Italy's Creative Accounting

Europe has been in economic decline for many years, but the past 25 years or so of social welfare policy has been an almost fatal blow. None  of the European countries may not be third world economically, but some are moving in that direction. As their GDP's fall some of them use creative accounting to improve their scores. Take Italy, for example. Italy is changing how it calculates its Gross Domestic Product, a measurement of the overall economy, to include black market activity. That would mean everything from prostitution to illegal drug sales, to the mafia businesses to smuggling and arms trafficking. Wow! Things must be in a free fall in that economy. By including the black market economy, for which there are no real ways to measure and accurately determine value, the Italian government will be able to make its GDP number look much bigger.  The other members of the European Union will not like this and foreign investors in Italy will learn to discount Italy's statistics, since they won't be regarded as "real." I just hope President Obama doesn't get the same idea about fudging economic stats. He needs a cover for the awful way his administration has guided the U.S. economy.

So the reason Italy is becoming creative with its accounting is because it wants and the European Union to look better on paper. And , in theory, when Italy shows a better economic profile it will be able to borrow more money more easily and cheaply. A country like Spain , which is said to have almost 20% of it's economy underground, could benefit even more. As for the new Italian economic method, they might as well compute it that way. Most of the Italian economy has been operating that way for generations. Not paying taxes has been the Italian national sport for years

This brings to mind what other measures countries could use to say "we are doing well" economically, when the reality is the opposite. Since the job of a politician and a government seems to be as much to lie as to tell the truth, it could get interesting out there in the economic world. The unfortunate reality is that politicians everywhere do not think in terms of reality but in terms of strategies for being elected.. A large proportion of the voting public does not have the basic economic knowledge to understand the full ramifications of government actions. This coupled with the fact that the true cost of government excess is not seen until later years means that the government can fork out billions to areas where they can get votes despite the bad economic consequences.

Oh well, the world was drugged years ago with the invention  of the cell phone and the other electronic gadgets to which it is so addicted. I guess in the end it really matters little whether a government calls a pig a pig or instead calls it Miss Universe.