It's amazing that the Economist still touts Anglo-Saxon "panaceas" for growth: deregulate, get rid of red tape, focus the economy on services rather than manufacturing.
When Germany entered a period of stagnation after the Euro-introduction in 2002, the Economist made exactly the same prescriptions. Look what that ideology has done to the US and the UK: countless jobs in manufacturing have been offshored and growth was simulated through financial "innovations".
Personally, I buy lots of organic food products from Italy (e.g. laselva-bio.eu) as well as clothes (e.g. slowear.it), and for a simple reason: They're the best on the market. Therein lies Italy's potential.
Sorry, but your post shows complete ignorance of Germany's economy and economics in general. Germany's services make up 72%+ of its GDP, while manufacturing makes up 27%. Its services sector is growing, while its manufacturing sector is decreasing. That's a fact of every developed economy. A quick scan of Germany's Wikipedia entry and any other developed economy's will show you that.
Deregulation has happened across every economy -- aside from North Korea and Cuba -- since the 1980s (e.g. with telecom, airlines, utilities, etc). The result of deregulation has spawned record growth in emerging economies, as well as massive growth with the newly liberalized sectors in developed economies (e.g., transportation, energy, communications).
HN has a lot of smart people, but sometimes the lack of any economic wisdom combined with a holier-than-thou attitude among some posters can be a little depressing.
>deregulation has spawned record growth in emerging economies, as well as massive growth with the newly liberalized sectors in developed economies (e.g., transportation, energy, communications).
In Energy and Finance deregulation has enabled massive crisies, in the former a crisis that led to shut downs of electricity to the 4th largest and most innovative economy in the world, and in the latter a crisis the size of which hasn't been seen since the Great Depression.
Is it so surprising that less than 10 years after Graham-Leach-Bliley ('99) undid the last regulations put in place after the Great Depression (Glass-Steagal) that we have another GD-level event? We had a historically unprecedented 80-year run without one of those, then some bankers get greedy, captured both political parties, pay them off, and boom, another Great Depression crisis.
In telecom, it's enabling consolidation of the industry into a small cartel that controls the Internet's infrastructure and who are using their massive revenue to lobby against Net Neutrality so they can shape and toll net traffic at will, unleveling the Internet playing field that has laid so many golden eggs.
On a more subjective level, it's also made tons of cheap stuff we don't really need much cheaper, but at the expense of eviscerating the middle class, grossly increasing the wealth (and hence political power) gaps between rich and poor, and making developed economies more dependent and fragile rather than robust and self-sufficient.
Sometimes I think the deregulation/outsourcing mantra is the Emporer's New Clothes, and I wonder when the consensus will change to recognize that economic optimization may not be so good after all, that economic robustness is a better policy for any self-interested nation.
Telco deregulation correlates with the birth of the entire commercial Internet. The Internet of Ma Bell-era telephony was a toy for wealthy universities and government research labs.
In fact, speaking as someone who helped build an ISP in the '90s, the adoption of the Internet --- as provided by indie IP-as-dialtone ISPs --- was owed entirely to the CLECs and their willingness to route numbers in hundreds of telephone prefixes down a PRI to a single server cage. The CLECs were almost literally the manifestation of telco deregulation; deregulation was practically a synonym for "let there be CLECs".
I call this out this simply as an illustration of the bogosity of the logic of your entire comment.
There are domains where, if left unregulated, the expected payoff is asymmetrically positive. The Silicon Valley tech ecosystem is one of those. Investors bleed money spreading relatively small investments across a pool of companies, but every now and then, boom you get a Microsoft, Google, Facebook, etc, and it makes orders of magnitude more money than was lost.
There are other domains where if left unregulated the expected payoff is asymmetrically negative. Banking appears to be the primary example here. You can make your ~5% yearly return relatively safely, but making significantly more than that can only be done with exposure to a much higher risk of a major collapse.
If you start at the Great Depression and work backwards in time, there's a financial crisis every 20 or 30 years for over a century. It wasn't until we figured out how and gained the political will to regulate the industry that that was mitigated.
Utilities may be another example. I grew up in the Southeast where electric is heavily regulated and boring, but always stable and predictable. It was interesting to witness the California energy debacle with Enron a decade ago, and compare the two.
Stable, predictable, and boring is the ideal state for systems like electricity generation/distribution and the monetary system. Underlie much of the rest of the economy and infrastructure? Check. Expected payoff is negative? Check. Then regulate for stability and robustness. Such states don't tend to naturally emerge from deregulation, except in the form of monopoly or trust, and then you've got innovation-crushing rent-seeking and anti-competitive behavior to deal with.
Now I'm not certain which domain the telcom system falls under, it doesn't seem vulnerable to the kind of major collapse enabled by deregulation in electricy and banking. However, it does have a history of monopoly and rent-seeking behavior that I think behooves us not to discount or ignore.
