To Boost Its GDP, Italy Has Decided to Add Some Weird New Statistics


The news: After years of chronic economic turmoil, Italy is turning to some unusual tactics to boost their numbers and hit deficit targets.

On Thursday, the Italian National Statistical Institute (Istat) announced that cocaine, prostitution and black market alcohol will be officially included in Italy's GDP starting in 2014, and prior-year figures will be "adjusted" to meet the methodology. The revision were, according to Istat, necessary to meet European Union rules.

Four recessions in 13 years have shrunk Italy's GDP to $2.13 trillion, 2% lower than in 2001, and in response, Prime Minister Matteo Renzi has committed to reducing the deficit below 2.6% of GDP. But in these years, police have clashed violently with protesters over harsh austerity measures and unemployment is as high as 13%.

"Even if the impact is hard to quantify, it's obvious it will have a positive impact on GDP," economist and finance professor Giuseppe Di Taranto told Bloomberg. "Therefore Renzi will have a greater margin this year to spend."

No word yet on whether Cosa Nostra will be included in the new policy.

The background: The Independent reports that by including the black market transactions, Italy's GDP is expected to rise about 2%.

For comparison, consider America's underground economy, which includes everything from prostitution and drugs to under-the-table labor and off-the-books construction jobs and is worth up to $2 trillion. Analysts Richard Cebula and Edgar Feige estimated in 2011 that "18% to 19% of total reportable income is not properly reported to the IRS," causing a $500 billion shortfall in tax revenues.

Legalized marijuana in Colorado, for example, has already raised millions of dollars in tax revenue, demonstrating that the drug market is robust even in shaky economic times. Legal cannabis sales across the entire United States are expected to reach a staggering $2.57 billion in 2014, up from $1.53 billion a year ago.

It's estimated that Americans send as much as $10–$30 billion south in exchange for drugs. Worldwide, the drug trade is estimated at $45–$280 billion, thanks to gigantic markups.

How legit is Italy's move? It's a little shady, given that drugs are as illegal in Italy as they are in the rest of Europe (non-organized prostitution is legal). So while the numbers increase Italy's GDP on paper, it won't actually have a practical effect on the Italian economy.

And no, former prime minister Silvio Berlusconi had nothing to do with this. He's currently banned from public service, and his only contributions to the new figures come from personal purchases.