23 Signs You're about to be Fired

Aine Caine in The Independent


Getting fired can be a real shock to the system.

But there are usually signs that your termination is pending. You've just got to know where to look.

Maybe your boss is out to get you. Maybe you've been embroiled in some recent controversy at work. Or maybe your organization is undergoing a massive transition or merger.

Either way, it helps to be prepared.

Lynn Taylor, a national workplace expert and the author of "Tame Your Terrible Office Tyrant: How to Manage Childish Boss Behavior and Thrive in Your Job," tells Business Insider that the savviest professionals always keep an eye out for the classic signs that their job is in danger. This way, if and when they notice red flags popping up, they can attempt to turn the tides before it's too late.

Here are 23 signs you may be getting the boot:

You receive a bad performance review (or two, or three)

A negative evaluation is not always synonymous with being fired, but, in conjunction with other bad feedback, it can mean trouble, says Taylor. "Your employer needs to create a paper trail, so along with warnings, your employer will use a performance review to document the problem areas."

More than one poor performance review in a row is an especially bad sign, adds Michael Kerr, an international business speaker and author of "The Humor Advantage."

"Depending on how bad your first performance review was, you may be given a chance to make corrections and improve, but a series of critical performance reviews could be a major sign that your job is in jeopardy," Kerr tells Business Insider.

If it's because of a lack of experience or lack of training in a certain area, then there's always a chance to fix it. But critical phrases to be mindful of during performance reviews include, "You're not a good fit for our culture," "You're not a team player," "Your personality or style doesn't seem to mesh with the team," or "You have a major attitude problem."

"If you hear any of these types of criticisms then it's time to break out your résumé, since it's often assumed that attitudinal issues are deeply engrained and unfixable," he says.

You're left out of the loop

If it's suddenly hard to access important data that would help you perform well in your job, or you're not invited to important meetings or included on key emails, a pink slip may be coming your way, says Taylor.

"There could be other reasons for this happening, but certainly one may be that your leadership has lost the trust or confidence in your abilities, making you vulnerable when and if layoffs happen," Kerr says. 

Your job has become mission impossible

"When you first assumed the role, you had your marching orders and could accomplish them. Now it seems that you're tasked with projects akin to climbing Mount Everest blindfolded," says Taylor.

"You're being set up to fail," Kerr explains. "Sometimes this is due to lousy leadership, but occasionally it can be because a company wants to get rid of you, but they need solid evidence to do so, and setting you up for disaster is one way of getting the 'proof' you longer belong there."
Your boss has 'warned' you (more than once)

Formal warnings are never a good thing. "You may have received a verbal warning, a written warning, and maybe even a second written warning," says Taylor. If you have, know that more bad news may be coming your way.

Your relationship with your boss has deteriorated

You used to be friends (or friendly, at least) -- but now there's tension whenever you're in the same room. "Once your relationship has deteriorated to the point of being toxic, then how your boss treats you -- from ignoring you to publicly berating you -- can be obvious signs that your job might be in peril," says Kerr.

You're asked to provide detailed reports about time or expenses

"Increased scrutiny is a phenomenon that is rarely initiated by the accounting department," Robert Dilenschneider, author of "50 Plus!: Critical Career Decisions for the Rest of Your Life," tells Business Insider. "The boss believes that you have wasted time or inflated expenses. Even if you are 100% innocent, it doesn't matter. Find out if you are the only person being scrutinized."
Fewer projects are coming your way

Here's a bad sign: You suddenly have a lot of time on your hands because not a lot of work is being assigned to you. "As you try to secure normal work, it seems it's hard to get cooperation from your boss and other managers," Taylor says. "They're suddenly making your work life difficult."
Teamwork isn't your strong suit

It's important to fit into the company's culture. That means taking one for the team sometimes, as HR consultant Laurie Ruettimann tells Reader's Digest: "If we ask you to travel for your job or attend a conference, it's not really a question. Say no, and it can be career-ending."

You've lost resources

When you lose staff, budgets, and access to certain outside services and/or office space -- or any number of tools that would enhance your performance -- it could be because your employer is trying to push you out. 

