Recently, the SEC said it was going after several rating companies, consulting companies, and subsidiaries of Chinese companies for possibly putting out false information. In the United States and in our markets we have strict rules for accounting and reporting. We have these to protect the investor, and to protect the market's integrity. If people don't trust the markets, they won't invest, and we won't be able to capitalize American businesses. Today, with the global flow of investment moving at such a high rate of speed we need similar rules and standardization around the world.
Still, there is a problem when it comes to state run capitalism, crony capitalism, and a lack of integrity or ethics amongst foreign companies. Even worse many foreign nations themselves put out economic data which is not entirely correct, it is often riddled with careful manipulation of statistical information, if not outright lies. The leaders of these nations have reasons for doing what they are doing, perhaps to stay in control, keep the peace amongst the citizenry, and boost local investor, consumer, and citizenry confidence while getting the advantage on foreign direct investment.
Who could blame them? Well, I guess I will, because the United States and other first world nations are unable to deal with an un-level playing field. So we need everyone to agree to the same standardization, measurements, and level of integrity. Of course, before we demand this, we need to live up to our own standards. Okay so let's talk about this for a moment shall we?
On December 7, 2012 there was an interesting article the Wall Street Journal by Tom Orlick "China Survey Finds Higher Jobless Rate," which noted that the actual Chinese unemployment rate from the survey was 8.05% as opposed to the official rate put out by the Chinese government of 4.1%. No, I'm not surprised, and perhaps neither are you as we get all sorts of funny numbers out of China, none of which bears much resemblance on reality.
Of course, before we go and pick on China we might want to look in our own mirror with our own BLS or Bureau of Labor Statistics here in the United States. We are constantly quoting economic numbers which are not exactly correct, or are hiding a bigger reality. And, the Obama Administration, just as other administrations before them are constantly playing with our economic figures and numbers for a political advantage. If we are to have true integrity, honesty, transparency, and get free from government corruption we will all do better in the end. So, we need to solve these problems not only here at home but also abroad.
Our global economy is interconnected, and if one country fudges their numbers they will experience an increased inflow of foreign direct investment, much of which may not be deserved and will thus, sting the investors unnecessarily. This unfortunately lop sides the economies of the world, and causes problems down the road when some nations continue to build an economic bubble that never really existed, one which must come back into the reality of fruition eventually. Indeed, I hope you will please consider all this on an economic philosophical level, think on it.
Lance Winslow has launched a new provocative series of eBooks on Economic Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net/
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