The government broke up the Ma Bell monopoly due to uncompetitive practices. Not until state regulation & later the 1996 Telecommunications Act, which was a regulation, not a deregulation, stipulating ILECs had to open up & allow CLECs on their networks did we see the flourishing(and eventual crash) you're talking about. The dot com bubble probably helped as anything Internet related was hot.
Do you really think the Baby Bells would have wanted to share their infrastructure with competitors? Judging by how they're trying to get back in bed with each other, my guess would be no.
It is a non sequitur argument to suggest that had telco's not been deregulated in the '80s, we would still have had CLECs building out the dialin and ISDN Internet of the '90s; that argument leaves out the fact that the RBOCs the CLECs piggybacked on were themselves the product of deregulation.
I am not sure you understand what "deregulation" is. Certainly an antitrust & monopoly busting lawsuit from the US government is not deregulation. When a regulated monopoly is broken up into smaller, regulated regional monopolies, that is not deregulation. It is also not deregulation when state & federal law has to mandate that line sharing be allowed.
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.
The break-up of AT&T & the 1996 Telecommunications Act were nowhere near deregulations.
Also I certainly do not believe that AT&T would have broken itself up or the regional operators would have opened their lines up, had it not been for government regulatory actions.
Most of the problems with energy liberalization can be attributed to politicians bungling the process and ending up with something that is very far from a properly functioning market. That the messy result ends up performing worse than a government controlled market does not prove that a deregulated energy market is much better for the economy.
Exactly. "Deregulation" without the ability of actors within the system to set their own prices is pretty much a recipe for disaster. In a normal market you make more money by selling more product. In California the energy producers discovered that given their regulatory environment they could make more money by selling less product. The rest is history.
California's problems do show, however, that people shouldn't uncritically think that any sort of deregulation is good. Its always important to to think carefully about what sorts of incentive are being created in any deregulation.
You've responded to an objective assessment of Italy's economy --- it's hugely in debt and lags the EU in job creation and GDP growth --- with subjective claims about organic food and clothes. Everyone seems to realize that Italy's economy is dominated by exports, including those organic foods and designer clothes. They're still getting their credit rating downgraded. Now what?
Which country doesn't have a downgraded credit rating? Also who is doing this "credit rating"? Standard & Poor's? The same crooks who fluffed up the ratings of fraudulent MBS & CDOs a few years ago helping to setup the housing crisis in the first place?
But no, let's further deregulate & offshore jobs to countries that have poor humane rights records so our corporate overlords can get ever richer.
A mystifying comment. Because today's banks are loaded up with sleazy bad actors, there's no such thing as compounding interest? Because S&P sold its reputation for a few deals, there's no such thing as creditworthiness?
S&P, Fitch & Moodys didn't just sell their reputation for a "few deals". Pretty much every MBS or CDO was rated highly by these companies. Trillions of dollars worth. A large part of this is due to the fact that they are paid by the "bad actors" inside the investment firms & banks that they're suppose to be "independently" rating. If we banned that form of relationship that would be "regulation" which is "bad".
So, here we are with these same companies in charge of sovereign credit ratings. The same companies that played a large part in creating a credit crisis are the companies that get to set creditworthiness. Magnificent system we have.
So in order to make these credit rating agencies happy, we must deregulate further, lower taxes further, turn into a service level economy & freeze or depress wages so we can hope for short-term gains in our economy. Which makes corporations happy, banks happy & market makers happy thus our creditworthiness goes higher. It seems rather biased for those who are on top & those who caused the calamity in the first place. Once the economy stabilizes those smart rich people on top can start making imaginary investments with their friends until they create another crisis. Rinse & repeat. Look where prosperity has come from over the last 15 years. Bubbles & scams.
Does this look sustainable? Who really benefits from this?
Do you believe that an international banking conspiracy is deceiving us about Italy's debt standing at over 120% of GDP?
Do you believe that Italy's debt is that high because Italy overleveraged itself on mortgage-backed securities?
Did you read the other comments on this thread, where Italy's central bank director complained about Italian wage stagnation and its two-tiered employment system, and its poor tax revenues?
No they are not necessarily deceiving us on the outstanding debt in Italy. But they certainly weren't sounding the sovereign credit alarm or MBS/CDOs alarm when the money was rolling in, even though they had direct access to data & probably knew what was coming down the line. 120% of GDP is concerning but not end of the world. The USA has a higher ratio. Italy's credit rating has actually been lower before. If we were extremely concerned about GDP/debt ratio & credit ratings then perhaps we should all adopt a model like China.
Italy didn't get to where it's at entirely because of MBSs but the crisis certainly didn't help any country's financial situation & many countries had to shore up banks & took a credit hit.
There are definitely some issues with how Italy operates. Having a philandering-media-monopoly-owning-billionaire tyrant in charge certainly doesn't help.
