Italy’s pallid growth
of individuals’ generosity and tolerance for financial risk’, 25 suggesting that the regional divide may be related less to individual characteristics than to the way individuals interact in groups. Thus, unequal opportunity might also be caused by poor social relations with southern regions, preventing financial cooperation and entrenching poverty which, undoubtedly, harms Italy’s economic performance as it does not make effective use of human capital (i.e., potential in certain
Figure 3: a graph showing the decreasing levels of trust in collaboration from the north to the south of Italy
Southern Italians is never realized). Indeed, Italy has the largest regional disparities among OECD countries in unemployment rates. 26 Sustained structural unemployment often causes a decline in the participation rate (as workers become discouraged and more likely to suffer health problems and may give up on the labour market entirely by retiring early) and hysteresis, where workers become less employable due to a loss of skill over time, causing future unemployment rates to be higher. Therefore, it is likely that poor social mobility – which disproportionately affects Italy’s southern regions and causes high levels of structural unemployment – has hindered It aly’s economic growth in the 21 st century, especially since regional economic disparities have increased since the year 2000. 27
III.
Other factors responsible for Italy’s economic stagnation
Eurosceptics often attribute Italy’s economic ills with the introduction of the euro in 1999-2002 (Fig.4). One possible explanation for this is that the value of the euro reflects the average strength of all eurozone economies. The common currency is too cheap for Germany (which boosts German exports due to foreign countries perceiving them as cheap) and too expensive for Italy. However, a closer look reveals that the country’s problems are broadly due to structural weakness, rather than the euro alone. The economic underdevelopment in southern Italy places considerable drag on the economy, in that its high unemployment rate and lack of taxable income increases the government’s fiscal deficit. This could lead to higher levels of public sector debt, and
Figure 4: a graph showing Italy’s (dark blue) underperforming economic growth since the introduction of the euro, compared to Germany, Spain, and France (1998-2018).
a higher percentage of national income being spent on debt interest payments, drawing away from investment into projects such as infrastructure, ultimately reducing long-term growth potential and
25 This evidence contrasts with one of the best-known interpretations of the causes of north-south divide, Edward Banfield’s book ‘The Moral Basis of a Backward Society’ (1 955). Banfield claimed that the origin of the divide in Italy lies in the moral flaws of southerners, whose only concern is with their personal welfare and that of their families with utter disregard for anyone else. 26 Oecd.org: ‘Regions and Cities at a Glance 2018 – ITALY’ 2018 . 27 Ibid.
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