Year 2007: The Spinning Has Begun

The Barbarian community wishes its readers a belated Happy New Year. We thank our readers for leaving kind comments on this blog and sending us emails of encouragement. We hope to continue to provide you with non-stop entertainment throughout this year.

So, what made 2006 such a special year? The great reservation fiasco? The Bombay bombings? Saddam hanging? Nah. 2006 will always be remembered as a pivotal point in Indian politics. From now on at least part of the debate will focus on or rather has to focus on economic development.

There has been a lot of debate on who gets the credit for India's liberalization. Indeed, the first time India took significant measures was under the Narasimha Rao Government, led by then Finance Minister Manmohan Singh. These changes were hardly deliberate though, the scepter of defaulting on its debt was hanging on India. World Bank was relentless in its threats. Anyway, the reforms did happen, however they did. A lot of credit is due to the NDA regime for not reverting back any of these changes. Think about it, the first reaction of a political party coming to power after ages would be to quickly jump back into a frenzy of populist measures. They did no such thing. Instead, they launched the India Shining campaign which ultimately doomed them.

Three years ago India was "shining" for some. Is it shining for more people today?

So asks the People's paper. Its conclusion?

As Prime Minister Manmohan Singh has gone beyond being a mere economist and so improved the capacity for all of India to shine.

Thankfully, Manmohan Singh hasn't been able to do too much damage. As soon as Congress came to power, they launched an avalanche of "social justice" programs. Congress didn't truly believe in the financial reforms they started. Until now. Already the various Cong mouthpieces have started singing different tunes.

So, we would exercise extreme caution in 2007. Let's take a quick look at how statistics is spun, from the most absurd to the most wily:

The year-end issue of The Economist ran a double feature on happiness. Socialist obsession for happiness is well known. It can be used for long term programming and indoctrination, the idea is that you need less money to be happy and hence have no reason to be grouchy about "social" spending. Because social spending is needed.

Think of the scramble for schools, Mr Frank says. Only 10% of kids can go to the top 10% of schools.

Can someone explain to me how under any system more than 10% of the kids can go to the top 10% of schools? From the same issue, notice this curious graph:

Scary, isn't it? The vice-like grip of retail prices has finally trumped earnings! The author tries to imply that compared to 1995, although wages have risen, prices have risen far faster, finally catching up.

Except that the graph says nothing of that sort. The graphs represent growth in average earnings and growth in prices over a previous period. Since the earnings growth graph has always stayed above the prices growth graph, as of 2006 the average earnings provide far bigger buying power compared to 1995.

Of course these are not directly related to India and provided here strictly for illustrative purposes.

Meanwhile, our own Finance Minister Shri Chidambaram slips in one or two when no one is watching.

''Though we are concerned about the inflation, it is also a fact that in the last ten years, the highest inflation was during June 2001 (when the NDA was in power) when it touched 8.8 percent. The average inflation during the UPA regime was between 3 and 3.5 per cent,'' said Chidambaram.

Now, as far as I can recall, the inflation never reached that high any given month during 2001. Indeed, the average inflation during UPA regime hasn't been that low. A summary stat is available here. The site used to provide a searchable database of weekly CPI, I can no longer find it.

Inflating poverty stats and deliberately creating confusion is nothing new to The Other Idiots. They have done it before. Perhaps the new party pamphlets are yet to reach Abi, he weighs in with a curious viewpoint about poverty stats.

Because escaping poverty and falling into poverty are caused by different factors, looking only at the figure for net change will not help to develop appropriate policy responses. [...] for example, a 3 percent net reduction over a ten-year period can arise because (A) three percent of the population escapes from poverty and no one previously non-poor falls into poverty during this time; or (B) eight percent of the population escapes from poverty while five percent descend into poverty; or (C) 20 percent escape from poverty while 17 percent fall into poverty during this time.

The quote is not Abi's own, it is from some socialist research.

What Abi is referring to is income volatility, specifically at the lower end of the spectrum. At any given point some people are escaping poverty just like some are falling back into it. So, in a general sense, you will not distort the count if you take a snapshot. Now what happens when a very large part of the population is precariously see-sawing between poverty and affluence? You call that country Argentina. Is it really the case in India? Much of the bottom 300 million are the chronically poor, marginal farmers, landless laborers, slum dwellers etc. It is hard to believe there is too much swing in there.

Situation (A) might require faster growth as the antidote to the observed slow pace of poverty reduction, but Situation (C) will certainly require first paying attention to the large ongoing decline.

A large swing would definitely induce different spending patterns and fiscal targeting than what we are seeing done. A larger swing would mean perhaps about 500 - 600 millions would have experienced dire poverty within the last year or so. You would see Congress dipping into forex reserves and expanding the deficit. That would be too big a vote bank to ignore.

History and statistical analyses show that over the longer term, growth is the only abiding antidote to poverty. But the long-term may often be too long in coming, and to paraphrase while slightly distorting Keynes, many of the poor may be needlessly dead by that time.

On the flip side, if Abi and the socialists keep on spinning it, we may end up keeping the bottom rung in dire poverty far too long, by needlessly denying them the benefits of brisk opening up of the economy.