This is a picture of one of the Cinque Terre towns--I've forgotten which. I was there in 2017.
One of the enduring debates in European politics is whether Italy will stay or
leave the Eurozone and perhaps the EU. I don't think Italy is likely to leave.
Nor do I think that most of Italy's ecoomic problems have much to do with the
Eurozone or the EU. But, many disagree with me. Here are some examples:
1. Samantha Fund
https://samantha.fund/why-its-time-for-italy-to-leave-the-euro/
https://www.schroders.com/en/za/intermediary/insights/economics/are-italys-days-in-the-eurozone-numbered/
I don't agree with either assessment, but they have great slides.
THE HISTORY OF ITALY"S PROBLEMS
[I wrote this in 2016--not a lot has changed. I will update 2016-2020 below after this long annotated bibliography.]
Perhaps the bleakest assessment of Italy's immediate prospects circa 2016/2017 comes from Ambrose Evans Pritchard (an arch Brexiteer and Europhobe).
AEP fears the ending of QE (ECB bond buying, in short) more than the referendum results. The key bit of his argument is here:
Note: not all economists agree with the claim that Italy can recover with "the help of devaluations." See the exchange between Martin Sandbu (an elasticity pessimist) and Paul Krugman (devaluation will solve the problem).
In order to understand the broader historical context that led to Renzi, it is necessary to understand the failures of Berlusconi and the German concern about Italy under Berlusconi's misrule.
The following series of articles in Der Spiegel from 2011 are especially useful here:
The Sweet Poison of Berlusconi: Italy's Downward Spiral Accelerates and here and here and here and here and here
Perry Anderson, who is both a Marxist and a misery-guts, has written a couple of very long but perceptive analyses of Italian politics over the last 20 years.
Perry Anderson, The Italian Disaster LRB (2014)
Perry Anderson, Land Without Prejudice LRB (2002)
Some long and short news documentaries of the key political figures in recent Italian Politics
Matteo Renzi (2014)--John Mauldin, "When Hope is a Strategy"--a very interesting discussion of Italy's economic problems with lots of charts and an assessment of Renzi's ability to solve these problems.
Beppe Grillo (2008)
Beppe Grillo (2010)
For a bunch of scholarly articles on Grillo's M5S, see the Special Issue of Contemporary Italian Politics Volume 6 2015 (available online from the library); see especially Paolo Natale, "The Birth Early History and Explosive Growth of M5S"
Rachel Donadio Talk on Italy 2013
Berlusconi (BBC Documentary 2010) (see all parts here(2) and here(3) and here(4) and here(5) and here(6) and here(7)
Berlusconi (BBC DOCUMENTARY 2010)
The Last Days Of Silvio Berlusconi (2011)
Silvia Berlusconi and the Mafia (in French)
Girlfriend in a Coma (Bill Emmott--former ed. of The Economist. I have the DVD if anyone wants to watch the whole thing.)
Italy's Productivity Blues
Francesco Giavazzi Lecture (2013)--Italy's Future--Reform or Decline
--Giavazzi makes the interesting observation that Italy's output in 08/09 fell more than in other countries which experienced (unlike Italy) a housing bubble and a bank crisis (Spain, for example); and then recovered at half their rate in 10/11. He notes that no one has adequately explained this puzzle.
--Giavazzi offers four explanations for why Italy has stopped growing:
(i) The Size/Inefficiency of the Public Sector;
(ii) The Euro (unit labour costs rocket compared to Germany)--
(iii) Firms are too small, too family-run, and drawn to protected service sector.
(iv) Failed Transition from Imitation to Innovation (why is there no Apple and Facebook?)
In short, Italy suffers from too much economic activity in the unproductive sector and not enough in the productive sector.
Politics blocks any effective transition from the former to the latter.
Luigi Zingales Lecture on Italy's Economic Problems--slides here
Zingales' Conclusions:
1. The Italian disease appears to be an extreme form of a European disease:
2. This disease appears to be linked to the lack of meritocracy and professional performance-based management.
3. Inability to take full advantage of the ICT (basically the internet and computers) revolution–
4. We still need to explain why these practices are so rare in Italy and Southern Europe
5. Suppose that there is some institutional factor in Southern Europe that makes difficult to keep up with technological change.
6. Since Japan and the United States could never have maintained a fixed exchange rate from 1950 to 1990? [Why? Because Japanese growth rates were at least twice those of the US in that period], then it is no surprise that Italy could not live in a common Eurozone with faster growing Northern European countries.
7. Italy cannot survive in the Euro as presently constituted.
Two comments on Zingales' talk:
1. Even if he is right, the talk begs the question why Italy was never able to implement a more meritocratic political and administrative culture. Why did Italy fail where France and Germany succeeded? To answer this question, one needs to look more deeply into Italian history and the nature of the Italian family and localism.
2. So far as the Euro is concerned, there are three options:
(i) Fix it through centralization--turn the EU into a Superstate, a United States of Europe (my own preference);
(ii) Muddle-through--(although this presumes that the Germans will be willing to support more bond-buying);
(iii) Break it up--whether into two groups (NEURO/SEURO) or one big Northern group and the rest (NEURO and the rest) or a Europe of national currencies.
Since (i) is not likely to happen; the choice is really between (ii) and (iii)--my preference would be (iii) over (ii), which condemns Italy (and other Southern European countries) to years of economic misery and unemployment.
The trouble with (iii), however, is that it is far from clear whether devaluation will work--here we are back to the elasticity pessimist thesis discussed earlier--see Maria de Merzis, The Italian Lira for more on this.
"The global reflation shock since the election of Donald Trump is bringing matters to a head faster than anybody could have imagined weeks ago. Italian borrowing costs have risen in lockstep with US Treasury yields, even though Italy is not reflating at all and is certainly not about to enjoy a fiscal shot in the arm.
