Sat | Sep 22, 2018

Martin Henry | Measuring the economy

Published:Sunday | June 24, 2018 | 12:00 AM
Martin Henry
A chef prepares a meal of chicken back in Maverley, St Andrew, on October 29, 2014. Martin Henry has proposed, facetiously, a chicken back index to truly measure prosperity and poverty.
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If the minister doesn't trust the data, what about you and me?

When I teach Research 101, I tell students that one definition of 'fact' is what the official data say unless one has a better data set of one's own.

So we accept that the population of Jamaica is 2,697,983, all the way down to those last three persons, because that's what the 2011 STATIN census tells us. And we haven't got any better data set of our own. Or means of getting one. Although there might be reasonable suspicion of undercounting with all the inaccessible informal settlements, the proliferation of aliases, and the absence of fixed identifiable addresses for more than a few citizens.

Well, here comes minister with responsibility for several things but 'without portfolio' in the Ministry of Economic Growth and Job Creation, Daryl Vaz, taking issue with the Government's own economic growth data generated by the Government's own Planning Institute of Jamaica.

I have long been nervous about the prospect of the PIOJ massaging the interpretation of data, if not the data themselves, to make the institute's political masters look as good as possible under the circumstances. And Minister Vaz's publicly expressed discomfort frightens me further.

The PIOJ's annual Economic and Social Survey of Jamaica is the data bible on government performance. There are quarterly updates in other publications and in press conferences.

But Minister Vaz is not a very happy minister right now even though the Planning Institute is estimating that the short-term prospects for the economy are generally positive based on the strengthening performance of most sectors compared to the same first quarter of 2017.

Peering down its microscope (or is it gazing into its crystal ball?), the PIOJ has spotted growth coming out between 1.5% and 2.5% for this second quarter compared to the second quarter of 2017. The numbers are tiny as they have been for decades. So they can easily fool us that they are meaningful.

Actually they're not. The human brain is very poor at weighing up variations in microscopically small things and astronomically large things. There is a 66.667 per cent variation between 1.5% and 2.5% (to be as accurate as the census figure!). Such a range of uncertainty, unacceptable in regular research, renders the projected growth meaningless.

 

INDEPENDENT STUDY NEEDED

 

What we really need but don't have is an independent means of measuring growth and economic performance in general. CAPRI may be the closest thing we have to a think tank that could take on such a big thing but is still not up to strength. The universities haven't demonstrated the capacity or interest. But research thrives on the replicability of data and on challenges to settled data sets by counter-data sets.

A side word on that super-Ministry of Economic Growth and Job Creation into that the prime minister is bent on scraping all the plum portfolios of public administration which have anything to do with economy however remotely. The MEGJC is a clumsy behemoth trampling on the established structures and functions of public administration with little to show for it. The ministry is only functional because the hodgepodge of portfolios remains largely autonomous within it under different ministers without portfolio, as if these portfolios still belonged to their traditional ministries. If there is any strong cross-unit collaborative synergy for economic growth and job creation, that has to be the best-kept secret of this administration.

'Jobs are coming', shouted The Gleaner on its front page last Thursday. 'Employment hike predicted as JISCO invests billions to construct industrial park in Nain ...' the story headlined. The Chinese company is to invest up to US$4 billion in a massive integrated industrial complex to include bauxite processing and electricity generation. Great for country. Great for rural Jamaica. But where is the railway that an inland industrial facility on the scale of 27 square kilometres will need? And why would this industrial development project not be fully executable through a Ministry of Industry, which has not been gutted?

Minister Vaz's quarrel with the official PIOJ growth data is the gap between these data and his observations. "When you look at the PIOJ figures and you look at what is happening as you drive around Jamaica, there is a vast contrast," Vaz argued at a Jamaica Investment Forum a couple of weeks ago.

He's not alone.

The economists in the PIOJ and elsewhere are counting beans in the formal economy, pretending that what is not counted does not exist. Well, Jamaica happens to have a large informal economy with estimates of its size ranging from 40-60 per cent of all real economic activity. And we mustn't forget to include those pricey professionals, lawyers, doctors, accountants, builders, etc, who operate in the cash economy below the radar of government inspection, nor those who operate in the booming illegal economy of drugs and contraband.

 

LOOK TO CONSTRUCTION

 

We need unconventional measures of growth and economic performance.

Minister Vaz is casting his eyes on cement and steel sales. "When you look at cement sales and steel sales and compare them to last year's figures, you will see something is happening that is not being reflected. Construction is a main economic driver in Jamaica. And can you imagine what would happen in the sector and for the economy if the Ministry of Economic Growth and Job Creation unleashed a real revolution in housing construction powered by the backed-up money which the National Housing Trust, now sitting in the MEGJC, controls?

I have half-seriously previously floated the idea of a chicken back measure of economic prosperity and as a poverty index since people eat more whole chicken and chicken parts and less chicken back as they get richer, and the reverse is true as they get poorer. "What will vary most with economic circumstance is protein consumption, more expensive and more dispensable in a food crunch. So chicken back consumption can provide us with a powerful hardship index, a poverty index." ('Pee-pee, cluck-cluck after chicken back', Sunday Gleaner, November 9, 2014).

Minister Vaz is also counting cranes, a powerful growth indicator which he picked up from a fellow minister in Singapore during an "eye-opening" trip there last year. Who is monitoring his travel bill? And how about counting machetes and files sales as indices of shifts up or down in small farming activity, a core economic activity?

We measure some things to a pretty high degree of accuracy. On the crime front, the murder numbers are pretty accurate, although not perfect, because there are bodies and the police respond. Almost all the other crime numbers are nonsense numbers based on under-reporting and police unresponsiveness. And we have almost no numbers on ubiquitous extortion. We have a fair handle on births and deaths because of reporting requirements, and in the case of births the almost absolute need for certification to get on with life.

I have had, in the past, to take on the economists on their balance of trade prognostication. For as long as anyone can remember, the value of imports have been outrunning the value of exports. And the economists have been bawling, "Wolf! Wolf!" But if no one is giving us a free lunch, how can we continuously buy more than we sell without complete economic collapse at some tipping point? Even if you factor in borrowing, which, in any case, has to be paid back from income? It seems clear to me that unofficial, uncounted exports are helping to finance official, counted imports. But the economists will set me straight when they take me on. Mr Seaga used to point out that the Jamaican economy cannot be managed by textbook economics.

Meanwhile, Minister Vaz has a point, and it's not a little one: A lot of the official state data that drives policy and planning are made up of nonsense numbers harvested from poor counting, as Government muddles through.

- Martin Henry is a university administrator. Email feedback to columns@gleanerjm.com and medhen@gmail.com.