A Rich Blog – Does the US Need to Take a Cue from Santa and Keep a Naughty List?

In last Sunday’s Wall Street Journal, Jo Craven McGinty’s “THE WAGES OF SIN WOULD GIVE BOOST TO GDP” suggests that the US needs to follow the Europe and UN GDP recommendations, to include illicit activities in GDP. I must admit, I never thought of such a thing and don’t quite know how we would measure it; but apparently, governments claim to have done so for the past 80 years.

For economic reasons, the added 1% plus to the growth of our economy may be good and worth a discussion, but for me the main point of the article is less important than an obvious fact of the chart: the US seems to be growing more honest, and the honesty of the US has cycles.

In reviewing the data for the article, it is amazing to me how honest the US has become since the Bad Ole Days of the 1930s and 70s. In both eras, illegal activities rose to over 4% of GDP whereas today it is hovering at just over 1%. Much to my surprise, despite the opioid crisis, drugs used to command 3% of illegal activities in both eras and now account for about ½ of 1%. A big drop if you ask me.

Now, I can understand great dishonesty in the 1930s as that was the time of the Great Depression and hard times may cause normally honest people to turn to crime in desperation. It does not explain the huge jump in crime when the Boomers came of age! Maybe all that love and drugs of the 60s and 70s was playing out.

Drug activities and theft from businesses seems to equal about ½ of 1%, with prostitution and gambling making up the rest — $110 billion for drugs and $109 billion for theft from businesses, out of a $20 trillion economy. The statistics suggest that the legalization of gambling (state lotteries and Indian casinos) has had a huge impact on illicit gambling and crime in general. I can’t say why theft dropped so much. I can guess that as the US economy transformed from mostly manufacturing to a service economy, there was less to steal, which makes intuitive sense.

The lesson here, at least for us at Colman Knight, is that the US seems much more honest today than in times past. Some of it may be from legalization of gambling and other may be from lack of opportunity, but no matter what, those are positive trends. From the current news, I would never have guessed that the US population is more honest, but in this holiday season it seems worth emphasizing something that is good news!

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