Math Debaters

After my dad blew up a part of the chemistry lab at George Washington University way, way back… a long, long time ago, he stepped into what he thought was a safer major: statistics. But in mind mind’s eye, blowing stuff up with explosive chemicals seems to be whole lot less destructive than manipulating and messin’ with statistics, knowing that millions (or more) of people will plan their retirements, nations their budgetary spending policies and multinational organizations will rely on those numbers to accept or reject massive financial commitments based on the resulting projections. Sometimes, statistics can just kill you.

In 1957, China’s Mao Zedong began his infamous Great Leap Forward program, a national call to action enforcing massive collectivization and widely dispersed steel manufacturing (melting down everything in sight to fuel backyard smelters that produced exceptionally low-quality steel). Communist cadres in the field outdid themselves in promising humongous (and statistically-projected) yields from these collective farms. Beijing only asked for one third of the output for national needs, allowing two-thirds to remain behind to feed and care for the workers and other locals responsible for the food production.

Only one little tiny catch: seeking stature in the Communist Party, these cadres over-projected what they could deliver, and even when the farms produce abysmal yields, their statistical reports continued to overstate yields, sometimes by more than 200%. But Beijing had to receive the promised “one-third” or the cadres would have failed to meet their quotas. Trains carried the foodstuffs away to Beijing as “projected.” The result? “No one is sure exactly how many people perished as a result of the spreading hunger. By comparing the number of deaths that could be expected under normal conditions with the number that occurred during the period of the Great Leap famine, scholars have estimated that somewhere between 16.5 million and 40 million people died before the experiment came to an end in 1961, making the Great Leap famine the largest in world history.” The University of Chicago Chronicle, Vol. 15, No. 13, March 14, 1996

And how about this one in our modern era: “Greece has admitted it joined the euro in 2001 on the basis of figures that showed its budget deficit to be much lower than it really was… Eurozone states are expected to have deficits below 3% of gross domestic product but revised data show Greece has exceeded that limit since 1999.” BBC.com, November 14, 2004. That is putting it mildly. Not that this was an accident, mind you; it appears that with some seriously professional help from Wall Street, Greece knowingly manipulated their national economic statistics for a very long time. The alleged culprit? “Goldman Sachs is reported to have systematically helped the Greek government mask the true facts concerning its national debt between the years 1998 and 2009. In September 2009, Goldman Sachs, among others, created a special credit default swap (CDS) index to cover of high risk of Greece's national debt.” Wikipedia. Clearly, Greece’ participation in the euro zone has been one of the major factors in the European debt crisis that threatens to reignite the global recession.

Back to the PRC in today’s world: China is clearly the second major economic power on earth, behind the United States, and while her per capita pales by comparison to the older industrial powers, the rise and fall of China’s economy has a major impact on global growth and economic resiliency. While China has downgraded its projected growth for 2012 from an initial forecast of over 9% to a little over 8% and now to 7.7%, are these really the numbers? “As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.

“Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said… Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.” New York Times, June 22^nd. How much of this rises to the level of criminal fraud? How much of this comes from folks not really looking at the basis for the calculations? And how much of this just falls into that human frailty we call bragging?

I’m Peter Dekom, and the most dangerous human beings in the world just might be politicians with a whole host of statistics to justify their cause.