Your boss is on your case all the time

Are you constantly being asked for progress reports? Do you find that your boss constantly monitors your work?

If so, you may want to start looking for a new job, says Dilenschneider.

You're being micromanaged or ignored

It seems that you're working in extremes. Either your boss is watching your every step, or they're nowhere to be found. "Either way, it makes for a highly uncomfortable environment," Taylor explains. "If they're watching over you, you feel a lack of trust. If they're ignoring you, then you are in a seemingly endless state of inertia on your project status."

You have fewer responsibilities

Do you feel less important? Have your subordinates been transferred to other managers? Have projects been reassigned to your colleagues? If so, you could be getting the boot sometime soon.
Your perks start to evaporate

"Your colleagues are all sent to a conference in Marrakesh, but you aren't invited. You are told to fly coach after years of flying business class. Suddenly, you lose your corner office and are relocated to the bullpen," says Dilenschneider. "Perks are an important part of the job, and if you sense yours are being eroded, you have every right to worry."
You're no longer praised for your work

Even if you performed a miracle never before witnessed by a mortal being, it seems your boss wouldn't acknowledge it now. "To do so would run contrary to the campaign underway to remove you from the company," explains Taylor.

You've received a pay cut or been asked to take time off

If you've been asked to take a leave of absence, you probably have something to worry about. "This is a major sign that things aren't well, even if it's under the guise of being what's 'best for you,'" says Kerr. "It's the equivalent of a dating couple 'taking a break for a while' -- and we all know how that usually ends."

You notice more gossip and strange behavior from your coworkers

When people seem to shy away from you, and you notice it most from people with whom you shared a friendship, it probably means something's up. "Oftentimes when coworkers hear rumors about someone being fired or even reprimanded, they stay away to avoid 'guilt by association,'" Taylor says.

You report to new or more people

Suddenly you're reporting to more junior people or more managers in a matrix environment. "There's more red tape and bureaucracy whereas before you could get your work done in a streamlined way," Taylor says. This isn't a great sign.

You've made a major mistake that causes your company external embarrassment or a lot of money

"Depending on the context and how your leadership team treats failures and setbacks, especially in the realm of experimenting with innovative ideas, then you might be allowed to file a major mistake under the heading 'learning experience,'" Kerr says. "But for some, this will mean an early exit out the door."

Your boss goes directly to your subordinates

This sign is similar to "being left out of the loop" -- but even worse. "Most organizations have a chain of command, and when it is disrupted, it is a clear indication that you are no longer needed," says Dilenschneider.

Your access to certain data is limited

When a company is preparing to let someone go, they sometimes limit or revoke the employee's access to certain accounts a bit prematurely.

Beware if your email password no longer works or you've been locked out of your company's intranet, says Taylor.

You're no longer asked for input on key decisions

Not being asked for input means your boss no longer values or cares about what you have to say, Kerr warns. "Freezing you out of the loop is often the first sign of a slow slide out the door."
There was a recent merger, but little information

After a merger, it's not uncommon for a company to make layoffs -- sometimes even massive layoffs, Kerr says.

"If you're feeling that your job was at risk already, then a merger could put the nail on the proverbial coffin," adds Taylor.

Your instincts are telling you something's wrong

"If you feel you've done everything you can, but still have that 'I might get fired' feeling, you're probably right, and it's likely time to move on," Andy Bailey of business coaching service Petra Coach tells Business Insider. "You may be an 'A' player, but it might have to be somewhere else. Begin seeking out other positions that better reflect your personality and work ethic."

Ketti Salemme of TINYPulse, an employee survey product, also tells Business Insider that it's important not to disregard your own instincts.

"Sometimes the sign can be nothing more than a gut feeling," Salemme says. "Whether it be a shift in the company culture, your job duties, or your relationship with colleagues, this can be indicative enough that you may soon be let go."

