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The Chinese Economy Hoax and Other Economists’ Fables

December 18th, 2007 - 10:06 pm

A few years ago, when I was a member of something called “The U.S.-China Strategic Review Commission” (or so I remember it), we issued reports on China’s economy, military strategy, and political situation. In each of the first two such reports (I left the Commission before the third came out, and confess that I haven’t kept up with them) we took pains to state that the “official” data issued by the Chinese Government were totally unreliable. Indeed, we stated explicitly that the numbers were simply made up.

Now the World Bank has issued a dramatic reevaluation of the dimensions of the Chinese economy, and the Bank says that previous estimates overstated the facts by forty percent, which is a hefty number.

Take a look at this excellent editorial from Investor’s Business Daily, while spells it out very clearly, and draws some very important conclusions.

It seems the Bank may have found a reliable metric for measuring the real output of a society, and I wonder if they’ve done the same for countries like Iran and Syria and Saudi Arabia. I’m going to ask them, but you might look around as well. We need what my kids used to call “true facts,” not official numbers, which are sometimes produced on demand to satisfy one audience or another.

Back when I was reporting on Italy–we’re talking mid-seventies–my editor demanded that I get the “real numbers” on the Italian economy, since the “official” numbers showed that Italy was dead on arrival. I told him the Italian economy was fine, based on walking tours of various neighborhoods in Rome, Florence and Bologna. But he wanted numbers. So I visited a friend who was then Minister of Finance, and I explained my mission. He smiled happily and asked me “what numbers would your editor like?”

Ever since, I’ve been touched at the faith people show in official data…

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