Lies, Damned Lies, and Statistics

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Instrument Failure: Why It Is Hard to Trust Rosstat’s Data on the Recession’s End
Sergei Aleksashenko
RBC
February 6, 2017

Over the last year, Rosstat has ceased publishing a number of important indicators for judging the economy’s real performance.

The other day, Rosstat published its updated assessment of the Russian economy’s performance over the past two years. Strictly speaking, there is nothing surprising about the fact that Russia’s official statistics agency amends its previously published assessments. It happens constantly in other countries, too. The fact is that the initial assessments, which are released a month or a month and a half after the the end of the latest quarter, are derived from on-the-spot information that is subsequently corrected.

A Rubik’s Cube
But what is really surprising is that, according to the updated view of Rosstat’s statisticians, the economy’s performance over the last two years was significantly better than had been thought. Rosstat now claims that, in 2015, Russia’s GDP decreased only by 2.8%, rather than 3.7%, as indicated in earlier assessments, and that 2016 basically saw no decrease whatsoever. This new take has been a surprise to everyone, including the Economic Development Ministry, whose experts have said they don’t understand why Rosstat has so radically revised its own assessments. They have been seconded by experts at Vnesheconombank (VEB), which nowadays employs a large team of macroeconomists led by ex-deputy economics minister Andrei Klepach. Rosstat’s assessement has also been a surprise to the prime minister and president, who have expressed no joy the economy had been doing much better than they thought only a couple of weeks ago.

As in many other cases, the different indicators in GDP figures do not exist in isolation from one another. They are closely linked, and it is almost never possible to change one of them without changing another. In very simple terms, it looks like this. GDP is the sum of the added value produced in different sectors of the economy, such as industrial manufacturing, agriculture, transportation, finance, etc. If the figures for manufacturing have suddenly improved or deteriorated, then, with all other things being equal, the figures for GDP should change just as much. But in addition to a manufacturing element in GDP, there is an end use element in GDP, which shows the level of demand for what the economy produces. In this case, the factors of demand are the populace, the state sector, nonprofit organizations, accumulation (investment and inventories), and net export (the difference between exports and imports). If the figures for manufacturing have deteriorated, not only should the total amount of GDP change but one of the components of demand should change as well, meaning we should be able to understand not only what manufacturing sector produced more added value but also who paid for it.

But that is not all. There is a third component of GDP, sources of income: added value divided by household income, net taxes (on manufacturing and imports), the gross operating surplus, and mixed income. That is, after we have determined from GDP figures for manufacturing who has produced more, and from figures for use who has bought what has been produced, the figures on sources of income tell us who earned money from this. It is a kind of Rubik’s Cube, which has only one correct (objective) combination. We see it clearly at once, just as see clearly when the cube has not been put together correctly.

The Quarterly Maze
There are other subtleties in GDP figures. For example, one of the big problems is calculating GDP in real terms, that is, adjusting it for inflation. Rosstat publishes deflators for individual sectors and, naturally, when they are used with sector-specific nominal data, the grand total should converge. So everyone has a good sense of the state of the economy, Rosstat should assess each quarter’s GDP performance in terms of the previous quarter. We are well aware that the first quarter, in which half of the month of January is taken up by holidays, and cold weather puts a halt to many kinds of work, bears no resemblance to the third quarter, when the weather is warm and the harvest is underway in the countryside. Nor does it bear any resemblance to the fourth quarter, when builders are trying to bring on line as many completed (or almost completed) buildings as possible, and the government spends at least twice as much money from the budget as in other months. When all these things are factored out, we arrive at the most important indicator, which tells us how things stood in the previous quarter.

Don’t laugh, but Rosstat has not published this figure since April 2016. At the recent Gaidar Forum, I needled one of the heads of Rosstat to find out why this had been happening. For fifteen minutes, he tried to persuade me I had simply not been able to locate the right table on his agency’s website. Rosstat’s website leaves a lot to be desired, of course. To fish out the right information, you sometimes have to spend an hour or two figuring out the poorly organized databases. In this case, however, I insisted the information was simply not there. A couple of days later, I received a letter from Rosstat saying that, indeed, Rosstat did not calculate this figure and did not know when it would be doing so again.

That alone is enough to take Rosstat’s published data about the Russian economy’s improved performance at less than face value. If we add to this the fact that Rosstat stopped publishing monthly investment figures in the spring of last year, and announced in November that revised figures for the manufacturing sector’s performance (figures that would, of course, be revised upwards) would be published only in the spring, it becomes obvious that Russia’s official statisticans cannot actually put the Rubik’s Cube together, and they don’t really know what is going on with the Russian economy. Meaning that all the instruments that should be telling us where the ship of our economy is sailing and how fast it is sailing there have failed.

The Secret GDP
I don’t want to argue the problem I want to touch on in my conclusion prevents Rosstat from adding everything up correctly. I suspect there are many more problems, and I fear that even the heads of Rosstat are not aware of all of them. But we cannot avoid talking about the fact that vast amounts of data relating to the work of the military-industrial complex and the security agencies are classified.