Tax evaders exposed: The HSBC Files

Annette Alstadsæter, Niels Johannesen and Gabriel Zucman in The Guardian


The statistics on inequality – those used, for instance, in Thomas Piketty’s bestseller, Capital in the Twenty-First Century – only include the income and wealth the taxman sees. So how high is inequality when also accounting for what he doesn’t see? Recent leaks from tax havens suggest the gap between the rich and the rest is even wider than we think.
Tax records are invaluable for the study of economic inequality. They contain detailed information about the income (and, in some countries, wealth) of taxpayers. Much of this information comes directly from employers and banks, and is therefore reliable. And because tax records exist as far back as the early 20th century, they can be used to shed light on the long-term evolution of inequality.

The graphs published on the World Wealth and Income Database, for example, show just how powerfully this information can inform the public debate. The top 1% income share is now closely scrutinised by journalists and policymakers in the US, where the rise of inequality has been particularly extreme; it even gave the Occupy movement its motto: “We are the 99%.”

But for all their merits, tax data raise an obvious issue: by their very nature, they entirely miss tax evasion. Is this a serious problem? That depends: if tax evasion is equally prevalent among rich and poor, measured inequality will be unaffected. But if the rich dodge taxes more than others, tax records will underestimate inequality.

At the time of the 2007 leak, HSBC Switzerland was a major actor in the offshore wealth management industry. Photograph: Harold Cunningham/Getty Images

Before now, there hadn’t been any attempts to address the measurement of global tax evasion systematically. The reason is simple: the lack of comprehensive information about who skirts taxes. The key data source used in rich countries to study tax evasion is random tax audits – but these audits do not capture tax evasion by the very wealthy, because few of them are audited, and because random audits fail to detect sophisticated forms of evasion involving shell companies and hidden accounts.


The higher one moves up the wealth distribution, the higher the probability ​​of hiding​ assets

In our recent study, however, we exploited a massive trove of data leaked from HSBC Switzerland, the so-called HSBC files, to fill this gap. In 2007 a systems engineer, Hervé Falciani, extracted the internal records of HSBC Private Bank, the Swiss subsidiary of HSBC. In 2008, Falciani turned the data over to the French government, who shared it with foreign tax administrations. The documents leaked by Falciani included the complete internal records of more than 30,000 clients of this Swiss bank in 2006-07.

At the time of the leak, HSBC Switzerland was a major actor in the offshore wealth management industry. It managed US$118.4bn – about 4% of all the foreign wealth managed by Swiss banks. This is a unique source of information through which to study tax evasion, because the leak can be seen as a random event, and it comes from a large (and, the available evidence suggests, representative) offshore bank.

We also made use of the Panama Papers, which last year revealed the identity of the shareholders of shell companies created by the Panamanian firm Mossack Fonseca. Just as with HSBC, this leak is valuable as it can be seen as a random event and involves a prominent provider of offshore financial services. The Panama Papers, however, have one drawback: they do not allow us to estimate how much tax was evaded (if any) by the owners of the Mossack Fonseca shell companies. It is not illegal per se to own shell corporations in Panama or elsewhere.

  Leaked documents revealed the identity of the shareholders of the shell companies created by the Panama-based law firm Mossack Fonseca. Photograph: Kin Cheung/AP

We combined random audits with these new sources of information to shed light on who really evades taxes in Denmark, Norway and Sweden – and the results are striking.

The higher one moves up the wealth distribution, the higher the probability of hiding assets. Scandinavian households in the top 0.01% of the wealth pyramid – the ultra-rich, who own more than $40m in net wealth each – are 250 times more likely than average to hide assets. Furthermore, the ultra-rich HSBC customers had considerably more wealth in their accounts than other customers – so although they were very few in number, they owned around half of all the wealth hidden at HSBC.


In Norway, the super-wealthy appear to be 30% wealthier when all the wealth hidden in tax havens is taken into account

This pattern is not specific to HSBC or the Panama Papers. Over the last few years, thousands of Norwegians and Swedes have voluntarily declared previously hidden assets under a tax amnesty. Here again, the super-rich are found to own half of the total amount of offshore wealth.

