Any "fact", when quoted in numbers, creates its own credibility, and gives a us sense of security, willing us to believe in its magical reality.
Economists, analysts, planners, investors, politicians and media understand this all-too-human (of the urban-elite-educated-kind) phenomenon, and therefore quote numbers to support their ideas and proposals.
But numbers also deceive and distort reality... and such is the power of numbers that we may not even be aware that we are hallucinating the world we (choose to) live in.
Here are some examples:
1. The "Booming" Service Economy of India:
It is agreed - and is true - that around 50% of India's GDP comes from service sector (which has been growing at a phenomenal rate of 10-11%... or whatever)... I mean, look at the growth of IT, software exports, banking, insurance etc., and who can deny this "reality"
...till one looks at the constituents of serice sector with their %age contribution to GDP:
In 2001, service sector contributed 48% to India's GDP. The following are the share of different economic activities that constitute Service Sector:
14.0% - Trade (Wholesale /Retail)
01.0% - Hotels and Restaurants
01.1% - Railways
04.3% - Other Transport & Storage
02.0% - Communication (Post, Telecom)
06.3% - Banking
00.7%- Insurance
04.5% - Dwellings, Real Estate
01.1% - Business Services
06.1% - Public Administration; Defence
01.1% - Personal Services
05.5% - Community Services
00.7% - Other Services
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48.0% - Total Services
(IT & ITES, form part of 1.1% "Personal Services")
2. The "Booming" Chinese Economy:
There is no need to quote numbers; we all know how the China has emerged as a global economic superpower:
etc...
There is nothing wrong with these numbers - except what is not said in numbers, e.g.,:
Some months back, I had posted how the gap in Indian and Chinese FDI is just a function of the way two countries calculate FDI - and am posting it again (sorry for the repetition):
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In terms of comparisons, India attracts less that 10% of the FDI as compared to China. However, such a difference is largely due to the different manner in which india and China calculate what constitutes the FDI.
The IMF definition of FDI includes 12 different elements:
-equity capital,
-reinvested earnings of foreign companies,
-inter-company debt transactions,
-short-term and long-term loans,
-financial leasing,
-trade credits,
-grants,
-bonds,
-non-cash acquisition of equity,
-investment made by foreign venture capital investors,
-earnings data of indirectly-held FDI enterprises,
-control premium and non-competition fee.
China includes all these in its calculation of FDI, while the Indian FDI reports only equity capital as FDI. Similarly, China reports improted equipments as FDI, while india includes these imports in its trade data.
Moreover, China also includes domestic money coming through Macau, Taiwan and HK in calculating its FDI inflows (often called "round-tripping" - i.e., domestic money routed through these destinations to be invested in mainland China, to avail concessions, tax breaks etc.). Estimates show that this can be as large as 60% of China's FDIs.
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3. The Employment "Boom" in USA
According to Bureau of Labor Statistics July '05 payroll jobs release, 207,000 jobs were created in July - which actually is pretty good and assuring...
...till, one looks behind these statistics - and as someone pointed out:
"Of the new jobs, 26,000 (about 13%) are tax-supported government jobs. That leaves 181,000 private sector jobs. Of these private sector jobs, 177,000, or 98%, are in the domestic service sector.
Here is the breakdown of the major categories:
- 30,000 food servers and bar tenders;
- 28,000 health care and social assistance:
- 12,000 real estate;
- 6,000 credit intermediation;
- 8,000 transit and ground passenger transportation;
-50,000 retail trade; and
- 8,000 wholesale trade.
(There were 7,000 construction jobs, most of which were filled by Mexican immigrants.)
Not a single one of these jobs produces a tradable good or service that can be exported or serve as an import substitute to help reduce the massive and growing US trade deficit. The US economy is employing people to sell things, to move people around, and to serve them fast food and alcoholic beverages."
Apparently, one does not need a university degree to get a job in USA!!!... What happens to the 65,000 engineers that US universities produce will remain a mystery!!
Didn't Mark Twain said: "there are lies, damn lies, and stastics."... And almost 50 years back Darral Huff wrote a book called How to Lie with Statistics
Sources:
Structure of Indian Service Sector
Share of Service Sector in India's GDP
The Economy: Is China Ahead?
You Don't Need expensive Colege Education to Work in US
FDI Flow will Increase if Accounting System Changes
Relevance of China to India
China in World Trade System
FDI: China & India - The Difference in Definition
New York Times: China's great Divide
1 comment:
Very interesting post. Also proves another common quote "Statistics reveals the obvious and conceals the vital!".
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