Truth Seekers

Lies, Damned Lies, and Stubborn Germans

  • Why it matters

    Why it matters

    Critics complain that statistics have been manipulated in some countries to make economic output appear larger than it is. Germans fear this could give actually affect how policymakers react.

  • Facts


    • Income in the financial sector was originally regarded as non-productive transfers, but has contributed to German ‘growth’ since 2005. In 2016, €27 billion ($31.4 billion) of private consumer spending, almost 2 percent of the total figure, related to interest payments.
    • The inflation figure announced each month by the German Federal Statistical Office is based on a basket of goods and services that includes more than 300,000 individual items. The basket is in the middle of a five-year review.
    • The monthly inflation figure is a key economic indicator, affecting the work of the European Central Bank and the choices of private citizens.
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Going down, no, wait, I mean up. Source: DPA

The last time US statisticians tweaked the measurements in 2013, they wound up increasing US GDP by more than the entire economic output of Sweden – without any additional goods actually having been produced – according to Jacob Assa, an economist at the United Nations. They did it by declaring patents and licenses, which had previously been treated as an advance payment on a good, as investments instead. In statistical terms, that meant they now contributed to economic growth.

Something similar happened in Germany in 2014, when citizens suddenly found themselves about €1,000 richer. Welcome to the crazy world of statistics – one that can have a massive impact on how an economy is perceived. That’s because industries and sectors can have an interest in making their contribution to economic output appear higher than it actually is.

Nowhere has this been truer than in the world of finance. Income in this sector was originally regarded as a “transfer” from consumers to bankers – something that didn’t actually contribute to growing an economy – but since 1968 the sector has gradually been declared “productive.” This meant that the “output” of the industry, which was expanding rapidly in the West, led to bigger and bigger increases in GDP, as Mr. Assa explains in a book and various papers.

In Germany, the federal office of statistics for years opposed such statistical tricks, but eventually wound up partially adopting them in 2005. For companies, bank loans are considered an advance payment that is deducted from sales in order to calculate the value added. But when the government or private households pay a bank interest, that notional service has been regarded as consumption, which increases GDP, since 2005.

Wolfgang Eichmann from the federal office of statistics estimates this has led to a rise of 1.5 percent in German GDP – all for what critics see as the fictitious contribution of bankers.

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