Italy’s Supply Constraint

The OECD estimates the current potential capacity growth rate of the Italian economy at 1.25% a year. Actually I suspect even this very low number is over-optimistic. Growth since 2002 has been as follows: 2003 – 0.1%: 2004 – 0.9%: 2005 – 0.1%. To be sure forecast growth for this year is somewhat higher, at 1.4%, and optimists are expecting this to be more or less repeated next year. But I suspect this outcome is unlikely simply because the global economy now seems to be slowing (and in particular the ever important US economy),so the strongly advantageous situation of 2006 is unlikely to be repeated, while next year the Italian government has promised to introduce an important package of spending reductions which are bound to negatively affect growth, at least in the short term..

But why is potential growth capacity in Italy so low?
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Turkey and the EU: Poles apart?

Like most numbers of the Spectator, the festive, XL-sized holiday edition is marred by the presence of Mark Steyn. But don’t let that put you off, there’s some good stuff there as well. And one of the better bits is an essay by Prof. Norman Stone on Turkey (Potential EU Accession of) (reg. req.).

For the most part Stone paints a picture of the old Ottoman Empire as something much less uniformly Islamic than some think. You should already be aware, of course, that what would later (in truncated form) become Turkey was a multicultural, multiethnic, multireligious state, but if you weren’t, Stone gives you a quick background. (By the time it fell apart, the Ottoman Empire had become the ‘Sick Man of Europe’; but for centuries it was a success.) What you might not have known, though, was that the orthodox Christians of the Ottoman realms were only too happy to be part of a nominally Islamic polity. The orthodox patriarchs and the Muslim sultans saw in the latinate West a common foe. Indeed my own suspicion is that the Greeks felt a keener enmity than the Turks. The sultan, understandably, might well have seen the theological differences between orthodoxy and Roman Catholicism as obscure and uninteresting (how many of us in the post-Christian lands of the west are aware of, let alone take much interest in, the distinctions between the theravada and mahayana strains of Buddhism?) To the bishops of the orthodox world, though, the sultan served (whether he cared about this or not) as a bulwark against the centralising domination of their brother-bishop at Rome.

But what set Stone off was a recent article in Die Zeit by Prof. Hans-Ulrich Wehler. The title of Wehler’s article, which formed part of the contra side in a Zeit-sponsored debate on Turkish accession to the EU, has some unfortunate historical echoes: “Das T?rkenproblem“.
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Book Review: “European Integration 1950-2003: Superstate or New Market Economy?”

Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.

Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.

And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.

In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.

In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.

But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.

Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
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