We have all noted how governments and the media seize upon new IMF/World Bank/OECD growth forecasts if they like the findings (“we are the fastest growing economy in Europe/Asia”) or rubbish them if they do not (“the Fund does not understand our policy mix”). This has become particularly noticeable in the UK, where supporters and opponents of Brexit want fuel for their view that the country has done better/worse than the EU as a whole. In the world of economists, market newswires and ratings agencies, the norm is to measure relative to GDP. This can be informative as with the share of manufacturing or depth of credit extension: it can sometimes be of limited use (such as the public debt stock).
We are being challenged in our comfort zone by voices calling for newer measures of economic development and advancement. The voices are not new but have grown louder in the Covid-19 pandemic. Lockdowns have complicated the traditional face-to-face gathering of data through surveys, and delayed data releases. Where there has not been a delay, the end-product may have suffered due to the cutting of corners. We suspect that inflation reports have suffered most in terms of accuracy in this respect.
The voices have queried the methodology in compiling the national data in our world turned upside down. In many cases, activity has moved from market to non-market production. Restaurants have been closed so we are eating at home. Public gyms have been closed so we have bought trainers from Amazon (rather than visiting a store in person) and watched a training video. So has production increased or fallen in this process, and how is it captured in the accounts? Another challenging area for official statisticians (that has grown in the pandemic) is the supply of goods ‘for free’ such as apps on mobiles and social media.
Real GDP, as we all know, is nominal GDP adjusted for inflation. However, its plausibility depends upon a reliable inflation series. In the US, an official commission in the 1990s concluded that inflation had been overstated (and real growth therefore understated). In the UK, the official statistics body announced in mid-2020 that it had underestimated the fall in the cost of telecoms services over several years as a result of technological advances, and that productivity and growth in the telecoms sector (and thus GDP) was rather higher than it had earlier reported.
The challenges for statisticians have been magnified by the pandemic. Some of the voices are asking whether national accounts in the traditional format have now had their day and whether our policymakers should be guided by different data sets. Accounts that somehow reflect environmental impact are one possibility. Another suggestion is that they should drill down into output per income groups: a third route takes us to happiness indicators, which assess a nation’s progress on the basis of changes to the quality of life; and for those nostalgic about the vanished Soviet era, we could return to the useless measure of net material product (NMP).
The most strident voices are those that have concluded during the pandemic (or because of it) that policymakers must have access to new data since the world has seen irreversible change. They may have reached this conclusion due to climate change or as a result of societal tensions or for other reasons.
Alternatively, we can decide that, whenever we emerge from Covid, our ‘new normal’ will mark an evolution from the life we had to leave behind. We saw how various environmental indicators improved during lockdown (such as cleaner air, a greater variety of wildlife and a decline in street crime) and feel that our governments should be more aware of the future of our planet. We do not like change for change’s sake, although we recall that this one emotive word was the rallying cry of the victorious APC in the 2015 and 2019 election campaigns in Nigeria. This is our camp.
The national accounts also evolve and often follow common standards framed by the OECD or the IMF. Other and new data series complement them. They include the collection of ‘big data’ driven by the latest IT and satellite tracking; environmental impact studies; and deeper analysis of consumption trends to highlight how changes in household incomes are far from uniform.
Put crudely, happier people are not necessarily those with most money and the quality of life is not always achieved with a higher income. The measures are not mutually exclusive, however. We are looking for more detail. There are numerous indices that, for example, compare education, transparency, human rights and freedom across jurisdictions in league tables. Country A has smaller classes in school than country B but is the quality of teaching always better? These indices serve a purpose but, by definition, leave gaps. National statistical agencies can support policymakers by drilling deeper.
Our mind was turned to this subject when we saw that our National Bureau of Statistics has started the preparatory work for a rebasing of the national accounts on 2018/19, which, we assume, will be the vanilla product without a Covid-induced overhaul.
