Posts tagged with: italy

Next Monday will be the sixtieth anniversary of Luigi Einaudi’s inauguration as Italian President. Einaudi (1874-1961) was a distinguished economist and defender of classical liberalism. In the immediate period following World War II, he was governor of the Bank of Italy and finance minister. Many credit his policy of low taxes and dismantling tariffs with having laid the foundation for Italy’s “miracolo economico” of the 1950s and 1960s.

However, while his role as president between 1948-55 is still remembered, his legacy of economic freedom as a key to Italian post-war development has largely been forgotten. In a recent article, the Milanese financial newspaper Il Sole 24 Ore lamented that currently there is no political force in the country which feels inspired by Einaudi’s actions and insights.

The center-right led by Silvio Berlusconi which won the recent general elections in April cannot be considered a catalyst for market reforms. Its new economy minister Giulio Tremonti has expressed hostility to free trade and blames most of the world’s economic problems on an ideology he calls “marketism”. At the same time, the Northern League, Berlusconi’s junior coalition partner, is impossible to categorize in terms of its economic policy. It demands decentralization and reducing the role of the Italian state but also advocates protectionism.

Neither can Einaudi’s heirs be found on the Italian center-left. The recently founded Democratic Party (PD) has its origins in communism. One can appreciate its transformation towards more moderate positions and a certain openness to economic liberalization. However, the transition is not complete and cannot be compared to the process initiated by Tony Blair in the UK Labour Party in the 1990s.

It is regrettable that nobody wishes to emulate Einaudi’s achievements. These go beyond the technical mastery and application of market economics. Einaudi’s understanding of freedom also led him to insights of more wide-ranging importance for Italian society. He believed that an excess of state power tends to make citizens more lazy in the way they live their lives and think of their responsibility towards others. This attitude leads them to tolerate the social ills around them. They view the poor state of public services as inevitable and accept corruption and rent-seeking as unchangeable phenomena.

Now, that so many people in Italy worry about the economic situation of the country and feel alienated from the political institutions and their lack of accountability, one might think that the time is ripe to return to Einaudi’s lessons.

Over the last two days, Italians have been heading to the polls to select a new parliament and a new government. As I’ve already noted, despite its commitment to moral and ethical issues, the Catholic Church in Italy does not have a favorite political party.

In last week’s Wall Street Journal Europe, Francis X. Rocca, a Vatican correspondent for Religion News Service, wrote a very coherent op-ed on this delicate topic. Rocca says the Church is not impressed with the center-right candidate for prime minister, Silvio Berlusconi, and seems to be closer on social-economic issues to center-left Catholics, like Francesco Rutelli, the once and perhaps future mayor of Rome, and Opus Dei member and Senator Paola Binetti. He also recalls a past statement of then-Cardinal Ratzinger: “in many respects democratic socialism was and is close to Catholic social doctrine.”

The Italian religious-political situation is a bit complicated. There are some significant divergences between Italian center–left policies and Catholic social teaching that Rocca could have noted. In the administration of its national welfare policies, the center-left hardly respects the principle of subsidiarity. Center-left environmentalists are vehemently opposed to genetically-modified organisms, while the Church has supported the use of biotechnology to feed the poor. Finally the center-left has historically been opposed to giving Catholic schools tax exemptions.

But the most intriguing aspect of this campaign has nothing to do with any of the main candidates or parties. Despite his formerly communist roots, Giuliano Ferrara is probably the most classically liberal voice in Italy who is running on a single issue: a moratorium on abortion (Read this interesting profile of Ferrara in the New York Times). He has also promoted the popular movie “Juno”. Surprisingly enough, he has not found much support from some major Catholic institutions, as explained by journalist Sandro Magister. The Catholic establishment seems to think Ferrara should not have created a political party devoted solely to abortion, as the Italian pro-life movement has become a mostly cultural and popular one.

Because of Italy’s byzantine political system and customs, important issues are often neglected by the parties and hence left to fringe candidates. This is why many Italians are fed up with mainstream politics, and partly explains the country’s economic woes. It is nonsensical to think that important ethical matters should have no part in a political debate. If there is ever to be a morally serious, classically liberal movement in Italy, this will have to change.

Blog author: berndbergmann
posted by on Tuesday, April 1, 2008

In yesterday’s Wall Street Journal Europe, Alberto Mingardi of Istituto Bruno Leoni (and long-time Acton friend) lists some of the reforms Italy needs to boost economic growth, which is forecast at a measly 0.6 – 0.8 percent for 2008.

Mingardi advocates a number of tax cuts and a more determined privatization of state assets. Some of these issues are being discussed – timidly – in the current election campaign; Mingardi also focuses on de-regulation and de-bureaucratization, issues heretofore neglected by Italian politicians.

Current labor regulations are “so numerous that no one can even give their precise number. No one can comply with rules they don’t even know about.” Mingardi adds that “it’s safe to say at least half the statutes currently in force should be repealed, as their only effect is to create confusion.”

A recent study shows that it takes on average 696 days to dismiss a worker in Italy compared to only 19 in the Netherlands. Critics of de-regulation would argue that Italian workers are therefore better protected. Wrong. Unemployment is 5 per cent in Holland compared to 6 per cent in Italy.

This may seem counter-intuitive but makes economic sense. If I know it will be impossible to fire an unproductive worker, I will be much less likely to take a chance on hiring any worker I don’t personally know. Hence, the Italian model of “family capitalism” and higher levels of unemployment.

Italian bureaucracy also exacts high costs on business creation. According to the World Bank, the cost of opening a business is 18.7 per cent of per capita income compared to only 0.8 per cent in the United Kingdom and 0.3 per cent in the Republic of Ireland. Moreover, an Italian business spends an average of 360 hours per year filing taxes whereas in neighboring Switzerland 63 hours suffice. (Not surprisingly, Switzerland is the economic envy of Europe.)

