Statistics are the lifeblood of policy

I cannot forget the day I got permission from the head of Russia’s State Statistics Service to access the former Soviet Union’s confidential data. I went through the armed security guards and walked up to the archive, where the archivist said that it was the first time in his decades of service there that a foreigner had been allowed to view confidential files. She had received an official order that I was to read designated files in the reading room, and the letter contained five stamps confirming the directions. But as she stamped the last seal, she told me that she was about to retire and was tired. We took an elevator down to the confidential documents archive and she left me there by myself. I was in the dusty archives filled with statistical data from the Soviet Union that had never been disclosed.

Many of the documents labeled “confidential” wouldn’t have been considered a secret in a democratic country. The particular data I was collecting was the household survey from the Soviet era detailing incomes and expenses of individuals. Every year beginning in the 1950s, tens of thousands of households were sampled; the survey was far more extensive than surveys in the United States.

But despite the enormous amount of money put into this project, the results were labeled confidential and were almost never used for research. As a result, even the Soviet government didn’t know how serious the shortage of necessities was. The Soviet people were extremely discontented as they had to wait in line for hours to buy necessities, and the Soviet authorities tried to hide that sentiment.

In order to lower the official prices of necessities, the Soviet authorities provided subsidies, and it was also kept a secret that subsidies made up 20 percent of government expenditures and 12 percent of national income in the late 1980s. The International Monetary Fund (IMF), which was not aware of this statistic, predicted that consumer prices would rise by a mere 50 percent if prices were freed. But when the policy was implemented in January 1992, prices rose by 250 percent and inflation that year was 2,500 percent. Russia fell into extreme political and economic chaos. Hiding statistics meant the collapse of the Soviet Union came early and the pain of regime change was aggravated.

The Soviet Union intentionally hid statistics, but North Korea doesn’t even have numbers to hide. A planned socialist economy is supposed to run on statistics, but few statistical surveys and research are conducted in North Korea. All socialist states publish an annual statistics report, but North Korea hasn’t published one since the 1960s and does not even announce national income, the most basic economic indicator. When the Bank of Korea published an estimate on North Korea’s economic growth in 2010, Pyongyang condemned it as “crap,” but did not present any real numbers.

Without statistics, economic policies cannot be properly established and implemented. Economic entities cannot have economic efficiency in acting based on statistics. Also, a country cannot join international financial organizations like the IMF without statistical bases. Recently, North Korea attempted to join the Asian Infrastructure Investment Bank, but one of the reasons for China’s rejection was presumed to have been the lack of statistics.

Foreign investors are also reluctant to invest in North Korea. Foreigners make investment decisions based on expected gains and risks based on economic and social indicators and statistics. When foreign investors ask for statistics at investment fairs, North Korean representatives repeatedly ask them to trust North Korea, which is paying the opportunity cost for not having proper statistics. If North Korea wants to develop its economy, it needs to get help from the international community and must gather and disclose economic statistics.

Our government is also not free from the tendency to hide facts and statistics. The critical mistake of delaying the disclosure of hospitals with MERS patients illustrates the Korean government’s stance. They seem to think it is better to keep citizens uninformed because if they are given the information, people will cause trouble. The government claims to be a democratic system but its decision making is not much better than that of the Soviet Union.

North Korean economic data is also kept secret here. Our government treats a considerable portion of North Korean data confidential, not because of justifiable reasons but for the convenience of the civil servants as disclosure could lead to more work. Individual data on North Korean defectors is classified. The data could be modified to make individuals unidentifiable and be offered to researchers, but the authorities are not budging. So the chance to do research to help defectors better adjust to South Korea is shut down, with taxpayers’ money. A country that conceals statistics will decline, and a country with no statistics will fall.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, July 2, Page 35

*The author is an economics professor at Seoul National University.

by Kim Byung-yeon