Drugs and prostitutes in Italy: They make up a surprisingly large part of its economy.

Drugs and Prostitutes Are a Surprisingly Large Chunk of Italy’s Economy

Drugs and Prostitutes Are a Surprisingly Large Chunk of Italy’s Economy

Moneybox
A blog about business and economics.
Feb. 27 2015 5:15 PM

Drugs and Prostitutes Are a Surprisingly Large Chunk of Italy’s Economy

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Bunga bunga indeed.

Photo by Pier Marco Tacca/Getty Images

Last fall, the European Union gave new meaning to the phrase stimulus spending when it began requiring its member states to start incorporating illicit activities—including drug trafficking, prostitution, and illegal alcohol and cigarette sales—when calculating the size of their economies. The goal was to make it easier to compare stats like gross domestic product across borders. The Netherlands, for instance, already counted the cash generated by legal marijuana sales in its national accounts. Germany, where prostitution is legal, tallied up the money from sex work. So European officials decided other countries could claim credit for those sorts of activities, even if, technically, they weren't above board.

So, which country's GDP got the biggest jolt? Perhaps this shouldn't be shocking, given that its former prime minister was indicted for allegedly sleeping with an underage prostitute, but the answer seems to be Italy. As the think tankers at Brussels-based Bruegel write, there's limited information out there about the ways the recent accounting changes affected different nations' statistics. However, this month the Organization for Economic Co-Operation and Development published a brief showing how much adding illicit activities in the mix changed GDP figures in 2010. Italy seemed to get the biggest boost, with its economy growing by a full percentage point. Spain was a close second, tacking on an extra nine-tenths of a point. These numbers aren't necessarily gospel, since sizing up a black market with precision is nearly impossible, but they are part of the official record.

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How to put that growth in context? Well, the new rules didn't just involve sex and drugs. They also reclassified research and development spending in a way that increased GDP. Bruegel points out that Italy got only a slightly larger boost from the tweak to R&D expenditures than it did from adding in all of the mob's favorite industries into its figures. Not a sign of the healthiest economy, but certainly of an entertaining one.

Jordan Weissmann is Slate’s senior business and economics correspondent.