International

Satellite photos shed light on the countries inflating their GDP | Torsten Bell

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A tweet by the author Nassim Nicholas Taleb caught my eye last week. Amid the merry-go-round of prime ministers, he told us all to “stop complaining about Britain’s turnover”. It struck me in part because I had made some self-complaints in last week’s column. His argument was that it is good that such rapid turnover can happen and is certainly preferable to “other countries that have NO turnover”, namely Russia and Saudi Arabia.

The tweet sparked two reactions. The first and strongest was that we may not be faced with a binary choice between dictatorship and the recent chaos. But secondly, it’s always good to be reminded of the benefits of our democracy. Being able to quickly dispense with leaders who make big mistakes is important, as a US tied to Trump for four years has shown. And there are some specific benefits for us economic researchers.

Taleb’s diatribe 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 nighttime light emissions (a proxy for economic progress that can be measured independently of satellites) and reported economic growth. The less democratic a country, the greater the reported GDP growth for a given increase in light, ie the more inflated the statistics were. The author argues that this could mean boosting GDP growth by 15%-30% in the most authoritarian regimes.

Further evidence comes with the finding that the overestimation of growth is greatest during 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 director of the Resolution Foundation. Read more at resolutionfoundation.org

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