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The Poverty of Statistics

Author

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  • Freeman, Alan

Abstract

This paper is a prepublication version of a paper accepted for publication by Third World Quarterly. It offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends, it shows, on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now promoted, with scant pause for critical thought, as a unique and unexceptionable standard for comparing and aggregating national income statistics. To get to the heart of the flaws in the PPP concept, this article adopts a unique approach: it accepts the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn, which in turn shows that they are not fit for purpose. By comparing PPP and Market Exchange Rate measures of inequality it shows that what really took place, in the closing decades of the last century, was a systematic reduction in the prices of consumption goods in the third world. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty. Neither genuine growth, nor lasting and sustainable poverty reduction, were achieved over this period. The fall in the price of consumer goods masked a systematic failure, for much of the third world, to overcome the central problem of development – the high price of capital goods, which PPP statistics understate and, intermediate goods, which PPP statistics completely omit.

Suggested Citation

  • Freeman, Alan, 2008. "The Poverty of Statistics," MPRA Paper 16827, University Library of Munich, Germany, revised 15 Aug 2009.
  • Handle: RePEc:pra:mprapa:16827
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    File URL: https://mpra.ub.uni-muenchen.de/16827/1/MPRA_paper_16827.pdf
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    References listed on IDEAS

    as
    1. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2009. "Dollar a Day Revisited," World Bank Economic Review, World Bank Group, vol. 23(2), pages 163-184, June.
    2. Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Wade, Robert Hunter, 2004. "Is Globalization Reducing Poverty and Inequality?," World Development, Elsevier, vol. 32(4), pages 567-589, April.
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    Citations

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    Cited by:

    1. Freeman, Alan, 2016. "The Whole of the Storm: Money, debt and crisis in the current Long Depression," MPRA Paper 84394, University Library of Munich, Germany.
    2. Freeman, Alan, 2009. "Marxism without Marx: a note towards a critique," MPRA Paper 48618, University Library of Munich, Germany, revised 17 Nov 2009.
    3. Freeman, Alan, 2000. "Has the empire struck back? ‘new paradigm’ globalisation or return to classical imperialism?," MPRA Paper 2589, University Library of Munich, Germany.

    More about this item

    Keywords

    Inequality; Development; Value Theory; Temporalism; World Systems Theory; Dependency Theory; Globalization; TSSI; General Equilibrium;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • C0 - Mathematical and Quantitative Methods - - General
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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