Satellite pictures shine light on the nations that inflate their GDP
Atweet from the author Nassim Nicholas Taleb caught my eye last week. Amid the merrygo-round of prime ministers, he told us all to “stop complaining about the turnover in Britain”. It caught my eye partly because I’d done some complaining myself in last week’s column. His argument was that it’s good that such fast turnover can happen and definitely preferable to “other nations that have NO turnover”, ie Russia and Saudi Arabia.
The tweet prompted two reactions. The first and strongest was that, just maybe, we don’t face a binary choice between dictatorship and the recent chaos. But, second, that it’s always good to be reminded of the benefits of our democracy. Being able to dispense swiftly with leaders making big mistakes is important, as a US stuck with Trump for four years demonstrated. And there are some specific advantages for us economic researchers.
Taleb’s rant reminded me of a paper that quantified the extent to which GDP statistics have been manipulated in authoritarian regimes and democracies. The author examined the relationship between night-time light emissions (a proxy for economic progress that is independently measurable from satellites) and reported economic growth. The less democratic a country, the greater the GDP growth reported for a given increase in light, ie the more the stats got inflated. The author argues this could mean GDP growth rates being inflated by 15%-30% in the most authoritarian regimes.
Further evidence comes with the finding that the overstatement of growth is greatest in periods of low growth and before elections. So here’s something to be thankful for – at least in Britain we can honestly measure the economic disaster of the past 15 years.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org