Just when you thought that Italy’s crazy government couldn’t get any more insane, it hit on a gimmick for improving the international perception of its economy. Just include the black market in its GDP. Never mind that the black market isn’t taxable, difficult to estimate and not exactly a good thing.
Italy is changing how it calculates its gross domestic product, a measurement of the overall economy, to include black market activity — everything from prostitution to illegal drug sales to smuggling and arms trafficking. Economists predict illegal sales will add 1.3 percentage points to GDP this year.
Hey, it’s one way to boost growth.
By including the black market, for which there are no concrete ways to measure and accurately determine value, the Italian government will be able to manipulate its GDP numbers in a way that’s bound to open it to criticism and agitate its Northern neighbors. Simultaneously, investors will learn to dismiss, or at least, discount, Italy’s statistics, since they won’t be regarded as “real.”
So Italy is creating a fake GDP based on imaginary numbers linked to organized crime. And this will not convince any investors of anything (except maybe in Russia, which is already buying into Italy).
A larger overall economy will enable Italy to lower its debt-to-GDP ratio, which is an essential part of meeting the EU’s financial standards. EU countries are not supposed to let their yearly bills reach more than 3% of the overall economy (or their debt exceed 60% of GDP.) If they do, they’re hit with hefty fines.
The other benefit of lowering the debt-to-GDP ratio, is that Italy should theoretically be able to borrow more money.
No, no and no.
Is Germany going to look at Italy’s new drugs and prostitution numbers and sign off on them? Is the City? I don’t think so.
This is a pointless gimmick that makes Italy look worse than before by an utterly insane government that could be replaced by zoo animals on cocaine with no one being the wiser.
While Italy’s move may be considered unorthodox, even shady, it’s not illegal. The EU seems to encourage the creative accounting; To give countries such as Italy a lifeline, new EU rules require member states to include the value of all income-producing activity in GDP calculations — and illegal activity is often income-producing. Italy is the first and only country to take advantage. Others, such as Spain (for which 20% of the overall economy is believed to be black market), and Greece, may soon follow.
You can see why the EU is on its last legs. It’s a giant fraud machine.
Last month, Nigeria declared itself the biggest economy on the continent of Africa by recalculating GDP. Ghana added 60% to its economy in 2010 by establishing new GDP accounting rules. Even the U.S. managed to tack on an additional $504 billion to our economy last year by giving credit to Hollywood and creative industries.
Meet the new world economy. It’s as fake as a three-dollar bill.