Paolo von Schirach
February 2, 2012
WASHINGTON– Crusty economics professor Mario Monti, the non political Prime Minister of terminally messy Italy, called upon to save the country on the edge of the fiscal abyss, sounded upbeat in recent interviews. It would appear that the souped up austerity program concocted by his team of technocrats is beginning to work. Italy’s budget deficit is headed down. The markets find the new cost cutting measures credible. It appears that the still gigantic Italian national debt may become more manageable. The almost obsessively watched interest rate “spread” between the Italian 10 year treasury bond and its German equivalent is slowly but surely shrinking, (it is now down to 4%), an indication, argues Monti, that Italy is no longer in a crisis management mode.
Corporatist special interests will kill Italy
But Monti issued some warnings. Using somewhat indirect language, the professor said that if the Italians want the return of “corporatist” tendencies, “then the situation will once again deteriorate and we shall crash“. At that point the Italians should study Greek, (not classical Greek like, in school), but modern Greek, a clear reference to semi-comatose Greece, whose downfall has been caused by myopic entrenched vested interests and rent seekers that led the country into virtual bankruptcy.
Just as in Greece, in the Italian context “corporatism” means that public policy until yesterday was dictated by special interests that care very little about the general welfare. These interests keep fighting to defend their own turf, unproductive as this effort may be. We are talking about protecting parasitical public sector jobs, money losing industries, unsustainable entitlements, and so on. Should these corporatist interests prevail, says Monti, then Italy’s public expenditures will creep up again and there will be another debt crisis. Fair warning from someone who knows a thing or two about economics and public policy.
The young should abandon the idea of life time employment
With all that, Monti made headlines stating something that should not be controversial. And its about his advice to the young: stop dreaming about life time employment, which, in any event, is monotonous and even boring. Rethink of yourself as an entrepreneur, capable and willing of making several job and career changes in the course of your working life.
In the context of any post-industrial, services-driven, globalized modern economy Monti’s counsel about the imperative to adapt to an ever changing economic environment should not be controversial. Indeed, in the US many have theorized notions of “Me Inc.”, “Personal branding”, “Perpetual self-marketing”, and so on. In a flexible economy in which old and new employers rely more and more on mobile pools of professionals who can move around with agility, according to the needs of an ever changing market place, this notion of employment that will last only for a while, until the employee is needed, is the new standard.
The Italians want life time employment
But not in Italy, apparently. Monti’s advice did not go down well. “Give me my monotonous –but life time– job“, is the loud reaction of Italy’s young would-be workers. But why this resistance to flexibility and adaptation? Here it gets complicated. In Italy, precisely because of the corporatist foot dragging that Monti said is anathema to new growth, there are the privileged “haves” who enjoy safe jobs and then there are all the others, most of them young, looking in, from the outside.
But here is the thing. The young do not say: “Let’s dismantle the old system so that we have a truly modern and flexible jobs market“. No. What they say is: “Give me a piece of the existing system. I see the cushy life of those who are protected by iron clad labor contracts, those who can never be fired, and this is what I want for me“.
Resistance to change
This little vignette of a Prime Minister who encourages the young to be adventurous and flexible, and the young who reply by saying “I would rather have the monotonous life time employment because it is safe“, in a way summarizes Italy’s sad predicament: entrenched resistance to change. And this resistance to change, already evident in the loud protests against Monti’s proposals to reform the “Workers Statute”, by creating meausures that would allow employers to fire workers more easily, tells us that the “corporatist” spirit that Monti warned Italians against is in fact alive and well.
In theory labor mobility and real flexibility would favor new enterprise and the creation of new ventures. With flexible labor arrangements, business people would be willing to take chances and expand in good times, knowing that they could easily shed excess labor in bad times. But now they do not invest and expand in good times because they fear the burden of redundant labor that they could not get rid off in a downturn. And so Italian entrepreneurs do not invest, and Italy operates well below its potential.
But, somehow, most people do not believe that labor mobility would oxygenate the system, if applied to them. “May be someone else should be flexible. But not me. I want the safe, life time job“.
The quest for security kills enterprise
Inadvertently Monti touched the delicate spot of the Italian quest for ”life time security“. And the vehement reaction his advice about flexibility got is a powerful indication of how difficult it will be to change and modernize Italy. You can tax the Italians some more, you can cut free services, and increase fees on others.
But apparently you cannot make the Italians more flexible. And, without flexibility, in this global market place in which only the nimble survive and thrive, you can forget about higher rates of growth. And with rates of growth at around 1%, (in good times), Italy is condemned to stay weak and anemic. Thanks to Monti, the country will not sink, after all; but without confident, risk taking enterprise not much worth telling will happen.