It’s amazing to think that nothing really hangs on the JSE’s embarrassingly large mis-statement of equity investment flows. At least that is what the JSE would have us believe. There’s something subversively Govian (as in Michael Gove’s "people have had enough of experts") about it. If, when push comes to shove, statistics don’t really matter, then why should "people" bother with them or with the experts whose stock in trade they are?
Anyway, the JSE might take some comfort from the realisation that one thing that can be even more embarrassing than inaccurate statistics is accurate ones.
The Irish government was absolutely mortified by the recently released — and accurate — statistics revealing that its economy had grown by 26.3% in 2015. As one commentator remarked, if Ireland continued to grow at this rate every year, its economy (with just 4m people) would be bigger than China’s by 2037.
According to Ireland’s national accounts, exports were up by 34%, investment increased by 27% and imports grew by 22% in 2015. The statistics indicate that income per capita (for those employed) increased from €88,000 in 2010 to €130,000 in 2015. All of this strikes me, as someone who visits Ireland regularly, as a load of tosh.
I’ve no doubt the statistics are accurate. It’s just that they don’t describe what’s happening in the real world, or rather in the real Ireland. Why, for example, should I ever be required to pay for a round of drinks if my fellow drinkers are this rich?
It could be that the entire population has taken to heart that very Irish expression "to put on the poor mouth", which as Wikipedia so aptly explains, is the practice of exaggerating the direness of one’s situation, particularly financially, to evoke sympathy, charity and perhaps the forbearance of creditors and landlords. (You have to put that in the context of 820 miserable years of colonisation.)
An annual per capita income of €130,000 would make the Irish the wealthiest people in the world, putting the country ahead of even Qatar, whose oil wealth made it so rich it was able to buy its own Fifa World Cup.
It’s not that being so filthy rich wouldn’t suit the Irish psyche and that’s why the Irish government is playing down the 26.3% growth rate. It’s also not that the prosaic reality is better described by the 4% increase in retail sales, tax revenue and government spending.
Whatever the statistics say, the reality is that in 2015, Ireland did not produce 26.3% more goods, the income of its citizens did not rise by 26.3% and they were not 26.3% more productive.
For the Irish government, the GDP growth figure is hugely embarrassing. For decades, in a bid to minimise the growing wrath of its EU partners, it has played down its role as a tax haven. Nothing screams "corporate tax haven" quite as loudly as 26.3% GDP growth.
Most of the growth comes from the stratospheric leap in gross fixed capital formation, which was underpinned by a dramatic increase in Ireland’s intangible assets and machinery and equipment. This happened as massive US multinationals rushed to take advantage of Ireland’s tax laws.
Corporate inversions, which are extremely popular with pharmaceutical companies, were one of the financial engineering tactics that made a mockery of the reality that statistics and accounts claim to describe. The bulk of the "inverted" assets were moved on paper only, not in reality.
Transferring financial activities to Dublin is another favourite. One aviation finance company is thought to have transferred €39bn of capital assets to Ireland in 2015, saving the company €200m tax.
The transfer had little impact on reality. At most, a handful of lucky brokers in Ireland may have benefited from this investment "growth".
In time we might forget the JSE’s statistical blunder. The Irish government will not be as lucky.