In fact, if this secrecy keeps anyone from understanding anything, it is the Russian authorities and Russian society. When it receives classified information, Rosstat has to hide it amidst its tables in such a way that not a single spy will guess it is there. To do this, Rosstat inevitably distorts the performance indicators for different sectors, adding something here, and trimming something there. But since hiding the truth from spies is much more important than telling the truth to Russian society, don’t shoot the piano player, as they say, for the poorly assembled Rubik’s Cube. He is playing as well as he can.

If you think about it, it is obvious the financial figures for the military-industrial complex’s performance are no state secret. The technical specs of weapons, the technology used to produce them, and, maybe, their locations can be secrets, but not the amount of money spent on their procurement (the classified section of the budget) or the amount of added value generated by the military-industrial complex.

I am confident that under the current Russian president we should not expect any progress in declassifying these figures. That was not what he was taught at the Higher School of the KGB. Since that is so, we are unlikely to find out in the coming years what is up with the Russian economy.

Sergey Aleksashenko is a senior fellow at the Brookings Institution in Washington, DC. Translated by the Russian Reader. Image courtesy of liketotally80s.com

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Yesterday in Soviet History (Susanna Pechuro, Maya Ulanovskaya, and the SDR)

Susanna Pechuro. Photo courtesy of Sergei Stepanov
Susanna Pechuro. Photo courtesy of Sergei Stepanov

Sergei Stepanov
Facebook
February 7, 2017

On February 7, 1952, the closed trial of members of a Moscow young people’s literary club was held in Moscow. They were accused of disseminating leaflets, produced on a hectograph, about the undemocratic Soviet electoral system. A total of sixteen schoolchildren and university students stood as defendants in the case. They were charged with treason and planning the murder of [Politburo member and Stalin henchman Georgy] Malenkov. The group’s three organizers were sentenced to death. Three other members were sentenced to ten years in the camps, while the remaining ten members were sentenced to twenty-five years in the camps. In addition, Susanna Pechuro was accused of acting as a liaison between youth organizations and Jewish Zionist organizations.

Yevgeny Gurevich, Boris Slutsky, and Vladlen Furman, executed in 1952. Photo courtesy of Sergei Stepanov
Yevgeny Gurevich, Boris Slutsky, and Vladlen Furman, the group’s three organizers, executed in 1952. Photo courtesy of Sergei Stepanov and Wikipedia

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At the end of World War II and shortly after, Malenkov implemented Stalin’s plan to destroy all political and cultural competition from Leningrad, the former capital of Russia, in order to concentrate all power in Moscow. Leningrad and its leaders earned immense respect and popular support due to winning the heroic Siege of Leningrad. Both Stalin and Malenkov expressed their hatred to anyone born and educated in Leningrad, so they organized and led the attack on the Leningrad elite. Beria and Malenkov together with Abakumov organized massive executions of their rivals in the Leningrad Affair where all leaders of Leningrad and Zhdanov’s allies were killed, and thousands more were locked up in Gulag labour camps upon Stalin’s approval. Malenkov personally ordered the destruction of the Museum of the Siege of Leningrad and declared the 900-day-long defense of Leningrad “a myth designed by traitors trying to diminish the greatness of comrade Stalin.” Simultaneously, Malenkov replaced all communist party and administrative leadership in Leningrad [with] provincial communists loyal to Stalin.

Source: Wikipedia

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Susanna Pechuro, circa 1950-1951, before her arrest. Photo courtesy of Wikipedia
Susanna Pechuro, circa 1950-1951, before her arrest. Photo courtesy of Wikipedia

Susanna Solomonovna Pechuro (22 July 1933, Moscow—1 January 2014, Moscow) was Soviet dissident, political prisoner, and historian.

In 1950, while still a schoolgirl, she became involved in the underground youth organization Union of Struggle for the Revolution (SDR), formed by several 16- and 17-year-olds who had met in a literary club at the Moscow Young Pioneers House. The SDR tasked itself with returning Soviet society and the Soviet state to Leninist principles of organization, which, in their opinion, had been perverted by Stalin’s Bonapartist regime.

On January 18, 1951, Pechuro was arrested along with the organization’s other members. On February 13, 1952, the Military Collegium of the USSR Supreme Court sentenced Pechuro to 25 years in labor camps on charges of treason and planning the murder of Georgy Malenkov[.] The organization’s three leaders, Boris Slutsky (born 1932), Vladlen Furman (born 1932), and Yevgeny Gurevich (born 1931) were shot.

Pechuro served her sentence in various Gulag camps, including camps in Inta, Abez, and Potma. In 1956, the group’s case was reexamined. Pechuro’s sentence was reduced to five years and she was released.

Although she passed the entrance exams to Moscow State University’s history department, she was not enrolled. She graduated from the Moscow State Historical Archives Institute.

