Italy’s Economic Problems Under The Spotlight

As Manuel points out in the accompanying post, Romano Prodi’s resignation as Italy’s Prime Minister is a rather sudden and dramatic, but scarcely unexpected, development. The immediate political crisis may be resolved as rapidly as it appeared, but again as Manuel indicates it may only serve as a prelude for further things to come, and the fragility of any government coalition which may be put together only underlines the difficulties Italy will almost certainly have in addressing what are important ongoing economic problems. The present post will simply attempt to outline some of the main economic problems Italy faces, in order to contextualize the political problem a little.
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La Febbre

A couple of weeks back I had the pleasure of seeing Alessandro D’Alatri’s recent film La Febbre (Fever). As the reviewer says (Italian link), this is a ‘normal’ (everyday) film, not a great one, even if it does include one or two memorable moments, like the scenes shot along the river bank, which were (and I imagine this is not entirely unintentional) rather reminiscent of some which are to be found in the unforgettable L’Albero Degli Zoccoli from that giant of Italian cinema Ermanno Olmi.

La Febbre è il classico film italiano, che vuol raccontare una storia normale, di tutti i giorni, e che per farlo non trascende dai canoni della buona creanza del plot, e da quel pizzico di amara critica sociale che lo rende molto politically correct.”

(La Febbre (the fever) is a typical Italian film, the kind of film which tries to tell a simple, ‘normal’ story – an everyday one – and which in order to do this stays well within the bounds of what is normally thought to be an acceptable plot structure, and then, following the recipe, there is added just enough social criticism to make the film a highly politically correct one.)

My point of interest in this post, however, is not really the film itself, but rather the film as a reflection of something else: the disenchantment and frustration that many young Italians seem to feel with contemporary Italian society, and the impact that the evident failure of Italian civil society to adjust to Italy’s contemporary social and demographic reality may have on the future evolution of Italian economy and society.
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Promising Elections

The Guardian today has a short profile on Angela Merkel, while the FT looks at some of the proposals which may well form part of the SPD campaign manifesto. Far be it from me to worry about ‘sting the rich’ tax proposals, but as far as I can see the main isssue is getting Germany back to work, and Schr?der’s time might be better spent adressing this issue.

Talking of which, this could be a good moment to mention the whacky world of Hans Werner Sinn.
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Human Capital And Trade Deficits

Michael Mandel had an interesting take on the US trade deficit in Business Week earlier this month (btw: he also has a weblog).

His opinion is that the US trade deficit isn’t as big a deal as people often think. One of the reasons: that the ongoing import of human capital into the US (which of course isn’t measured in the trading accounts ledger) more than compensates for the deficit:

But get with the 21st century, folks. The trade in goods and services represents only one part of America’s connection with the rest of the world. What’s equally important — and what the trade numbers miss completely — is the incredible flow of people into the country. Each year, the U.S. receives about 700,000 legal immigrants, as well as a host of temporary skilled workers and undocumented immigrants.

Now I wouldn’t go down the same road as Mandel with the deficit question per se, but he obviously raises an interesting point here – and one, of course, that immediately strikes a chord with me.
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