Italy is in a sense the biggest casualty of the Trump effect and the tornado of imported monetary tightening. Its banks own €400bn of Italian government bonds and these are suddenly worth less. Some paper losses must be marked to market, further eroding core capital ratios.
It is our old friend the 'doom loop'. The banking crisis is driving up sovereign bond yields, and higher yields are in turn driving the banks into deeper trouble.
The painful saga of Italy is by now well-known. The country is stuck in a depressionary debt trap. Trend growth is below zero. GDP is still 9pc below its pre-Lehman peak. Industrial output is back to levels reached thirty-five years ago.
The contours are worse than the 1930s. It is a lost decade turning into a second lost decade. No large developed country in modern times has ever suffered such a fate.
Italy is the victim of a vicious cycle of labour hysteresis as economic stagnation and weak productivity reinforce each other. Its exchange rate is overvalued by 20-30pc against Germany.
How easily we forget that Italy used to run a big trade surplus with Germany in the old days of the lira, and its real growth rate tracked German growth almost exactly with the help of devaluations."
Note: not all economists agree with the claim that Italy can recover with "the help of devaluations." See the exchange between Martin Sandbu (an elasticity pessimist) and Paul Krugman (devaluation will solve the problem).
In order to understand the broader historical context that led to Renzi, it is necessary to understand the failures of Berlusconi and the German concern about Italy under Berlusconi's misrule.
The following series of articles in Der Spiegel from 2011 are especially useful here:
The Sweet Poison of Berlusconi: Italy's Downward Spiral Accelerates and here and here and here and here and here
Perry Anderson, who is both a Marxist and a misery-guts, has written a couple of very long but perceptive analyses of Italian politics over the last 20 years.
Perry Anderson, The Italian Disaster LRB (2014)
Perry Anderson, Land Without Prejudice LRB (2002)
Some long and short news documentaries of the key political figures in recent Italian Politics
Matteo Renzi (2014)--John Mauldin, "When Hope is a Strategy"--a very interesting discussion of Italy's economic problems with lots of charts and an assessment of Renzi's ability to solve these problems.
Beppe Grillo (2008)
Beppe Grillo (2010)
For a bunch of scholarly articles on Grillo's M5S, see the Special Issue of Contemporary Italian Politics Volume 6 2015 (available online from the library); see especially Paolo Natale, "The Birth Early History and Explosive Growth of M5S"
Rachel Donadio Talk on Italy 2013
Berlusconi (BBC Documentary 2010) (see all parts here(2) and here(3) and here(4) and here(5) and here(6) and here(7)
Berlusconi (BBC DOCUMENTARY 2010)
The Last Days Of Silvio Berlusconi (2011)
Silvia Berlusconi and the Mafia (in French)
Girlfriend in a Coma (Bill Emmott--former ed. of The Economist. I have the DVD if anyone wants to watch the whole thing.)
Italy's Productivity Blues
Francesco Giavazzi Lecture (2013)--Italy's Future--Reform or Decline
--Giavazzi makes the interesting observation that Italy's output in 08/09 fell more than in other countries which experienced (unlike Italy) a housing bubble and a bank crisis (Spain, for example); and then recovered at half their rate in 10/11. He notes that no one has adequately explained this puzzle.
--Giavazzi offers four explanations for why Italy has stopped growing:
(i) The Size/Inefficiency of the Public Sector;
(ii) The Euro (unit labour costs rocket compared to Germany)--
(iii) Firms are too small, too family-run, and drawn to protected service sector.
(iv) Failed Transition from Imitation to Innovation (why is there no Apple and Facebook?)
In short, Italy suffers from too much economic activity in the unproductive sector and not enough in the productive sector.
Politics blocks any effective transition from the former to the latter.
Luigi Zingales Lecture on Italy's Economic Problems--slides here
Zingales' Conclusions:
1. The Italian disease appears to be an extreme form of a European disease:
2. This disease appears to be linked to the lack of meritocracy and professional performance-based management.
3. Inability to take full advantage of the ICT (basically the internet and computers) revolution–
4. We still need to explain why these practices are so rare in Italy and Southern Europe
5. Suppose that there is some institutional factor in Southern Europe that makes difficult to keep up with technological change.
6. Since Japan and the United States could never have maintained a fixed exchange rate from 1950 to 1990? [Why? Because Japanese growth rates were at least twice those of the US in that period], then it is no surprise that Italy could not live in a common Eurozone with faster growing Northern European countries.
7. Italy cannot survive in the Euro as presently constituted.
Two comments on Zingales' talk:
1. Even if he is right, the talk begs the question why Italy was never able to implement a more meritocratic political and administrative culture. Why did Italy fail where France and Germany succeeded? To answer this question, one needs to look more deeply into Italian history and the nature of the Italian family and localism.
2. So far as the Euro is concerned, there are three options:
(i) Fix it through centralization--turn the EU into a Superstate, a United States of Europe (my own preference);
(ii) Muddle-through--(although this presumes that the Germans will be willing to support more bond-buying);
(iii) Break it up--whether into two groups (NEURO/SEURO) or one big Northern group and the rest (NEURO and the rest) or a Europe of national currencies.
Since (i) is not likely to happen; the choice is really between (ii) and (iii)--my preference would be (iii) over (ii), which condemns Italy (and other Southern European countries) to years of economic misery and unemployment.
The trouble with (iii), however, is that it is far from clear whether devaluation will work--here we are back to the elasticity pessimist thesis discussed earlier--see Maria de Merzis, The Italian Lira for more on this.
The Social and Economic Background to the Crisis:
Italy has Horrible Demographics
Italy has Horrible Demographics
No comments:
Post a Comment