Also, the "enduring dispute about whether Russians as a whole are better or worse off after a dozen years of reform" seems to exist only outside of Russia. Everybody in Russia knows that 90% of the country is worse off, except in Moscow, where they are better off.
The Economist (UK) September 13-19, 2003 Russia's tangled statistics Mud and weeds The difficulty of measuring Russia's economy
The figures prove what everyone knows: Russians drink like mad. In 2001, alcohol overdoses killed 139 people in England and Wales, but more than 40,000 Russians, in a population less than three times the size. But other official figures indicate quite the opposite: the average Briton consumed the equivalent of 8.4 litres of pure alcohol in 2001, the average Russian swallowed a mere 8.1 litres.
Why the discrepancy? A mix of understated production by Russian distillers and the Russian taste for industrial alcohol or toxic moonshine could be one explanation. But the confusion about just how drink-mad Russians are is just one example of the difficulty of measuring anything in Russia these days. (Indeed, even the official data on deaths from booze poisoning are blurred: "more than 40,000" is as precise as they get.) Contradictory figures are the bane of Russian economists and sociologists and have fuelled a dispute about whether Russia is getting better or worse.
Yegor Gaidar, the architect of the early economic reforms, once said that Russian businesses "went from fulfilling the plan to avoiding the taxman"--that is, from exaggerating to understating their output. Goskomstat, the state statistics committee, was accustomed to counting physical things--and was especially keen on tonnes of steel. Now it must make sense of a fast-growing service sector and a multitude of small firms. After the 1998 economic crash, people changed their spending habits as often as their underwear, moving from basic foods to processed foods to durables to ever-snazzier luxury goods as the economy recovered. They dragged inflation experts in their wake. Goskomstat has revised some GDP figures three times.
Vladimir Sokolin, the agency's director, says its methods, after years of collaboration with the IMF and other countries' statistical services, are now as good as any. Yet even the best bean-counters would be hard-pressed to keep up with such changes; and Goskomstat cannot afford to hire and keep the best staff.
The grey economy, with its tax evasion and bribery, is another headache. Goskomstat, using World Bank methods, reckons it to be about a quarter of total GDP. Greg Thain of Interactive Research Group, a market-research firm, says the agency still underestimates private consumption and investment by small businesses.
Labyrinthine regulations also lead to distortions. In 2002 investment growth suddenly fell, sparking fears that the recovery from the 1998 economic meltdown was faltering. However, the government had just eliminated tax breaks that had encouraged companies to disguise some of their profits as investment. With the loophole closed, investment is roaring again.
Likewise, a tangle of tariffs encourages importers to register, say, flowers, which carry a high duty, as vegetables, with a much lower one. Goskomstat adds about a third to the import data it gets from the customs service to plug a gap in the trade figures. Even so, there is a big hole in the balance of payments ("net errors and omissions", in the accounts). More unregistered imports, say some; capital flight, say others. The answer matters, since capital flight is a sign that investors are scared.
All this fuels an enduring dispute about whether Russians as a whole are better or worse off after a dozen years of reform. Official GDP is still nearly a third lower than before the Soviet Union's collapse. But this is partly for all the reasons above, and partly because Soviet estimates used state-fixed prices for goods that, in a free market, became worthless. The prices used to evaluate barter transactions, common in the 1990s, were also overstated.
Optimists argue that consumption, which is 20% higher than in 1990, is a far better measure of the real improvement in most Russians' lives. But it, too, is misleading. Few Russians pay rent or mortgages (they inherited their homes from the state), and they save very little, preferring to spend it while they have it. That means they may look rich now, but will look less so when their dwellings start to decay.
The confusion is not confined to economics. New HIV infections have dropped in the past two years from 8,000 a month to 2,500. A success? No; it is probably because testing used to focus on high-risk, needle-using groups. Now the same number of tests is being carried out, but on a broader population.
A recent article in the Moscow Times lamented that the land of Dostoevsky and Gogol is becoming a nation of illiterates. Book circulation is less than half what it was 1992. But a closer look at the figures reveals that, even as the number of books sold has dropped, the number of titles has more than doubled. Are Russians reading less? Or are they now choosing what to read, instead of having titles foisted on them? So trivial a number, and yet its true meaning would tell so much about Russian society.
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