Workers also pay for onerous regulations. Everyone in Italy nowadays complains about stagnant wages, these are clearly the result of decreasing productivity caused by bureaucratic disincentives for businesses to invest and grow.

An overwhelming bureaucracy undermines both individual liberty and the public interest. It punishes the creative spirit of the entrepreneur by obstructing investment and innovation, and harms society by killing the potential for growth and employment. The irony is that regulation and bureaucracy are often enacted in the name of social values.

Blog author: paola.fantini
posted by on Tuesday, March 25, 2008

It’s election time in Italy, with voting scheduled for April 13 and 14 to select a new parliament and government. With the center of the Roman Catholic Church located within the Italian republic and historic tensions between the Church and State in Italy, it is worth asking how Italian pastors address public issues in this notoriously political country.

On March 18 the Secretary of the Italian Episcopal Conference (CEI), Giuseppe Bertori stated that the Church does “not express any involvement or preference for any politician or political party.” Local bishops can and do react differently, however. Vatican journalist Sandro Magister recently highlighted how the Archbishop of Bologna, Cardinal Caffarra, has issued specific guidelines for his priests.

Bologna is a noted left-wing city, where the cultural and political life is dominated by professors of Europe’s oldest university and Italian communists (yes, they still exist!). So the temptation for Bolognese priests is often to find common ground with the dominant part. Perhaps as a result, Cardinal Caffarra has forbid his priests from getting involved in partisan politics, primarily because it would compromise the communion of the Church.

The Cardinal has also prohibited the use of Church property for any political meetings or debate, will not allow parties to campaign on Church grounds, and has forbid the posting of any election posters, most likely making these parts of Bologna the only manifesti-free zone on the peninsula.

None of this means that the pastors cannot “guide” their flock. The last guideline says, in part, “If a parishioner should ask for counseling concerning the upcoming elections, priests must bear in mind that every elector is called to express a choice [….] The priest is called to help the parishioner, guiding him, so that he may distinguish those human rights worthy of being defended.” Finally, Cardinal Caffarra directs his priests to Congregation for the Doctrine of the Faith’s note on the participation of Catholic in political life.

So while the Church in Italy is non-partisan, it clearly has something to say about politics, especially when it comes to issues such the taking of innocent life, marriage and family, Catholic education and biotechnology. It has not, to date, addressed the various economic proposals of the parties, so we can assume that faithful Italian Catholics can differ on these matters in good conscience. The argument over economic reform should therefore take place on the basis of sound economics, which would probably mark an historical occasion in this country.

Hostility towards globalization is not the exclusive territory of the left in Italy. Giulio Tremonti, a former minister of the economy in Silvio Berlusconi’s centre-right government, has written a book called Fear and Hope (La Paura e la Speranza), largely arguing against free trade and the opening of international markets.

Tremonti blames the recent rise in the prices of consumer goods on globalization and says that this is only the beginning. The global financial crisis, environmental destruction, and geopolitical tensions in the struggle for natural resources are also fruits of globalization, according to Tremonti. He identifies the main problem as a lack of international governance of the process of globalization and calls for a new Bretton Woods-like system to confront the multiple crises caused by what he calls “marketism”.

The “dark side of globalization” can only be countered by a return to European values: tradition, the family, and the nation, adds Tremonti. Europe “needs a philosophy which makes politics and not economics the primary mover [of globalization]. This can only work if we go back to the roots of Europe, these are the roots of Judeo-Christianity”.

This “cure” to the ills of globalization remains vague (as one would imagine in a book of only 112 pages). Still more puzzling is his insistence on a contrast between market principles and traditional European values. The idea that a return to values must be coupled with a stronger politicization of the world economy clashes with experience. More regulation and state interference not only tend to reduce growth and living standards but also create new opportunities for rent-seeking and corruption, and thereby undermine the traditional virtues that Tremonti supports.

He misses the opportunity to discuss how certain values are enhanced by the market and how international competition has in fact strengthened Europe by highlighting its best qualities, both technologically and culturally, while repressing its worst.

Tremonti’s vision is inward-looking and profoundly pessimistic. Some market-oriented Italian commentators have pointed out that his ideas seem dangerously close to old-style protectionism. It is clear if Europe followed his analysis, it would be led on a path of future irrelevance both as an economic and a cultural model.

Blog author: berndbergmann
posted by on Tuesday, February 12, 2008

Last week, Istituto Acton’s close Italian ally in defense of liberty, Istituto Bruno Leoni (IBL), presented the 2008 Index of Economic Freedom in Rome. The IBL invited speakers to discuss the decline of economic freedom in Italy over the last 12 months. Il bel paese ranks as the 64th freest economy in the world, with Hong Kong at number one and the U.S. at five.

Italy’s economic problems were blamed on corruption and weak law enforcement. While corruption to some extent reflects individual moral failings and certainly does affect economic growth, the reverse is also true: corruption tends to flourish in environments already hostile to markets and free competition.

Bad and excessive regulation tends to create opportunities for the arbitrary use of power when dealing with citizens and companies. This, in turn, distorts market incentives and deters investment but it also creates mistrust among people and alienates them from the governing institutions. Better and less regulation, on the other hand, not only boosts economic growth but could tackle a more deeply-rooted crisis of political and social ethics.

Not surprisingly, a labor union representative at the IBL event argued for stronger government to fight corruption at the expense of additional economic reforms. He unfortunately missed the point: The lack of economic freedom simply leads to more opportunities for the moral evils that already plague Italy.