most people have very limited information about the economic reality in which they live, while a crucial tenant of the free-market system demands that consumers act on correct, up-to-date information.An equally important problem is the weakening quality of the Turkish government.

The witch-hunt that the government started two years ago has ensured that it is staffed by new employees who are loyal but whose work is of poor quality. One can observe this deterioration on a daily basis in Turkey.

A dramatic example came recently from the Ministry of Foreign Affairs when it issued an announcement seeking to reserve a large swath of airspace over the Aegean Sea for Turkish military maneuvers until the end of the year The Notice to Airmen (NOTAM) was inaertently declared with an inaccurate coordinate, then canceled.This deterioration of our countryand#39s quality is negatively affecting our statistical credibility.

Statistical credibility is now a part of daily debates in Turkey, as the governmentand#39s numbers are no longer believed by a large segment of Turkish society. For example, does anyone really know the exact amount of Turkish foreign exchange reserves? One can easily understand that numbers given to the public by even the most high-ranking Turkish politicians are not correct.

Risking Turkeyand#39s statistical credibility is incredibly dangerous, as it increases the likelihood of economic crisis. It is now clear that a negative economic outlook awaits Turkey, and that unintelligent mistakes accelerate Turkeyand#39s march into darker days.

SOURCE: Today’s Zaman