So what are the consequences for inequality? At the very top of the pyramid, it is much greater than previously estimated. In Norway, where the available wealth data is particularly detailed, the super-wealthy appear to be 30% wealthier than previously thought, when all the wealth hidden in tax havens is taken into account. The share of wealth owned by the top 0.1% increases from 8% to 10%.

Since Scandinavians generally pay their taxes and hide little wealth in total, our results are likely to be even stronger in Great Britain and elsewhere. A more accurate measurement of tax evasion would likely increase inequality levels even more than in Scandinavia.

These results underscore a basic truth: in a world where wealth is globalised and where a big industry has specialised in helping the ultra-rich avoid and sometimes evade their taxes, our ability to track great fortunes – and to tax them appropriately – faces considerable challenges.

But does this mean nothing can be done? Not at all.

It is possible to collect much better information on wealth and its distribution. Progress has already started in this area, as a number of tax havens have agreed to automatically exchange bank information with foreign countries’ tax authorities – a major evolution since the time of the HSBC leak.

But this policy faces an obvious issue: what are the incentives for offshore bankers to provide truthful information? After all, these are the same people who for decades have been hiding their clients behind shell companies, and sometimes even smuggling diamonds in toothpaste tubes or handing out bank statements concealed in sports magazines – all of this in violation of the law and the banks’ stated policies. Yet it still should be possible to secure their cooperation, if they face stiff enough sanctions for non-compliance.

More broadly, the key to successfully fighting tax evasion is to change the incentives for the providers of wealth concealment services. Over the last few years, a number of banks have pleaded guilty in the US to criminal conspiracies to defraud the Internal Revenue Service – yet they were able to keep their banking licences, and the fines they had to pay paled in comparison to their profits. A more ambitious approach would put criminal organisations out of business. If tax evasion ceases to pay, it will disappear.

NDTV and Chidambaram by Subramanian Swamy

In conversation with Rajiv Malhotra

The Corbyn Effect

Part 1 Andrew Murray interviewed byTariq Ali

Part 2

Yes this really is the end of Tory austerity – because it was never about economics in the first place

Ben Chu in The Independent

“The crisis”, the economist Rudiger Dornbusch once noted, “takes a much longer time coming than you think. And then it happens much faster than you would have thought.” A similar dynamic describes the progress of Conservative austerity politics.

The stunning failure of Theresa May in last week’s general election signalled to Tory MPs that the public have had enough of spending cuts. Though the deficit still stands at £50bn and the national debt is £1,700bn (and rising), austerity is over, we’re now told.

Seven years of Tory lectures that eradicating the deficit for the good of future generations is paramount suddenly fall silent. Politicians who have tarred critics as criminally irresponsible for suggesting an increase in public borrowing have now, in an instant, changed their tune.

People who insisted that if we did not balance the budget at the earliest possible date Britain was destined to become an economic basket case, like Greece, apparently no longer fear such a gruesome outcome. The collapse of the citadel of austerity rhetoric is truly remarkable in its rapidity.

But it was a very long time coming. It became clear within a year of George Osborne’s 2010 “emergency budget”, which forced through huge cuts in capital budgets and an intense squeeze on Whitehall departments and welfare spending, that the austerity medicine was hurting, not helping.
The economy was flatlining, teetering on the verge of recession. Whether this was primarily due to the crisis in the neighbouring eurozone or because the negative knock-on impact of the government’s domestic spending cuts was bigger than initially thought is still debated by economists.

But it doesn’t really matter. Even the conservative estimates of the Office for Budget Responsibility suggest that GDP growth would have been around one per cent higher in both 2010-2011 and 2011-2012, if the Coalition government hadn’t slashed domestic spending on the scale and pace it did.

With interest rates as low as they could go and the Bank of England struggling to support demand through money printing, this was a time for the Government to ramp up capital investment spending to offset the general slowdown – something numerous distinguished academic economists, and even the IMF eventually, urged. It would have made us all better off, putting idle resources to use.

