Doubting Macroeconomic Statistics from Authoritarian Regimes

I’ve touched a number of times on how you shouldn’t take at face value the statistical announcements of countries without a free press or viable opposition. Currently, this means China.

Thirty years ago, this meant the Soviet Union.

The guy who started pointing this out to people passed away this month.

Birman, who died on April 6 at age 82, was a Russian economist who emigrated to the U.S. in 1974 and predicted the collapse of the Soviet economy. Perhaps because he had served as a director of planning in Soviet factories, Birman had a profound distrust of Soviet statistics and believed its economy was smaller and could support far less nonmilitary consumption than nearly all Sovietologists in the West believed at the time.

… Birman was especially critical of the CIA and most Western experts for trusting too much in Moscow's official claims. For this apostasy, these Western elites ostracized and criticized Birman, saying that his views were by definition biased because he was an emigre.

That dismissal was unfair to Birman's scholarship, but it also had profound implications for U.S. policy during the last decades of the Cold War. The flawed CIA judgment that the Soviet economy was nearly as large and as wealthy as America's supported the view that the Soviet empire could never be defeated and so some kind of detente with Communism was inevitable.

Birman's insight that the Soviet Union was far weaker than it seemed from its military prowess was implicitly adopted by Ronald Reagan when he famously predicted in 1982 that "freedom and democracy will leave Marxism and Leninism on the ash heap of history." For that, Reagan was also reviled as a Cold War simpleton.

Birman stuck to his views and drew further scorn later that decade by predicting that Mikhail Gorbachev would lack the will to make the far-reaching economic reforms that were the only way to save the Soviet political system. As the world soon learned, Gorbachev's economic reforms were too little and the Soviet Union collapsed.

In a 2003 essay, "The Failure of the American Sovietological Economics Profession," John Howard Wilhelm recounted the debate between Birman and the CIA, concluding that "Given what has happened and what we now know, Birman clearly did get it right."

That the deaths of both Birman and Rusher have been so little remarked is a reminder that the liberal establishment will forgive intellectual dissenters for being wrong, but it will never forgive them for being right.