Good Italy, Bad Italy
The two Italies framing: competitive exporters against captured incumbents.
Summary
Emmott, a former editor of The Economist who has written extensively about Italy and Japan, wrote this during the eurozone crisis as an assessment of why Italy underperformed and what could change it.
His organising device separates two Italies. Bad Italy consists of the arrangements that block improvement: political corruption and the connection between politics and business, organised crime's control of parts of the south and its penetration of the legitimate economy, a judicial system so slow that contracts are effectively unenforceable, protected professions and closed markets, a labour market divided between protected permanent employees and precarious younger workers, an education system that does not produce what the economy needs, tax evasion on a very large scale, and a gerontocratic structure in business, politics and universities that excludes people under fifty from responsibility.
Good Italy consists of what works: the export manufacturers in the industrial districts of the north and centre, competing internationally on quality and design in machinery, components, food and fashion; the entrepreneurs building new businesses; the anti-mafia campaigners and prosecutors; the civil society organisations; and the researchers and professionals, many of whom leave.
His argument is that Italy's problem is not a lack of capability but the political and institutional arrangements that prevent capability from being deployed, and that the Berlusconi period entrenched rather than addressed them.
Emmott writes as a sympathetic outsider with long familiarity. The book was published in 2012, during the Monti technocratic government, and its hopes for reform were largely disappointed. The structural analysis of what blocks Italian productivity growth has held up, and Italian output per head has continued to stagnate since.
Key takeaways 7
- Italy's problem is the arrangements that prevent capability from being deployed rather than a lack of capability itself.
- A judicial system slow enough that contracts cannot be enforced in reasonable time deters investment independently of any other factor.
- Protected professions and closed markets raise costs across the economy and block entry by new firms.
- A labour market divided between protected permanent employees and precarious younger workers excludes a generation from careers.
- Organised crime's penetration of the legitimate economy affects business conditions well beyond the regions it controls.
- Gerontocratic structures in business, politics and universities exclude people under fifty from positions of responsibility.
- Export manufacturers in the northern industrial districts compete successfully internationally, which shows the constraints are institutional rather than commercial.
Who should read it
Investors and operators in Italy who want a structural account of what blocks productivity growth and where the economy actually works.
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