But despite such a capital spending stimulus being permitted under his own fiscal rules, the former Chancellor George Osborne refused to do it. He told us that the international bond markets would lose confidence in the UK’s creditworthiness if we deviated from his original plan – a risible claim given that UK borrowing costs were plumbing new depths as investors around the world ploughed money into government bonds.

The reality was that Mr Osborne didn’t want to do it because it would have meant losing face. He would have had to admit that his previous pigheaded insistence that he didn’t need a fiscal “plan B” was wrong. The credibility risk was not to the UK’s borrowing status but his own political stock.

With the help of a cynically conceived and distorting subsidy to the housing market, the Conservatives managed to eke out a surprise victory in the 2015 general election. Drawing the lesson that austerity had become an electoral asset and useful stick with which to beat Labour, the Chancellor doubled down. He tightened his fiscal rules in a way that virtually the entire economics profession regarded as economically illiterate, making no distinction whatsoever between day-to-day government spending and productive capital spending, and also unveiled a round of large welfare cuts for the working poor.

Hubris set in. And nemesis soon followed. Unexpected parliamentary resistance mounted to Osborne’s welfare cuts, prompting a humiliating reversal on tax credits. At the same time the impact of extensive cuts to policing, schools, social care and the NHS finally became apparent in the form of deteriorating services. It took longer than expected, but it finally arrived.
Yet when Theresa May replaced David Cameron as Prime Minister and Philip Hammond replaced George Osborne as Chancellor last year, they didn’t reverse any of the inherited departmental spending or welfare cuts. And they went into the 2017 election with the same old scare stories about Labour’s reasonable capital investment plans, the same old specious lines like “no magic money tree”. Only now has the dam of Conservative denial crumbled.

Reducing the UK’s deficit, which had ballooned to 10 per cent of GDP in 2010 due to the financial crisis, was a necessity. Cutting it without regard for the state of the overall economy and the feedback effects on aggregate demand was unscientific stupidity and wanton vandalism. Austerity, as practiced by the Conservatives, was a policy driven not by economics, but by politics and ideology. The politics was baiting Labour. And the ideology was the desire to reduce the size of the state.

Who was to blame? The prime culprits were George Osborne and David Cameron of course. But Treasury civil servants were also enthusiastic supporters. It was enabled by two senior Coalition Liberal Democrats, Nick Clegg and Danny Alexander. It was endorsed by economists in the City of London and cheered on by Tory-supporting newspapers. It was abetted by ostensibly neutral political journalists, who unthinkingly succumbed to the fatally misleading idea that a government’s finances can be compared to a household’s budget.
They say victory has a thousand fathers whereas defeat is an orphan. But if we look carefully it’s clear the austerity failure of the past seven years has a sprawling parentage.

Jeremy Corbyn​ has won the first battle in a long ​war​ against the ruling elite

Italian Marxist Antonio Gramsci understood that before taking power, the left must disrupt and defy common sense – just as Labour defeated the proposition that ‘Corbyn can’t win’


Paul Mason in The Guardian



To stop Jeremy Corbyn, the British elite is prepared to abandon Brexit – first in its hard form and, if necessary, in its entirety. That is the logic behind all the manoeuvres, all the cant and all the mea culpas you will see mainstream politicians and journalists perform this week.

And the logic is sound. The Brexit referendum result was supposed to unleash Thatcherism 2.0 – corporate tax rates on a par with Ireland, human rights law weakened, and perpetual verbal equivalent of the Falklands war, only this time with Brussels as the enemy; all opponents of hard Brexit would be labelled the enemy within.

But you can’t have any kind of Thatcherism if Corbyn is prime minister. Hence the frantic search for a fallback line. Those revolted by the stench of May’s rancid nationalism will now find it liberally splashed with the cologne of compromise.

Labour has, quite rightly, tried to keep Karl Marx out of the election. But there is one Marxist whose work provides the key to understanding what just happened. Antonio Gramsci, the Italian communist leader who died in a fascist jail in 1937, would have had no trouble understanding Corbyn’s rise, Labour’s poll surge, or predicting what happens next. For Gramsci understood what kind of war the left is fighting in a mature democracy, and how it can be won.

