Earlier this week two countries announced that they would recognize prostitution and drugs as part of the economy. Italy and the United Kingdom (U.K.) now include these illegal activities as part of their Gross Domestic Product (GDP). GDP is the current method of measuring how much a country’s economy grows or contracts.
The U.K. Office of National Statistics announced on Thursday that paying for sex and drugs adds an extra £10 billion British pounds or approximately $16.7 billion U.S. into the economy every year. The decision by the British government to include the sales of narcotics and prostitution into the official GDP statistic comes only a week after Italy announced that starting in October, prostitution and drug sales would be included in the country’s GDP.
According to official government estimates, in the United Kingdom, illegal activities make up about 0.7 percent of the economy. Meanwhile, Italy officials have not yet released their estimates. While the move to add sex trade and drug is a bold one, the main reason for the change is to harmonize economic reporting across the European Union. In the Netherlands, prostitution and some drugs are legal. This allows the Dutch government include the activities in official statistics. The attempt to harmonize economic reporting means that many more European countries will be announcing the changes in the coming months.
In those countries where prostitution and many narcotics are illegal, the governments plan to use police statistics and other data to come up with estimates of how much these activities are adding to the economy. While governments are usually forced to use surveys to gather this information, many of those involved in the illegal activities are unlikely to answer those.
Britain and Italy join several other countries in measuring illegal activities. So far the list also includes Estonia, Slovenia, Austria, Sweden, Finland and Norway.
Recognition of prostitution and drugs as part of the economy also happens in some American states. The U.S. Bureau of Economic Analysis (BEA) counts prostitution as a part of Nevada’s state GDP categorizing it as “other personal services”, while in Washington and Colorado marijuana business is included in different categories such as retail and agriculture. A spokesman for BEA, Thomas Dail, said that only legal activities are counted as part of the economy in the United States. That means that U.S. will not follow the growing trend of including illegal activities into GDP count any time soon, however it may be possible in a few years.
As for Europe, this statistic will soon be requirement across the European Union. Although Britain’s Office of National Statistics estimates were widely criticized due to the way they were collected and Italy’s future estimates are believed to be negligible. The director of Italy’s statistical body national-accounts department, Gian Paolo Oneto admits that tracking such activities a great challenge. Meanwhile, a professor of economic statistics at the University of Rome and a former Istat president, Enrico Giovannini quips that non-statisticians underestimate the difficulty statisticians are faces with when it comes to measuring GDP. Recognizing illegal activities such as prostitution and drug sales as part of the economy only makes the task more difficult.
By Ivelina Kunina