Drugs, prostitution and smuggling—Italy’s GDP is about to get much bigger

Wouldn’t everybody love another 11% of GDP?
Wouldn’t everybody love another 11% of GDP?
Image: Reuters/Ciro De Luca
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The drug trade, prostitution and smuggling are to be added to Italy’s GDP calculations from Sep 2014, Italy’s institute of statistics, ISTAT, announced on May 22 (link in Italian). The change is meant to comply with an EU regulation from 2013 that requires all transactions, regardless of their legal status, to be accounted for.

Italy is home to several huge organized-crime organizations, and according to a 2012 estimate by Italy’s central bank, the country’s criminal economy is worth about €170 billion ($230 billion), around 11% of 2012 GDP. If that estimate is accurate, Italy will report a big jump in GDP this year. Without the change, the increase would be only 0.5% for 2014.

Image for article titled Drugs, prostitution and smuggling—Italy’s GDP is about to get much bigger

Clearly, this would not mean that Italy was actually doing any better. But it could boost Italians’ morale nonetheless. This isn’t the first time Italy has revised its GDP calculations to include shady activities. In 1987, after “black,” untaxed transactions were factored in, Italy showed a staggering 18% growth, performing what is still remembered as il sorpasso, briefly overtaking the UK’s GDP. Though Italy’s unemployment at the time was 11% (it was 12.7% this March), the jump was welcomed by the Italians, who, remembers The Economist (paywall), “virtually took to the streets to celebrate Italy’s overtaking of Britain in the international rankings.”

Indeed, a boost of confidence was reported at the time. ”Who wants to be compared with a poor country like Great Britain?” one commentator asked. ”We want to compare ourselves with rich countries: Sweden, Denmark, France.” Even if that’s on the basis of an illegal economy.