While changes probably need to be made, the fact is that changes always need to be made. Radically switching to a pro-corporate/anti-worker strategy because shady rating agencies might downgrade you a point is silly.
I think it's fair to say that "Objective assessments" don't have a high level of confidence either. Economies have their ups and downs, and Italy still has some very profitable sectors and a diversified economy. Hopefully Silvio will be out before disaster comes, and indeed the Italians have to correct course before they become the new Greece.
Actually I've responded to the advice the Economist is giving in that article, which isn't objective at all. Italy needs to boost the sectors it's great in, instead of applying generic Anglo-Saxon recipes.
This "generic Anglo-Saxon" epithet sounds like an emotional appeal. The facts are straightforward, aren't they?
Italy has an immense public debt. It is getting more and more difficult for Eurozone countries to finance sovereign debt. Its population is aging. Pension costs are rising. Productivity, according to Mario Draghi, is stagnant, in part because employment in Italy is structured weirdly, with large numbers of closely-held firms with a two-tiered system of full-time full-benefit workers hired through nepotism and armies of temp workers†. Civil cases in Italy average more than 1,000 days. The country has wild gaps in educational outcomes between different regions.
I don't think you can write all this off as an "Anglo-Saxon conspiracy". These are ideas that can be described with simple numbers, aren't they?
† Articles about Italy have long attributed this to Italy's family culture, in which people cohabitate with their extended families long into adulthood, but it seems just as likely that this is a result of laws making it hard to fire people.
"Anglophobia. Within the intelligentsia, a derisive and mildly hostile attitude towards Britain is more or less compulsory, but it is an unfaked emotion in many cases. During the war it was manifested in the defeatism of the intelligentsia, which persisted long after it had become clear that the Axis powers could not win. Many people were undisguisedly pleased when Singapore fell ore when the British were driven out of Greece, and there was a remarkable unwillingness to believe in good news, e.g. el Alamein, or the number of German planes shot down in the Battle of Britain. English left-wing intellectuals did not, of course, actually want the Germans or Japanese to win the war, but many of them could not help getting a certain kick out of seeing their own country humiliated, and wanted to feel that the final victory would be due to Russia, or perhaps America, and not to Britain. In foreign politics many intellectuals follow the principle that any faction backed by Britain must be in the wrong. As a result, ‘enlightened’ opinion is quite largely a mirror-image of Conservative policy. Anglophobia is always liable to reversal, hence that fairly common spectacle, the pacifist of one war who is a bellicist in the next."
Substitute "Britain" for "Britain and America" in the above passage and the mentality of critiquing "generic Anglo-Saxon" economic neoliberalism is plain to see.
In France there are similar laws which make it hard to fire workers, yet I don't see the same phenomena of young people staying with their family until their late 30s.
A "young" Italian, by living with her parents, doesn't have to worry about rent, food or other basic expenses and can use her modest salary to pay for recreational activities.
Personally, I buy lots of organic food products from Italy (e.g. laselva-bio.eu) as well as clothes (e.g. slowear.it), and for a simple reason: They're the best on the market.
You have endorsed the quality of Italian products made by private business enterprises. To keep this discussion on topic for Hacker News (ahem), I wonder what you think about how well the current Italian governmental administration is allowing business owners like that to succeed. The overall economic growth figures for Italy reported in the submitted article suggest that the preferences of consumers like you are not sustaining steady economic growth in Italy. Could that be the result of government mismanagement?
It seems like exports of lucrative sectors are still strong in Italy. Of course, as in most europe, taxation is heavy. The main factor hindering growth seems to be high wages.
I think that non-wage labour costs can be an important factor. I think they are quite high across Europe. Could anyone tell the numbers for Italy? (for example: in Poland a net wage of 2700 PLN (~ $1000) is a gross wage of 4500 PLN (~ $1650)).
Having never heard of slowear.it before, I decided to check out their website. If anyone else also does this, be forewarned that the UI assaults the eyes. It is extremely "busy", has poor (none?) navigational structure, and everything moves slightly and unexpectedly if you hover over it.
Jobs moved offshore because of trillions of dollars borrowed, both by government and individuals.
You can't consume more than you produce without importing more than you export.
Deregulation and opening of markets did not create the US trade deficit. Nobody did anything to focus the US economy on services, other than borrow massively. Which caused wages to go up, workers to move to the US and imports to soar.
All of the long term economic imbalances we're facing are interrelated.
When Germany entered a period of stagnation after the Euro-introduction in 2002, the Economist made exactly the same prescriptions. Look what that ideology has done to the US and the UK: countless jobs in manufacturing have been offshored and growth was simulated through financial "innovations".
Personally, I buy lots of organic food products from Italy (e.g. laselva-bio.eu) as well as clothes (e.g. slowear.it), and for a simple reason: They're the best on the market. Therein lies Italy's potential.