GDP, Blow and Hookers

Norm Gibbons

GDP, Blow and Hookers

For those unfamiliar with the term GDP, here is the definition: Gross domestic product is the market value of all “officially” recognized final goods and services produced within a country in a year, or over a given period of time.

The term, GDP, can also be applied to the world, even minute economies like on Cortes Island. This metric is considered the most important measure of economic growth. GDP is often measured against public debt, known as the GDP-to-Debt ratio. If GDP goes up, then a country may choose to increase its debt load. Anytime debt levels exceed GDP, many economists view this condition with alarm. Lucky us, Canada’s debt load is only 84.1% of its gross domestic product. Greece is 185%, Ireland 117%, Japan 238% and the U.S.A. 106%.

Above, I threw quotation marks around the word “official” for a reason. Lately, governmental economists have been tinkering with the way calculations of GDP are made, otherwise known as travesty accounting.

Italy, the fifth largest economy in the world, already includes much of its shadow economy in its GDP figures, but will now venture further into the unknown. They will add drugs, prostitution, and black market alcohol and cigarettes. This new way of calculating Italy’s GDP will increase their measure of goods and services by more than two percent, according to Eurostat. In this way, Italy’s hookers and drug addicts will help the Italian Prime Minister Matteo Renzi borrow more money. This improvement in the GDP-Debt ratio will also decrease the interest cost on new debt.

Italy is not alone in these actuarial fictions. The European Union encourages a raft of changes for all members. The United Kingdom will add a $16.7 billion boost to their economy with new estimates of drugs and prostitution. Even financially conservative countries like Germany, Sweden and Finland are quietly following with accounting changes as they realize that the benefits outweigh the downside of admitting their citizens are woefully addicted to illegal sex and drugs.

us-debt-to-gdpThe U.S.A. has also changed its rules. Now “intangibles” are a part of the calculation: research and development, movies, music and art. Not the sale of any of these things, but the inclusion of them as an asset, even though that “asset” may sit in a drawer forever. This announcement may not sound like a big deal, but the adjustment will account for a three percent drop in the US GDP-to-Debt ratio. The little maneuver will prevent the debt ceiling debate from coming in front of Congress and allow the US Treasury to add significantly to its $17.5 trillion debt burden.

What if Afghanistan included the poppy trade in their calculations? And Columbia admitted to the value of their cocaine trade. And Qatar placed a true value on the bribes paid for securing the 2022 World Cup. Lobbyists in Washington admitted to the extent of their bribes and Wall Street owned up to backroom deals. The answer would be that the world recession is over.

Just think what would happen if we on Cortes could increase the value of our final goods and services by taking into account our latest poem, the doodle on a calendar, a new and original tune we keep humming even in our sleep. Perhaps then, the Credit Union would think twice before closing their doors.