On October 5 I decided I should embark on writing a series of short newspaper-like articles with the goal of attracting attention to explanations of the current situation of the Italian economy alternative to the one offered by the (overwhelmingly neoclassical) austerity lovers. While I had no planned to publish both in Italian and in English, the ‘likes’ I got on the first three pieces in Italian convinced me that I should go the extra mile and publish them in English as well.
Of course, ‘likes’ on socials are not the only reason to publish in English. My preoccupation is that even many foreign colleagues of valor tend to adhere, along with the foreign general public, to judgments about the Italian economy that are not facts at all but, rather, judgements presented as facts. I thought it would be worthwhile to alert colleagues and public alike: when reading austerians, please take what you read cum grano salis, my friends!
Fact # 1: Italian legislation protects Italian workers to an abnormous, market-distorting extent. UNTRUE. It does so less than in other high per-capita income countries
Figure 1: Protection of permanent workers against individual and collective dismissals, 2013*
Source: OECD Employment Outlook, October 2014. *Data refer to 2013 for OECD countries and Latvia, 2012 for other countries. The figure presents the contribution of the indicator of regulation for standard fixed-term contracts (EPFTC) and the indicator of regulation for TWA employment (EPTWA) to the indicator of regulation on temporary contracts (EPT). The height of the bar represents the value of the EPT indicator. OECD average: 2.29.
Let us make sure we erase the possibility of any misunderstanding when talking about labor protection: Labor must be protected. Says who? Says Figure n. 1: France, the Netherlands, Belgium, Germany (yes, the oh-so-competitive Germany), all countries similar to Italy though their per-capita income is substantially higher than the Italian one, all of them protect their workers more than Italy does. So, why are those countries not going through the most dreadful recession, like Italy is, why are their investments in industry and manufacturing not falling to absurdly low levels due to investors’ fears that their overprotected workers would organize who knows what terrible fights in firms and society!?
Nothing of the sort, of course, is happening in any high per-capita income country where Labor is protected. And, as we shall see with Fact n. 2, both German wages and German cost of labor are high. Something that Italian wages, and cost of labor, are not.