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  1. Wealth
December 5, 2011updated 26 Jan 2016 1:13pm

Will Italy Rise Again?

By Spear's

A restoration of growth requires far more than can be offered up by following the dictates of smug EU bureaucrats

Italophiles ask me if Italy can ever be great again. Will the home of Dante, Cavour and Verdi enjoy a new risorgimento? The nub is this: Italy has a wealth of native creative talent. This is the engine which drives its capacity to remain a leader in cutting edge design in a wide range of industries from fashion to architecture and an array of consumer brands. Italy has always been “great” as defined by its human capital.

Unfortunately, however, a restoration of growth or indeed national “greatness” will require far more than can be offered up by following the dictates of smug elites from the likes of the EU’s bureaucrats and the unanimated policies of their philosophical cousins at the IMF.

These policies are growth killers and extensions of a belief in the maintenance of the centralization and social contract otherwise known as the “grand lie”.

Mario Monti is a product of this mindset. His initial comments confirmed all: “We need to initiate polices that will return Italy to growth while maintaining social fairness.” This is the usual code of the left. In their world growth is defined to 1-2 percent otherwise known in the real world as “anaemic”.

They simply don’t get it. Technocratic speak about how Italy can instill polices to access EU bailout funds and shore up financing from the IMF all avoid the real issue and merely put off the day of reckoning at great cost.

This denial is an extension of the “grand lie”. Until and unless leadership emerges to confront this reality the problems will simply grow.

Further, Italy, while having the benefit of a traditional strong saving rate and private sector wealth, is subject to a demographic implosion which has a direct impact on the entitlement program’s viability. With a birth rate hovering just north of 1:1, there is no nation with such paltry belief in the future that has ever been great. The family unit, the institution of marriage and their faith have been core to the national strength. As the secular values and the implicit selfishness of this approach have taken root it has exacerbated the problems and has served to accelerate national demise.

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The solution to an Italian revival and stability does not exist in the pathetic and frantic mentality of the elite sages, rather it comes from a combination of leadership on polices that unravel the “Lie” and shift from the economic and social policies of pessimism to those of optimism. It is the same formula for most of “old Europe”.

It has a four pronged policy attack. It includes a reduction in the transfer model away from the socialist notion of “entitlement” to one of protecting those most at risk in our society. It requires a transition on pensions which are all too familiar; retirement ages must be extended, private accounts for younger workers introduced and payout schemes reduced. Italy is one of the most arcane and heavily regulated business sectors in the world. Work rules have to be eliminated. The stratification of labor laws must allow for far more freedom to hire and fire. Minimum wage rates must be eliminated and stream line processes of business creation encouraged.

All departments of the government have to be cut. The process of elimination of regional bureaucracies started under Berlusconi must be accelerated. The spending cuts will need to be attended with tax cuts. A VAT at 20 percent and the illusion that it has no impact on growth is reckless thinking. Progressive confiscatory tax rates and the shadow of wealth taxes have nothing to do with “greatness”. These are tailings of the pessimism and class warfare of socialism. Mario Monti comes from the school of this EU mind set who believes that social spending must be maintained for “fairness and social order” , while increasing the tax burden.

Delusions of “greatness” will not come from doctored up finances. Until and unless the country is prepared to overhaul this rigid and suffocating legacy of the heritage of bad leftist policies it will not be “greatness” but mere marginal mediocrity which will be its fate. It is exactly where the country is today.

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