Antonio Gramsci, the Italian Marxist theoretician and politician. Photograph: Laski Diffusion/Getty Images

Consider the events of the past six weeks a series of unexpected plot twists. Labour starts out polling 25% but then scores 40%. Its manifesto is leaked, raising major questions of competence, but it immediately boosts Corbyn’s popularity. Britain is attacked by terrorists but it is the Tories whose popularity dips. Diane Abbott goes sick – yet her majority rises to 30,000. Sitting Labour candidates campaign on the premise “Corbyn cannot win” yet his presence delivers a 10% boost to their own majorities.

None of it was supposed to happen. It defies political “common sense”. Gramsci was the first to understand that, for the working class and the left, almost the entire battle is to disrupt and defy this common sense. He understood that it is this accepted common sense – not MI5, special branch and the army generals – that really keeps the elite in power.

Once you accept that, you begin to understand the scale of Corbyn’s achievement. Even if he hasn’t won, he has publicly destroyed the logic of neoliberalism – and forced the ideology of xenophobic nationalist economics into retreat.

Brexit was an unwanted gift to British business. Even in its softest form it means 10 years of disruption, inflation, higher interest rates and an incalculable drain on the public purse. It disrupts the supply of cheap labour; it threatens to leave the UK as an economy without a market.

But the British ruling elite and the business class are not the same entity. They have different interests. The British elite are in fact quite detached from the interests of people who do business here. They have become middle men for a global elite of hedge fund managers, property speculators, kleptocrats, oil sheikhs and crooks. It was in the interests of the latter that Theresa May turned the Conservatives from liberal globalists to die-hard Brexiteers.
The hard Brexit path creates a permanent crisis, permanent austerity and a permanent set of enemies – namely Brussels and social democracy. It is the perfect petri dish for the fungus of financial speculation to grow. But the British people saw through it. Corbyn’s advance was not simply a result of energising the Labour vote. It was delivered by an alliance of ex-Ukip voters, Greens, first-time voters and tactical voting by the liberal centrist salariat.

The alliance was created in two stages. First, in a carefully costed manifesto Corbyn illustrated, for the first time in 20 years, how brilliant it would be for most people if austerity ended and government ceased to do the work of the privatisers and the speculators. Then, in the final week, he followed a tactic known in Spanish as la remontada – the comeback. He stopped representing the party and started representing the nation; he acted against stereotype – owning the foreign policy and security issues that were supposed to harm him. Day by day he created an epic sense of possibility.

The ideological results of this are more important than the parliamentary arithmetic. Gramsci taught us that the ruling class does not govern through the state. The state, Gramsci said, is just the final strongpoint. To overthrow the power of the elite, you have to take trench after trench laid down in their defence.

Last summer, during the second leadership contest, it became clear that the forward trench of elite power runs through the middle of the Labour party. The Labour right, trained during the cold war for such trench warfare, fought bitterly to retain control, arguing that the elite would never allow the party to rule with a radical left leadership and programme.

The moment the Labour manifesto was leaked, and support for it took off, was the moment the Labour right’s trench was overrun. They retreated to a second trench – not winning, with another leadership election to follow – but that did not exactly go well either.

As to the third trench line – the tabloid press and its broadcasting echo chamber – this too proved ineffectual. More than 12 million people voted for a party stigmatised as “backing Britain’s enemies”, soft on terror, with “blood on its hands”. 

And Gramsci would have understood the reasons here, too. When most socialists treated the working class as a kind of bee colony – pre-programmed to perform its historical role – Gramsci said: everyone is an intellectual. Even if a man is treated as “trained gorilla” at work, outside work “he is a philosopher, an artist, a man of taste ... has a conscious line of moral conduct”. [Antonio Gramsci, Selections from the Prison Notebooks]

On this premise, Gramsci told the socialists of the 1930s to stop obsessing about the state – and to conduct a long, patient trench warfare against the ideology of the ruling elite.