At the Historical Archives Institute, Pechuro researched the purges during the reign of Ivan the Terrible. Her work was published in the Proceedings of the Moscow State Historical Archives Institute. In 1961, she successfully defended her thesis, “The Decree Books as a Source on the History of Ivan the Terrible’s Zemshchina,” with Alexander Zimin as her advisor.

Pechuro worked in the Archive of Ancient Documents at the Institute for African Studies.

She was rehabilitated only on July 18, 1989, by the Plenum of the USSR Supreme Court.

A long-time member of Memorial, she signed the“Putin Must Go” petition in 2010.

Pechuro died in Moscow on January 1, 2014. She is buried at St. Nicholas Archangel Cemetery.

Source: Wikipedia

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The Union of Struggle for the Revolution (SDR) was a radical left-wing anti-Stalinist underground youth organization that existed between 1950 and 1951.

The Union of Struggle for the Revolution (SDR) was organized in Moscow by university students Boris Slutsky, Yevgeny Gurevich, and Vladlen Furman in 1950. The organization drafted a program and manifesto that spoke of socialism’s degeneration into state capitalism, described the Stalinist regime as Bonapartist, and noted the lack of civil liberties, the farcical elections, the imperial nature of [Soviet] foreign policy, and the disastrous state of agriculture. The members of the organization reproduced the documents on a hectograph.

The members of the organization were arrested by the MGB in January and February 1951.

On February 13, 1952, the Military Collegium of the USSR Supreme Court issued a verdict in the case. The verdict stated that a group of Jewish nationalists had established a treacherous terrorist organization whose members had tasked themselves with overthrowing the current Soviet regime by means of an armed uprising and terrorist acts against the leaders of the Soviet government and Communist Party. The only SDR member who did not plead guilty was Maya Ulanovskaya. Slutsky, Gurevich, and Furman were sentenced to death. Ten members of the organization were sentenced to 25 years in prison, and three more, to 10 years. The three leaders of the SDR were shot on March 26, 1952, and their ashes were buried at Donskoe Cemetery. The surviving defendants were released from the camps after a retrial in 1956. In 1989, all the defendants in the case, some posthumously, were rehabilitated “for lack of evidence of a crime.”

SDR Members

Sentenced to death:
Yevgeny Gurevich (born 1931)
Boris Slutsky (born 1932)
Vladlen Furman (born 1931)

Sentenced to 10 years in prison:
Tamara Lazarevna (born 1932)
Galina Smirnova (born 1931)
Nina Uflyand (born 1934)

Sentenced to 25 years in prison:
Irena Arginskaya (born 1932)
Ida Vinnikova (born 1931)
Felix Voin (born 1931)
Grigory Mazur (born 1931)
Vladimir Melnikov (born 1932)
Yekaterina Panfilova (born 1932)
Susanna Pechuro (born 1933)
Alla Reif (born 1931)
Maya Ulanovskaya (born 1932)
Inna Elgisser (born 1930)

Source: Wikipedia

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Maya Ulanovskaya in the Gulag, 1955. Courtesy of Wikipedia

Maya Alexandrovna Ulanovskaya (born October 20, 1932, New York) is a translator and writer who was a member of the Soviet dissident movement.

Ulanovskaya was born in New York, where her parents Alexander Ulanovsky (1891—1971) and Nadezhda (Esther) Markovna (1903—1986) were Soviet spies working for the Main Intelligence Directorate (GRU). They were arrested in 1948 and 1949 on political charges.

In 1949, after graduating from high school, Ulanovskaya enrolled in the Moscow Food Industry Institute. There she joined the underground anti-Stalinist youth organization Union of Struggle for the Revolution (SDR).

On February 7, 1951, Ulanovskaya was arrested by the MGB. On February 13, 1952, she was sentenced to 25 years in prison. She served her sentence in Ozerlag.

In February 1956, the case was reviewed, Ulanovskaya’s sentence was reduced to five years, and she and her accomplices were released under an amnesty.

The same year, she married Anatoly Yakobson. In 1959, she gave birth to a son, who later became a historian, journalist, and politician.

In the 1960s and 1970s, Ulanovskaya worked at the library of the Institute of Scientific Information on Social Sciences of the Russian Academy of Sciences (INION RAN) and was involved in the Soviet human rights movement, retyping samizdat publications, passing information overseas, etc.

In 1973, she emigrated with her husband and son to Israel. In 1974, she divorced her husband.

Ulanovskaya worked at the National Library in Jerusalem. She has translated several books from English (including books by Arthur Koestler), Hebrew, and Yiddish. She and her mother co-authored a memoir entitled The Story of One Family, published in the US in 1982 and later reprinted in Russia. She is author of the book Freedom and Dogma: The Life and Work of Arthur Koestler (Jerusalem Publishing Center, 1996).

Source: Wikipedia

All texts except the excerpt about Malenkov translated by the Russian Reader. Thanks to Yuri Albert for the heads-up on Sergei Stepanov’s Facebook post, which got this ball rolling.