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. Last Updated: 07/27/2016

First Of All, Don't Believe The Statistics

Much of Russia's political debate has been based on quarterly statistics showing that production continues to plummet in a frightening freefall after two years of economic reform, apparently reducing the nation to a state of general poverty with no recovery in sight. But what if that assumption were simply wrong? What if the production figures were so incomplete as to be false? Even government officials in charge of developing economic policy acknowledge that Russia's production statistics are unreliable. This may seem less shocking to Russians, because they are used to poor statistics. It was an open secret that Soviet economic indicators were a cheerful fiction. But as the government attempts the Herculean task of moving to the market it is incredible that cabinet ministers are having to make policy decisions based on guesswork that could be wildly inaccurate. What if, as economist Jeffrey Sachs claims to have been the case in Poland, the failure of production statistics to include the private and black markets means that rather than falling a disastrous 26 percent over the first five months of this year, production dropped by only 5 or 10 percent? Would the voice of the industrial lobbies be so powerful if it were commonly accepted that, while many heavy industries are in a state of collapse, the expansion of private enterprise is already taking up much of the slack? Would the populist ravings of Vladimir Zhirinovsky have such appeal? Probably not. Perhaps the true figures would show that Russia is both collapsing and growing, but in a traumatically uneven manner that leaves whole regions and industries destitute while others survive or even boom. That conclusion would demand different solutions from the assumption that Russia's economy is in a state of general collapse. Unfortunately, not even the best informed among critics of the current statistics have been able to come up with real numbers for the decline of Russia's post-communist economy. All they can offer is a deep suspicion that the production figures quoted in every budgetary debate and political mud slinging contest are wrong. Even under the best construction, the economy is in an unhappy state likely to cause political turmoil in the near future as tens of thousands of workers at a time are laid off and forced to look for new and unfamiliar employment. But when answering the question of whether Russia's reforms can or cannot succeed, disregard the production figures: They may only indicate that inefficient state enterprises are contracting now that they answer to the consumer and not the state -- which is as it should be.