Eighty years on, the terms of the battle have changed. Today, you do not need to come up from the mine, take a shower, walk home to a slum and read the Daily Worker before you can start thinking. As I argued in Postcapitalism, the 20th-century working class is being replaced as the main actor – in both the economy and oppositional politics – by the networked individual. People with weak ties to each other, and to institutions, but possessing a strong footprint of individuality and rationalism and capacity to act.

What we learned on Friday morning was how easily such networked, educated people can see through bullshit. How easily they organise themselves through tactical voting websites; how quickly they are prepared to unite around a new set of basic values once someone enunciates them with cheerfulness and goodwill, as Corbyn did.

The high Conservative vote, and some signal defeats for Labour in the areas where working class xenophobia is entrenched, indicate this will be a long, cultural war. A war of position, as Gramsci called it, not one of manoeuvre.

But in that war, a battle has been won. The Tories decided to use Brexit to smash up what’s left of the welfare state, and to recast Britain as the global Singapore. They lost. They are retreating behind a human shield of Orange bigots from Belfast.

The left’s next move must eschew hubris; it must reject the illusion that with one lightning breakthrough we can envelop the defences of the British ruling class and install a government of the radical left.

The first achievable goal is to force the Tories back to a position of single-market engagement, under the jurisdiction of the European court of justice, and cross-party institutions to guide the Brexit talks. But the real prize is to force them to abandon austerity.

A Tory party forced to fight the next election on a programme of higher taxes and increased spending, high wages and high public investment would signal how rapidly Corbyn has changed the game. If it doesn’t happen; if the Conservatives tie themselves to the global kleptocrats instead of the interests of British business and the British people, then Corbyn is in Downing Street.

Either way, the accepted common sense of 30 years is over.

Economic forecasting is not a science

Prashanth Perumal in The Hindu

India lost its tag as the ‘world’s fastest-growing economy’ last month as its fourth quarter GDP growth fell to 6.1%, the slowest in two years. Very few economists expected the slowdown. In fact, most waited for the economy to rebound as it quickly healed from the impact of the demonetisation of high-value rupee notes in November. Critics of demonetisation felt vindicated, particularly after GDP figures for the third quarter suggested that the shocking, overnight move to demonetise had very little negative impact.

Yet, for all the sermon delivered by the country’s punditry, the fact remains that macroeconomic forecasting is a lousy business — regardless of who makes the predictions. For one, data cannot prove or disprove any hypothesis as they do not establish causation. The mere fact that growth slowed in the first full quarter after demonetisation does not prove decisively that the slowdown was caused by demonetisation. As some have speculated, the current slump in the growth rate may be a continuation of the trend of slowing growth witnessed even before demonetisation.

Nor does the unexpectedly strong GDP growth in the third quarter prove that demonetisation has had no negative impact on the economy. The economy is a complex organism with several variables working in tandem, which makes prediction an almost impossible task. This is in contrast to the physical sciences where controlled experiments allow scientists to tease out the influence of any variable.

Two, there are no constant relationships between variables when it comes to the economy that allow for making exact predictions. So, even if economists were to dig into historical data and find the exact impact that demonetisation has had on GDP growth, there is no guarantee that it would hold in the future. For instance, people’s expectations may change which makes them adapt to a cashless economy better, thus blunting the impact of demonetisation on GDP growth.

Three, macroeconomic forecasting is focussed to a very large extent on measuring things that are fundamentally immeasurable. When it comes to measuring GDP, for instance, the price that is assigned to a good as its value is arbitrarily decided by statisticians. This happens despite the fact that the value of any good lies in the eyes of the consumer. Finally, both innocent and political biases influence the process of official data collection to calculate GDP, a fact that raises questions about its reliability.
None of this is to say that economists can make no useful predictions. But such predictions are more likely to be qualitative rather than quantitative. Any wise economist could foresee that demonetisation would have a substantial impact on the economy; simply from the premise that money greases the wheels of commerce, so outlawing it would affect demand and create chaos across production lines. But trying to quantify its impact in terms of the exact percentage points of growth that would be shaved off GDP is a futile exercise.