Matteo Renzi To Lead Italy Out Of The Swamp Of Terminal Decline?

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By Paolo von Schirach

February 13, 2014

WASHINGTON – And so Italy is getting a new Prime Minister. Matteo Renzi, head of the Partito Democratico, will replace the incumbent, Enrico Letta, also of the same party, because now, as party leader, he believes that it is up to him to lead the nation as well.

Party Leader and now Prime Minister

In principle this sounds reasonable. Matteo Renzi went through an open and transparent primary process within the Partito Democratico just a few months ago (December 2013) from which he emerged as the clear winner, outdistancing other contenders by a large margin. Indeed, he got an impressive 67.6% of the votes cast.

Given Italian political practice, it is entirely reasonable that the triumphant leader of the biggest party within a ruling coalition would also aspire to become the Prime Minister. With some grumbling, Enrico Letta recognized this reality by resigning. And so, the boss of his party gets the top job, (even though he was not elected by the nation, but only by his fellow party members). Fair enough.

Modest chances of success

That said, the notion that an energetic, good-looking new party leader –Matteo Renzi– now Prime Minister, will engineer the radical transformation Italy badly needs is not just a dream, it is a laughable proposition. And this is not about Renzi’s leadership and vision. He may have it. This is about Italy.

Sadly, the country is semi-comatose. It takes a heroic level of optimism to believe that a clear-headed young leader –assuming Renzi is all this– will get the country out of the swamp, rekindle innovation, investments and enterprise and re-generate hope and enthusiasm.

Terminal decline

Italy has been losing ground for about 10 years. The global recession simply made things worse. The national debt is now at 133% of GDP. Its unemployment rate is at 12%. Youth unemployment is at 40%. Most alarmingly, the best and the brightest leave, or have already left the country, seeking better opportunities elsewhere.

Beyond fashion, wine, olive oil and Ferrari luxury vehicles, Italy has no leadership position in anything. No major players in high-tech and electronics, only a second or third tier player in aerospace. Worst of all, Italian companies do not invest much in R&D, nor are there any significant public sector funds allocated to this critical area. And, please, do not forget organized crime: Mafia, Camorra and ‘Ndrangheta being just the best known branches. Finally, in case this is not enough, Italy is one of the most corrupt countries in the western world, with dismal positions in the universally respected Doing Business rankings compiled each year by the World Bank.

Fertility crisis

Beyond that, consider the fertility rate collapse, (1.4 children per woman). This well consolidated trend indicates that Italy will soon be a geriatric ward. Lots of old people who get pensions and medical care, with very few active people supporting them.

You want more? Tens of thousands of desperate illegal immigrants land in Italy every year, coming mostly from the poor Maghreb and sub-Saharan Africa. And, with due respect, these are not the equivalent of the bright, highly educated PhD. holders coming to America from India and China who then create successful start-ups in Silicon Valley.

How can anyone do well trying to run Italy?

Newly minted Prime Minister Matteo Renzi may have vision, and he may turn out to be a passionate national leader. I wish him well. But at least on the basis of what we know, there is no reason for enthusiasm. Please note that, keeping up with a well established, if pernicious, Italian political tradition, Renzi is another full-time political operative.

In plain language: he never run anything in the real world. He never had a real private sector job. He rose fast from local politician to national leader. But this is all within a political party. This is not about his ability to run anything in the hard world of industry, competition and globalization. His current job is Mayor of Florence, a second or third tier Italian city of 370,000 people who stopped producing anything interesting about 500 years ago. Yes, it has been a long time since the days of Michelangelo.

Party functionary

So, who is Matteo Renzi? A party functionary who got to the top leadership because he is a good politician, at least within the context of his own party. Does this mean that he understands modern capitalism, supply chains, the role of IT, competitiveness and globalization? And what about the urgent need to drastically reform gigantic entitlements, invest in education and strategies to attract precious foreign investments?

Does he get all this? Do the people around him get all this? I hope he does. I hope they do. But I doubt it.

Mission Impossible

Look, governing a large post-industrial democracy is very difficult, even when things are going well. Trying to get Italy out of its historic decline will take more than speeches and bold slogans. It will take a credible, sustainable action plan that has the long-term and sincere buy-in of most key constituencies: capital, labor, the now dispirited young, public servants, retirees.

I wish Matteo Renzi best of luck. I mean it sincerely. But this is “Mission Impossible”.

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