Damned lies

About 180 years ago, the great Danish writer Hans Christian Andersen published the last of his Fairy Tales Told for Children – “The Emperors New Clothes”.

There was no Facebook or Instagram at the time, but the storyline could not have been more fitting for our very own times now.

Two weavers had promised an emperor a new suit of clothes. They told the emperor and everyone else that those clothes were very special. So special in fact that they were invisible to those unfit for their positions, stupid or incompetent.

The truth was that they made no clothes at all. When the emperor paraded his new clothes to the public, nobody saw them as they did not exist but everyone was afraid to be labeled as stupid, incompetent or otherwise unfit and hence they all complimented the emperor for his magnificent wardrobe. Finally, a child cries out that the emperor did not wear anything at all.

Most of us know the story. Indeed, in my home country Austria its taught in schools. And it never fails to bring a smirk on our faces.

How could people be so stupid? How could they allow themselves and the world to be so fooled by something that was so painfully obvious? I mean, it’s like looking towards the night-sky and pretend the moon is made of cream cheese.

Preposterous. Who would fall for such a thing?

You?

Before you jump out of your chair now, let’s make a little test. Let’s use an example.

What comes to your mind when I mention China? I am not talking about its human rights record. No, its also not the environmental situation there. And no, we also don’t want to look at the geopolitical issues or the trade war.

I would dare to wager that its Chinas stellar growth story that immediately pops up in your mind. A nation of poor peasants that has become the second most important economy of the planet and rivals the US for supremacy now.

However, it all looks a bit stale once we take into consideration the fundamental nature of the Chinese system.

Because there have been and there still are plenty of rumors that the growth rate of China is not realistic. I actually believe that most people don’t really believe the figures coming out of China at face value. However, when push comes to shove, most people like to pretend that its all fine as nobody wants to mess with an angry China.

How can we know? It might all be alright. I mean, many wondrous things happen in China and those folks have a 5000-year-old culture so who knows what they have up their sleeves? So, is it all that surprising that we prefer to close our eyes and accept those figures while we know fully well that they cannot be true.

We close our eyes and ears even when those in the know like Michael Pettis of Peking University say things like the debt overhang produces stagnation or a research paper written by economists at the University of Hong Kong and the University of Chicago says that you cant trust China’s official GDP statistics.

Those provincial party leaders that have been exposed over faking the data like Liaoning, for example, are just the tip of an iceberg as there is intricate machinery at work that shall conceal such things from prying eyes.

But why does everyone lie? It’s not only a repressive system that accomplishes this. It’s much more the desire to not stick out. Just imagine you are a party leader or a manager in a Chinese state-owned company. Or a low-level official in a village. Meeting the rather ambitious figures demanded by the Politburo turns to the impossible for them. They know it, but their personal careers depend on meeting or exceeding them.

Not meeting the figures is akin to sticking out. If you just want to remain a cog in the system, you better fake the data and be fine. And this goes through al the ranks. Nobody has an interest in exposing his underling’s fakery as he needs it as a basis for his own fumbled up figures. The art is meeting the targets for an easy life or exceeding the targets for a career but not too much as this would attract the wrong kind of attention.

Not playing the game of at least doing as if feels like being a whistleblower – and we all know that whistleblowers rarely ever have a nice ending. Being a whistleblower in China might cost you more than your career. But if you are working for a western company that has pegged its fate to the Chinese market, you might feel the same kind of pressure to comply.

There are studies that say that Chinas economy is far smaller than the official figures pretend. And that growth is far smaller. I have a feeling that real growth is a thing of the past and that China is contracting for real by now. It has contracted the Japanese disease before its average citizen got as rich as the average Japanese is.

If you think that I am singling out China, you are mistaken. This is a very general mechanism that would work out just the same in the US – if only it could. In open societies such as the US, failure is much quicker exposed and it also does not hold the same kind of stigma that it holds in countries such as China – or the Soviet Union.

You sure know the snowball analogy. The further the snowball rolls down the hill, the faster it grows. At a certain point, what would have been almost effortless to change now has become impossible. Open societies stop the snowball far earlier as the failings are exposed much earlier and corrected. They fail just as much as any other society, they just don’t let them grow into monsters. That’s not always true but it generally works to some degree.

Have you watched the HBO series on the greatest nuclear accident ever? I have and I was shocked. Not by the accident itself and the death and misery.

It was much more the generalized system of lies and the brutality with which it was enforced. It was not possible that Communism makes mistakes so any mistake that happened had to be covered up as they knew quite well that mistakes are unavoidable. And those cover-ups involved sending people to their sure death.

Many of those dying later must have known that they would not survive this and they still went along – some of them out of terror what might happen if they don’t comply. But they also harbored the hope that the system might still be right and they will somehow be just alright. Their head told them that they would die if they went on that roof, but they clung to some irrational belief in the system that made them prefer radiation poisoning over a quick bullet.

We believe in the infallibility of a caste, a bureaucratic system so much that we cannot even fathom that someone might have misconstrued a nuclear reactor to the point where using the emergency switch-off transforms this reactor into a nuclear bomb.

We are told that nuclear power plants in Japan are safe even if they are more than 10 years past their expiry date without major refurbishment because some managers wanted to save money. And we believe it until some mediocre Tsunami comes and shatters our belief system.

We are not used to asking questions. We trust the data that has been adjusted so many times over, nobody knows anymore what the truth must look like.

When we get notions that Russian gas will always be the cheapest gas there is, we lap it up like ice cream on a hot summer day. We don’t ask how this gas can be so cheap when the new Russian gas fields are some of the most challenging upstream ventures on this planet. Remember – challenging means it costs a lot of money.

We are being told that LNG from the Arctic circle that must travel through some of the worst seas the planet knows and be transported on extra-sturdy ships that are ice rated and then the LNG must be reloaded onto normal tankers from where it can then be brought to its destination and this LNG is competitive with all the other LNG on earth that does not have to go through this logistical ordeal. And we just accept it because we are told so and we want it to be true.

Many gas executives I worked with were honestly convinced that Russian gas would always be cheaper. They did not lie as they truly swallowed this fable hook and sinker.

Does this make it a true lie?

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