Anorak | When Governments Lie: Following The Argentina Model

When Governments Lie: Following The Argentina Model

by | 24th, October 2011

GOVERNMENTS lie all the time of course for you know that a politician is lying when you see his lips move. However, there are lies and lies: we all know that “Vote for me a it’ll all be fine” is a lie. We might not know that “US poverty is at an all time high” or “Rents are unaffordable for many families” are for they depends upon detailed statistics which are simply too geektastic for most of us to give a shit.

But just as an example, Shelter released a report last week which said that private rents are now unaffordable in 55% of British cities. And, well, sorta, but not in the way it’s being reported. Yes, rents are high, because houses are expensive.

However, what Shelter said is that rents are too high as a percentage of take home pay. What is being reported they said is that rents are too high as a percentage of household income. These are not the same thing at all: take home income is wages after taxes. Household income is wages after taxes plus benefits.

This is fairly important, because one of the benefits on offer in the UK is housing benefit: so measuring rent as a percentage of take home pay is interesting but not very important: what we want to know is how many people still can’t afford the rent after we’ve given them housing benefit to help pay the rent.

This isn’t the government lying of course, this is just an example of how statistics can be used to obscure an issue. A good example of a government actually and really lying is Argentina.

Not really one of the things we would normally care about, some Latin American nation being run as a banana republic, except that Argentina is being used as an example of what Greece ought to now do. Default, get it all over with: for Argentina has had really good economic growth since they did the same.

For the years 2002-2011, using the IMF‘s projections for the end of this year, Argentina has chalked up real GDP growth of about 94%.

Sounds just great except:

Argentina’s official inflation data has been widely discredited for being too low since January 2007, when the government appointed a political ally to head the consumer price unit at the INDEC national statistics institute.

The way you get to “real GDP growth” is that you measure nominal GDP growth then subtract inflation. In Argentina the official inflation rate is about 10%. The actual inflation rate is 20-25%. If we adjust that 94% growth in real GDP by the actual instead of the official inflation rate then some, much, possibly more or even all of that real GDP growth disappears.

Which is why it is important that the Argentine government is lying because those lies are being used to justify what happens here in Europe. As it turns out, Greece will have to default, there’s no way out of that. But by being geeky and looking at the Argentine statistics, we can see that default isn’t enough. They’re still going to have to do all the hard reform of the economy as well.

Posted: 24th, October 2011 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink