Blog author: kjayabalan
by on Wednesday, November 30, 2005

That’s the title of this week’s survey of Italy in The Economist.

The news for Italy is quite depressing. Its economic growth is the slowest in Europe, behind even France and Germany, its productivity is down while its wages are up, and a massive demographic crisis looms.

The survey is extensive, covering the structural, political and even cultural impediments today’s Italy faces. These include a tendency to blame Europe and China for Italian woes, an over-reliance on small- and medium-sized enterprises, too little foreign competition (especially in the banking sector), fractured political coalitions, high taxes and budernsome regulations, and crime, corruption and poverty in southern Italy. And while the economic situation is bleak, things are not really bad enough to push through the needed reforms. The overall prognosis is for a “long, slow decline.”

(See also, next week’s Time Asia magazine for this interview with Italy’s finance minister. I’m baffled how one man can manage to confuse the issue of global competitiveness so many times in one short intervew!)

The major difficulty is, however, ideological. Berlusconi himself and his government are simply not believers in the power of free markets, as they have sought personal and national wealth through political cronyism and negotiated deals. There is even less hope that a center-left coalition led by Romano Prodi will be capable of seeing the light.

Here’s a passage from the survey that sums this up:

“One general problem is that the whole notion of service is rather undervalued. Indeed, Italy often seems to suffer from a pervasive anti-business, anti-consumer culture. Italians may be entrepreneurial and creative, but they are no means pro-market. Neither of the two main post-war political parties, the Christian Democracts and the Communists, could be described as economically liberal. Nor is the Catholic Church, still a huge influence in the country, which has always affected to disdain profit. In any case, many businessmen in Italy do better by exploiting contacts and seeking favours from the state than by building companies or trying to serve customers better.”

This is a fair description of the intellectual climate regarding business in Italy, and it is a highly unsatisfactory one. Capitalism remains a dirty word espcially among the elite classes, including the religious.

Thankfully, the late Pope John Paul II helped develop Catholic social doctrine and lead it in the direction of a greater appreciation of free markets. In the landmark 1991 encyclical Centesimus Annus, he explicitly supported “an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector” (n. 42).

Clearly, this development of doctrine has not yet taken root in Italy, but that’s why the Acton Institue is here. With friends like the Istituto Bruno Leoni, we hope to be able to change this climate for the good of the bel paese and its charming yet under-employed citizens.