Whenever the U.S. Commerce Department or Labor Department comes out with some better-than-expected economic number, I am sure to get a few comments\emails\tweets accusing Washington of fudging the data like Greek bureaucrats. I am, to say the least, skeptical of such accusations.
But perhaps I shouldn’t be. Maybe even governments of leading economies shade the numbers. A former editor at Forbes and the Financial Times contends Toyko has been lying for years about the strength of the Japanese economy … and this is the really weird part .. to make it seen weaker than it really is. (Efharisto to Kevin Drum at Mother Jones for this.) Here’s a bit of Eamonn Fingleton’s evidence:
One of the key contradictions that must be addressed is the evidence of electricity statistics. In 2007 it was discovered that the long-term record in electricity output completely gainsaid the “lost decades” story. Adjusted to a per-capita basis, the figures showed that Japan’s electricity output in the 1990s rose 2.7 times faster than America’s! And Japan continued to outperform in the new century. As you know, electricity output is widely accepted as an impartial, culture-neutral proxy for economic growth and it is indeed relied on by international organizations such as the IMF and World Bank when a government may not be following international accounting standards in calculating GDP growth.
And his theory of the case:
For those who know Japanese history, a clue lies in trade policy. The fact is that, constantly since the 1870s (with the exception of a brief interlude in the late 1930s and early 1940s), Japan’s pre-eminent policy objective has been to keep ramping up exports. That policy came very close to derailment in the late 1980s as a groundswell of opposition built up in the West. By the early 1990s, however, the opposition had largely evaporated as news of the crash led Western policymakers to pity rather than fear the “humbled juggernaut.” It is a short jump from this to the conclusion that Japanese officials have decided to put a negative spin on much of the economic news ever since.
I have no idea if Fingleton’s right, none at all. But if he is, that means the Japanese economy could be nearly a third bigger than what official statistics show. Japan has a roughly $5.5 trillion economy. Let’s say it is actually a quarter bigger, or $1.4 trillion. To put that number in perspective, $1.4 trillion is like adding another Russia or Spain or Australia to Japan’s official GDP. Is Japan hiding a Spain? Drum adds some context:
On the other hand, if Japan really has been manipulating its official statistics for two decades, this is one of the biggest, most complex conspiracies in history to stay secret for so long. By now, it would amount to something like a 20-30% cumulative difference between reported GDP and actual GDP, which would be damn hard for the rest of the world not to notice, and it would require the active collusion and silence of thousands and thousands of bureaucrats with not so much as a single leak over the course of 20 years.
Big claims require big evidence. But a fascinating topic for a slow news week.
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