Semantron 23 Summer 2023

Italy’s pallid growth

preventing the aforementioned geographical immobility of labour from reducing. Indeed, with the EU’s second -highest debt-to-GDP ratio, Italy spent 3.7 per cent of its GDP on debt interest payments, double the average of the EU. 28 Additionally, high public debt may crowd out business investment and ‘limit the resources that have been devoted to the productive sector of the economy’, 29 further reducing available funding resources necessary for long-term growth. A growing problem for Italy in recent decades has been an economic model dependent on family- owned enterprises that are typically smaller and less productive than their equivalents elsewhere. The Italian economy has been hurt by the increase of outsourcing by Italian and European businesses, which has fuelled unemployment in 21 st century Italy. Although such a model drove growth in the 1970s and early 1980s, many of those companies did not invest in R&D and lacked the management capabilities and human capital to allow them to compete on a global scale. 30 According to the European Commission’s SME tracker, 95 per cent of Italy’s businesses have fewer than 10 emp loyees, while OECD data show Italian companies of that size have lower levels of labour productivity than their peers. Larger companies also fail to innovate, perhaps due to traditional, change-resistant family ownership. 31 Moreover, the traditional lifestyle present in the wider southern Italian socio-culture has created an acceptance of poverty, rather than discouraging it, which contributes to Italy’s comparatively low labour productivity, and thus poor growth. The ‘poor management style of institutions’ was found to be the central reason for Italy’s stagnant economy in the 21 st century by a 2021 Maryland Smith study, 32 as firms often use cronyism and nepotism to decide job promotions. The researchers claim such disregard for meritocracy did not hurt Italy’s economy until the digital revolution in the mid -1990s, as Italian firms failed to fully capitalize on the rise of IT (a key driver of growth in any modern economy). This is due to productivity growing faster in tech-intensive sectors in countries where firms were more likely to select, promote and reward people based on merit. A ranking of ‘meritocracy score’ was made using World Economic Forum expert surveys, in which Italy placed last. 33 It could be argued that political corruption and the pervasive presence of criminal organizations (i.e., mafias such as the 'Ndrangheta from Calabria) are responsible for slowing It aly’s growth, 34 although Italy has never been a haven of political stability – the current government is the 69 th since 1945 35 – and mafia and corruption have long been embedded, yet this did not hinder the Italian economy from developing dynamically at times post-war. There is, however, uncertainty in the way that the 99 billion 28 ‘Why Italy’s economy is stagnating’ 2018 . 29 Ardagna 2018. 30 Ibid. 31 ‘Why Italy’s economy is stagnating’ 2018 . 32 Pellegrino 2021. 33 Indeed, the countries that scored highest for meritocracy – such as Sweden, the United States, and Japan – also saw the biggest bumps in productivity, thanks to the technology revolution. 34 A study by Censis blames the pervasive presence of criminal organizations for the delay of southern Italy, estimating an annual loss of wealth of 2.5% in the south in the period between 1981 – 2003 due to their presence, and that without them the per capita GDP of the south would have reached that of the north. 35 ‘I Governi nelle Legislature’ 2018 .


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