"Is Italy Too Italian?"
08/01/2010
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"Is Italy Too Italian?" asks David Segal in the NYT, as he lays out the usual chatter from economists about how Italy is doomed because it hasn't embraced globalization fully enough, chatter I've been reading for the last 35 years about how Italy is going to collapse because it's not getting with the program:
Economists said that Mr. Barbera had a point, but they also said that worrying about this issue was like fretting about the head cold of a patient with Stage 3 cancer. They see a country with a service sector dominated by guilds, which don’t just overcharge but also raise the barriers to entry for the millions in ill-fated manufacturing jobs who might otherwise find work as, for instance, taxi drivers. They see a timid entrepreneur class. They see a political system in the thrall of the older voters who want to keep what they have, even if it dooms the nation to years of stasis.

They see a society whose best and brightest are leaving and not being replaced by immigrants, because Italy has so little upward mobility to offer.

If economists were running things in Italy, all those "millions in ill-fated manufacturing jobs" would already have had to "otherwise find work as, for instance, taxi drivers." And the rest could have gotten jobs at fast food restaurants.

Why won't Italians get with the program and outsource their entire manufacturing base to China?

Subversively, however, Segal occasionally stops to note that, no matter how badly Italy violates Contemporary Economic Theory 101 by refusing to go down the cheap labor route, his lying eyes tell him the place looks pretty good. He describes Signor Barbera's mill, which produces the world's finest wool fabric for men's suits, in loving detail. And, Italy hasn't blown up the world economy, at least not yet:

Since the economic crisis began, this country has regularly turned up on the informal list of Nations That Worry Europe. ... Study the numbers and you will find symptoms of distress that look a lot like those of Greece. Public sector debt amounts to roughly 118 percent of the gross domestic product, nearly identical to Greece. And like Greece, Italy is trying to ease fears in the euro zone and elsewhere with an austerity package, one intended to cut the deficit in half, to 2.7 percent of G.D.P., by 2012.

But dig a little deeper and the similarities end. The Italians, unlike the Greeks, are born savers, and much of the Italian debt is owned by the Italians. That means that unlike Greece, which will be sending a sizable percentage of its G.D.P. to foreign creditors for a generation to come, Italy is basically in hock to its own citizens.

”I know that in the States, all Mediterranean countries get lumped together,” says Carlo Altomonte, an economist with Bocconi University in Milan. ”But Italy’s problem isn’t that we have a lot of debt. It’s that we don’t grow.” ...

A sclerotic job market is a major reason that the Italian economy has been all but dormant for the past decade, growing far more slowly than its European peers. And this is a country that never had a housing bust or a major bank crisis.

They've haven't? That's downright un-American of them.
So how does Italy keep going? Given the numbers, you expect it to be flat on its back. But when you visit, there are hardly any signs of despair ...

One answer is the black economy, say economists. Roughly one-quarter of Italy’s G.D.P. is off the books. When you inquire about the cause and persistence of this longstanding fact of life, people here say that most Italians have little sense of national identity, an obstacle to a system of national taxation. The country didn’t really begin to transcend its clannish roots and regional dialects until after World War II; even today, displays of national pride are reserved for World Cup victories and little else....

The suspicion of Italians when it comes to extra-familial institutions explains why many here care more about protecting what they have than enhancing their wealth. Most Italians live less than a mile or two from their parents and stay there, often for financial benefits like cash and in-kind services like day care.
Something needs to be done about this!
It’s an insularity that runs all the way up to the corporate suites. The first goal of many entrepreneurs here isn’t growth, so much as keeping the business in the family. For a company to really expand, it needs capital, but that means giving up at least some control. So thousands of companies here remain stubbornly small – all of which means Italy is a haven for artisans but is in a lousy position to play the global domination game.

Those damn Italians, always refusing to play the global domination game. We ought to shoot some cruise missiles at them, just on general principles.

You know, I'm starting to rethink this whole High Trust = Good / Low Trust = Bad paradigm, which I've been guilty of pushing. Maybe we Americans could learn a little from the wisdom of the Italians. They've been an advanced, urbanized civilization for thousands of years, and maybe they've learned a thing or two about whom you can trust in the long run.

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