Top-down indicator harmonization around the world

Lead-researcher

Daniel DeRock

What do we really know about the economies of developing countries? A quick look at any statistical database would suggest: quite a lot. GDP figures, inflation rates, government debt and labor statistics, to list just a few, provide snapshots of countries’ economic health. But how are these numbers actually obtained, and who decides how they are to be measured? In the developing world, this question is particularly acute; after all, macroeconomic indicators were first developed with highly industrialized countries in mind, and often are a poor fit for countries in which, for instance, subsistence agriculture and the informal economy loom large.

Harmonizing statistical systems

In line with the FickleFormulas project as a whole, this subproject searches for the political and social underpinning of macroeconomic indicators. In most developing countries statistical systems have either been copied or imposed from the outside. This particular subproject investigates efforts by international organizations – for example the International Monetary Fund or the United Nations – to harmonize economic statistics and oversee compliance with international standards in developing countries. Such efforts range from standard-setting in transnational expert groups to technical assistance missions on the ground. 

Data initiatives produce winners and losers along the way.

At first sight, these harmonization efforts could seem peripheral to other, more high-profile activities of international organizations. But they have wide-reaching effects, producing winners and losers along the way. Countries that have not developed indigenous measurement formulas often find templates imposed on them that are ill-suited to the local socio-economic context. This can concern, for example, the nature of work, the size of the informal sector, or the functioning of the financial system. At the same time, the resulting figures have consequences for their assessment by international institutions and donors as well as foreign and domestic investors.

Global organisations with influence

The project focuses on the United Nations Statistics Division (UNSD), the World Bank, and the International Monetary Fund as the most relevant organizations attempting to influence macroeconomic measurement practices in low- and middle-income countries. Since the post-WWII period, these organizations have been at the forefront of global efforts to harmonize statistical practices. In many ways these efforts have been remarkably successful, considering that nearly all countries are now on board with international standards. 

Playing by the rules

Official statistics have many users, not least the departments of international organizations themselves. These agencies rely heavily on member countries to collect and report data in a timely and reliable fashion. This is an immense challenge for countries with limited resources to fund and operate national statistical systems. To this end, the World Bank and International Monetary Fund in particular have increasingly prioritized capacity building and technical assistance in recent decades. To a large extent, statistical governance also involves enforcing compliance with the rules and norms. This can be achieved through formal mechanisms such as conditional lending or more informal channels like global rankings. 

Making countries legible

The global governance of economic statistics makes countries legible and amenable to policy intervention. We need a sense of the trade balance or fiscal deficit of a country to design specific policy. Whether or not the figures get at the right number, some number is indispensable for policy intervention. International organizations have influence over what types of statistics are made available. For instance, should a country with limited statistical capacity prioritize fiscal indicators over data for the Sustainable Development Goals? Statisticians at the international level also develop standards for the measurement of indicators. Should GDP, for example, include the output of unpaid household work, the informal sector, or financial services?  Given the degree to which numbers shape policies around the world, it is imperative to understand what drives these harmonization efforts.

As is true for the FickleFormulas project as a whole, there is no presumption that these international organizations are driven by some malign intent. Quite to the contrary, this subproject investigates empirically what motivates these organizations to pursue particular projects.

The data demand keeps growing…

The evolution of policy over the past two decades has only increased the importance of a deep understanding of how official statistics are governed around the world. Now more than ever, they take a central role in economic policy and international development agendas. At the same time, the promises of data as a tool for development are outpacing the ability to collect reliable statistics in many parts of the world. The Sustainable Development Goals greatly increase the demand for wide-ranging economic, social and environmental data. With this in mind, the project takes a close look at how the UNSD, the World Bank, and IMF actively attempt to shape macroeconomic measurement. Whatever we know about the economies of developing countries is ultimately influenced by these understudied political processes.