Mon, Jun 09, 2014 page15

• Drugs and sex could boost EU’s growth

  MONEY TRUMPS MORALS? Some rights groups have responded with outrage to the idea of including revenues from drug trafficking and the sex trade to calculate GDP

  • AFP, PARIS
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  Europe’s governments are turning their attention to prostitution, drugs and contraband as possible ways of boosting their economic growth profiles, as they struggle away from their debt crises.

  Italy caused a stir when it announced last month that it would begin including revenues from drug trafficking and the sex trade, as well as contraband tobacco and alcohol, to calculate GDP from next year.

  One effect would be to reduce the public deficit as a ratio of output, if EU authorities were to accept the idea. That would be a big help to countries trying to get their public deficits below the EU ceiling of 3 percent of output.

  In 2012, Italy’s central bank estimated the value of the criminal economy at 10.9 percent of GDP. Including these figures could therefore boost the country’s growth to above the government’s 1.3 percent estimate.

  Last month, Britain said including illegal activities such as prostitution and drugs into national accounts would add about ￡10 billion (US$16.8 billion) to GDP, equivalent to about 1 percent of national output.

  Using the undeclared or so-called black economy to calculate national statistics is part of a range of changes recommended by the EU’s statistical institute, Eurostat, to be implemented in September.

  Eurostat said including such data would allow a better comparison between countries with different laws.

  “GDP is not an indicator of morality,” a spokesman said, adding that only transactions carried out consensually would be included.

  However, others are less convinced.

  Institute of International Relations researcher Eric Vernier said including “gross criminal product” in growth figures is a cynical attempt to combat the eurozone’s debt crisis.

  “The problem is to put this new statistical method on the table at the moment when everyone has budget problems,” he said.

  Many of Europe’s struggling governments will welcome any boost to growth figures that will reassure both disillusioned voters and markets.

  However, the decision has sparked outrage among politicians and rights groups.

  French Minister for Women’s Rights Najat Vallaud-Belkacem and Belgian Interior Minister Joelle Milquet have both written to the European Commission to express their “astonishment” over the proposals.

  “Prostitution is not a voluntary commercial activity. To believe that it can have an ideological bias is a mirage and an insult to the millions of victims of sexual exploitation worldwide,” they said.

  “Prostitution cannot be assumed to be a transaction freely agreed between parties. The question also arises concerning drugs, especially hard drugs, considering the issue of addiction,” said Ronan Mahieu, head of INSEE, which calculates France’s GDP.

  A spokeswoman for the Association for the Protection of Women’s Rights in Britain said the group was “surprised and saddened” by the decision.

  While in France, Marine Le Pen, the leader of the extreme-right National Front party, which came top in recent European Parliament elections, described it as a “denial of basic morality.”

  Europe’s black market is already huge, according to experts.

  Friedrich Schneider, professor at the Johannes Kepler University of Linz in Austria, estimates that the EU’s “shadow market” is equal to 18.6 percent of the bloc’s GDP this year.

  However, calculating the value of illegal activities is no easy task.

  An EU document from 2012, littered with acronyms and complex mathematical formulas, gives guidelines on how to calculate the “inputs” of the prostitution industry, such as the cost of renting an apartment, or “transport and storage” for drug traffickers. It even includes how to interpret the “ratio of purity” in narcotics.

  Schneider said that undeclared illegal activities and “value creating” services such as prostitution should be included in the calculations, but not totally criminal activities.

  On this basis, Germany, Italy and France account for about half of Europe’s black-market activities. In recession-hit Greece, he estimates that black market transactions account for an estimated 23 percent of GDP, lower than the estimated 40 percent of the less-developed economies of Eastern Europe, but far higher than the roughly 8 percent in Luxembourg.
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