Eastern European Economic Statistics Made Fun (Really!)
By Bryan Caplan
Tim Worstall provides some entertaining insight into the neverland of Communist and post-Communist economic statistics. It’s gotten rather trendy to say that former Communist countries are worse off than they were in 1989 or 1991. The main problem with these claims is that they take the original numbers at face value.
Simple example: If the East German Mark had been valued at the market exchange rate instead of the official 1:1 rate subsidized by the West, estimates of East German GDP under Communism would have been far less:
We could even look at Germany…at unification Ostmarks were exchanged at 1:1 with D Marks, one of the things that is still causing huge problems in the East. But even responsible economists thought that 2:1 would have been valid…..now we think that 4:1 would have been about right. What this means is that in 1989 we were overvaluing the GDP of East Germany by a whole 100%.