Window dressing

Window dressing is perhaps more associated with the world of finance and accounting today, rather than with the retail business from where the term originated; it unflatteringly refers to actions, or inaction, directed towards improving the appearance of the financial statements, most likely with not very noble intentions. And, sadly, accountants, albeit for obvious reasons perhaps, bear the brunt of the related derogatory criticism. However, lately, with nothing much to do after Iftar, except to collapse on the couch in front of the idiot box, and get tortured by the uninformed debate on Pakistan's economic crisis, I had an epiphany.
It is payback time.
Numbers don't lie, but to the untrained mind, which is like most of the world population, numbers are Greek; perhaps the primary reason why everything in the financial statements appears as fudging to the common man. Don't get me wrong, I am not defending the dark side by suggesting that financial statements are always accurate, or true and fair; or making any excuses for the accounting profession. In fact, admittedly, accountants over time have made sure that users of the financial statements, more and more remain clueless; today, my guess is everybody else has given up on even trying reading, let alone understanding, corporate annual reports. Incomprehensible Accounting Standards have literally ensured that only accountants have the capacity to actually make some sense out of financial statements, and even that too, not fully all the time.
But even if financial statements, taking advantage of mankind's inherent gullibility relating to anything numeric, have been made all the more unreadable and unfathomable, so what! Does not every other profession strive to be mysterious in their respective pursuit of fame and money? Does anyone really know what a surgeon does when he opens a patient up in the operation theatre? Or does anyone have any clue what the mechanic was doing under the car and what services has he invoiced?
The point is that if a doctor window dresses, and a car mechanic window dresses, and a plumber window dresses, and every other professional in the world window dresses, why only accountants are constantly ridiculed over allegations of window dressing.
Perhaps the answer lies in the price tags, the size of the dressing; financial statements of the Global 200 run into billions of dollars with annual revenues in certain cases exceeding national budgets of large developing countries; even in the case of a country like Pakistan, corporate balance sheets go into billions of rupees. But if monetary size is the only criteria to deserve the stigma of window dressing, than there is a profession which has done far more; trillions worth of window dressing should take precedence over billions!
At least in the case of the Accounting Standards, by and large the accounting treatments prescribed are exact with little manoeuvrability allowed in certain specific situations; and in most cases window dressing had more to do with ethical choice. Compare it with a profession where proof of all theories is imbedded in models which need to keep all other variables constant, or else the theory fails; and obviously all else is never constant in the real world. And let us not even discuss the economic man.
There is no accounting standard which claims to encompass the entire financial statements. Contrarily, hitting a consumer price inflation target is supposedly sufficient for managing the entire economy; and apparently inflation can be managed simply by moving interest rates up and down, incredible! And then there is another magical recipe, GDP growth; it is argued, GDP growth can singularly take care of everything under the sun, starting from unemployment and ending on fiscal deficit.
Unfortunately, the magic did not work as per the recipe, at least in the case of Pakistan. We listened to the economists and had the right GDP growth, we had low inflation, and we had low interest rates, and the economy still went south. For decades, irrespective of where interest rates or inflation were, according to the annual economic surveys, unemployment was always around 6% in Pakistan; but still the economy remained under duress. All along the narrative was that the economy was back on track, except when it suddenly wasn't. And it isn't just about us, most economists were confident that the world had entered the era of great stability, until it turned out to be the great recession.
So what exactly has economics been selling all these years? Even if you diligently follow the prescription, the economy still gets sick. If that is not window dressing at its best, then what is?
Dear Readers, I hope I have successfully argued my case, even if satirically. Albeit I am under no delusion that window dressing will now suddenly become the bane of existence for economics and economists; but it was fun anyways. On the other hand, at the very least, I hope to have shaken, even if a little bit, the foundation of the belief that economics is our knight in shining armour; interest rates, fiscal deficit and inflation will not increase productivity. Standard economic theory is definitely guilty of misguided policy in our case, even if it is not guilty of window dressing!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])