Well that’s one way to boost your country’s reported economic output. One wonders whether or not each European Union nation will break down the vice trade by component so that we can see growth trends in, say, prostitution. From Bloomberg News:
Europe has a new source of economic growth. In the next few months all European Union countries that do not already include drugs, prostitution, and other illegal and gray-market businesses in their gross domestic product calculations will have to do so.
The 2010 version of the European System of Accounts becomes obligatory for GDP reporting by EU member states in September. It states unequivocally that “illegal economic actions shall be considered as transactions when all units involved enter the actions by mutual agreement. Thus, purchases, sales or barters of illegal drugs or stolen property are transactions, while theft is not.”
The ostensible goal is to make countries’ economic data comparable. Relatively permissive EU members such as Germany, Hungary, Austria and Greece, where prostitution is legal, already include the revenue it produces in their national accounts. Other countries with more prudish laws have been denied a statistical bonus. The same goes for drugs: Some of them are decriminalized in the Netherlands — and have long been included in the GDP calculation — while other countries have shied away from doing this, to their own statistical detriment.
Italy already includes much of its shadow economy in its GDP figures, but will now have to go further. Adding drugs, prostitution, and black market alcohol and cigarettes could increase Italy’s GDP by as much as 2 percent, according to Eurostat. In this way, Italy’s hookers and drug addicts would help Italian Prime Minister Matteo Renzi bring Italy’s budget deficit below the euro area’s statutory 3 percent of GDP. They would also help him to meet requirements to show declines in Italy’s debt to GDP ratio, which continued its steep rise to 132.6 percent as of December.
The U.K., which also already includes part of its gray economy, and would only add $16.7 billion, or slightly more than 0.7 percent, to its 2009 GDP under the new rules. The British Office for National Statistics hasn’t done the calculations for subsequent years yet.
GDP measurements have long been a feast of creative accounting. Italy’s 1987 sorpasso, or rush to overtake the U.K. as the world’s fifth largest economy, is an often cited example: It was achieved when Italy first started accounting for its untaxed shadow economy, adding about 18 percent to GDP…
[continues at Bloomberg News]