Why survey data often falls short

In social reality, various theories or principles are often discovered. However, not all theories apply universally across different countries or periods. Over time, these theories may evolve or be refined, and in some cases, they may even be discarded. The crucial point here is that no theory can be considered without the context of time. A principle that seems highly relevant at one point in history might become obsolete as circumstances change. This is the reality, but we often fall into the trap of assuming that certain information is timeless and universally applicable. Additionally, when evaluating a theory, its exceptional aspects are often overlooked. Moreover, in Bangladesh, the statistics published based on various surveys are often incomplete. This leaves room for significant gaps and problems in the data. We cannot accept any information as fully comprehensive or unquestionably reliable.

A private research institution, in its report, stated that due to the high inflation over the past two years, 7.8 million people in the country have fallen below the poverty line, with 3.4 million becoming extremely poor. Another 9.82 million people are living just above the poverty line and are at risk of slipping into poverty with even a minor setback. A few years ago, following the COVID-19 pandemic, another research organization noted that the pandemic had caused a significant migration of people from cities to rural areas, with many losing their jobs. As a result, 34.5 million people had fallen below the poverty line. However, we have yet to learn what happened to these individuals afterward. This data could be considered incomplete or partial research. The fact that people have fallen below the poverty line is not the most crucial piece of information. What is far more important is understanding how these individuals have worked to overcome their situation and how successful they have been in doing so.

The question arises: what is the basis for the survey report that has been drafted and published? Did the surveyors collect data by visiting each individual household, or did they only gather information from a selected few families? If they collected data from only a small sample of households, can this be considered comprehensive? Complaints have been made that many of those responsible for market monitoring do not personally visit the markets to gather information on product prices. Instead, they rely on various secondary sources to determine whether prices have risen or fallen. Based on this information, they make minor adjustments to the previous month's data to calculate the inflation rate. As a result, the inflation rate reported by the relevant government institutions often does not reflect the actual market conditions.

There is a common misconception that if the price of one or two goods increases abnormally, it is automatically considered inflation. However, this is not the case. To measure inflation, a specific set of goods is considered. In economic terms, an increase in the price of just one or two individual items does not constitute inflation. In Bangladesh, inflation is measured by the Bangladesh Bureau of Statistics, which takes into account the average price increase or decrease of a predetermined set of goods. These goods are divided into two categories: some for urban areas and others for rural areas. Inflation in urban areas is measured based on 422 goods, while for rural areas, it is based on 318 goods. If the average price of these goods increases, it is considered an upward trend in inflation. Conversely, if the average price of these goods decreases, it is seen as a downward trend in inflation. Inflation is further categorized into two types: food inflation and non-food inflation. Among the 740 goods used to calculate inflation in both urban and rural areas, some items are not frequently purchased by consumers.

Therefore, an initiative has been taken to exclude these essentially unnecessary goods from inflation calculations. Many economists often use the terms inflation and monetary inflation interchangeably. While the negative effects of both may be similar, the distinction between these two concepts is important. Inflation refers to a rise in the price of goods in the market, assuming other conditions remain unchanged. On the other hand, monetary inflation refers to an increase in the money supply within the economy. The term "inflation" itself means an increase or swelling. So, when the price of goods rises, it is called inflation, and when the money supply increases, it is referred to as monetary inflation.

On one occasion, I asked a renowned economist what we understand by money laundering. He replied that money laundering means money being transferred out of the country and sent abroad. I was taken aback by his answer.

Because money laundering and money smuggling are not the same thing. While money smuggling is one of the techniques used in money laundering, the term "money smuggling" cannot be used to describe the entire process of money laundering. Money laundering refers to the process of making illegal money appear legitimate through various methods. This can occur both within a country and abroad. Many people believe the term "money laundering" originates from the word "laundry," referring to the act of cleaning dirty clothes in a laundry. Similarly, money laundering involves various techniques to "clean" illicit money and make it appear legitimate.

Another example of statistical confusion could be money laundering. Most of the information published about money laundering and money smuggling is often based on assumptions and can be misleading. A prominent economist in Bangladesh recently stated that over the last 50 years, 1 trillion taka had been smuggled out of the country, meaning an average of 2,000 crore taka was smuggled abroad every year. However, a report from the Washington-based research organization Global Financial Integrity (GFI) claimed that every year, 64,000 crore taka is smuggled out of Bangladesh under the guise of international trade.

A former president of the World Bank stated that the amount of money laundered globally each year is equivalent to 2 to 5 percent of the world GDP. In terms of dollars, this amount ranges from 85 billion to 200 billion US dollars. In 2012, the Ministry of Finance published a report stating that Bangladesh's underground economy constitutes 37 to 85 percent of the GDP. It is important to note that the information provided by the former president of the World Bank or the Ministry of Finance is far from being fully verified. Had they been certain, they would have specified the exact amounts. Isn't the range of 2 to 5 percent of global GDP somewhat odd? Typically, when we are confident about a statistic, we mention the exact figure. If uncertain, we use a range, such as between 30 to 32 percent or 80 to 85 percent. However, the gap in the range provided here is quite large, making this statistic uncertain. Those involved in illicit financial activities never disclose the amount of money they earn or spend to anyone. There is also no authority responsible for maintaining records of black money or laundered money. Therefore, it is safe to say that such information is misleading.

Many people mistakenly use the terms "black money" and "undisclosed money" interchangeably, which is incorrect. It is often claimed that the government has provided opportunities to legalize black money through the national budget, but in reality, the government only offers opportunities to legalize undisclosed money, not black money. There is a distinct difference between the two. Black money refers to money earned through illegal means (such as theft, bribery, corruption, etc.) and kept outside the formal tax system. Undisclosed money, on the other hand, is money that is legally earned but not reported or taxed, thereby remaining outside the tax network. The owners of black money commit two crimes, while those with undisclosed money commit only one. Therefore, these terms should not be used interchangeably. It is sometimes stated that a bank has waived loans for a particular project. This is a misconception, as banks do not have the authority to waive the principal loan amount. Banks can only waive the interest and penalty interest imposed on the loan.

It is true that a significant amount of money earned through corruption has been siphoned off from Bangladesh in the past 15 years. However, can we accurately determine the exact amount of money illicitly transferred? While many people have made various claims about the amount, these statistics cannot be regarded as fully verified or credible. Those who have earned and laundered money illegally are unlikely to have left behind any traceable evidence. Economic formulas and other related measures may evolve or be modified over time. Nothing is fixed.

M A Khaleque: Retired banker and writer on economic affairs.