The Italian economy, it turns out, has not been in a recession since the end of the second quarter of 2014 – thanks mainly to prostitutes, drug dealers, cigarette smugglers, and the myriad other citizens who earn their money on the Black Market. According to Italy’s National Institute of Statistics, or ISTAT, revised data for the first quarter of 2014 shows that rather than declining by 0.1 percent, Italy’s Gross Domestic Product remained flat during the first three months of the year.
The change was due, in part, to a decision on the part of the European Union to begin measuring black market activity as part of GDP. The traditional measure of GDP is the total value of goods and services purchased from producers in a given economy over the course of a year. And whether you like it or not, there is no arguing that drug dealers and hookers are offering, respectively, goods and services.
The revision, announced Wednesday, means that Italy did not suffer two consecutive quarters of shrinking GDP, the technical definition of a recession. It does not, however, mean that the economy experienced by the average Italian in the first half of the year was actually any better than it seemed at the time or that growth prospects going forward are any better. The addition of black market production was an accounting change and not an actual increase in activity.
The United Kingdom, among other countries, has also begun considering the black market when it measures its GDP. In a recent analysis, the UK’s Office for National Statistics estimated that drugs and prostitution combined constitute a market the size of 0.7 percent of the country’s GDP.
If that figure were applied to the United States, it would suggest that drugs and prostitution add about $114 billion per year to U.S. GDP – roughly the size of the motion picture and recording industries and more than a number of other sectors, including coal mining and air transportation.
Again though, the addition of these and other activities represents no real change in the GDP. It’s the economic equivalent of arguing “…but these go up to eleven.”
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