A pact for productivity between the social partners and the Government to get out of the recession and the crisis. This is the proposal put forward by Marcello Messori, one of the most famous economists, full professor of financial intermediaries at the University of Rome Tor Vergata and former president of Assogestioni. Here is the interview he granted to FIRSTonline.
FIRST online – Professor Messori, the Monti Government has launched a discussion with the social partners on productivity, which has been a structural handicap for the competitiveness of the Italian system for some time, but in a phase of acute recession like the current one at the top of the agenda- In the country, shouldn't there be above all the relaunch of internal demand with an eye to consumption and investments to focus on short-term returns on growth and employment?
MESSORS – It is true that, in the short term, raising labor productivity could aggravate the (already dramatic) problem of unemployment and unemployment. However, in the Italian situation, stimuli for productivity and a relaunch of demand and growth are not antithetical choices; indeed, even in the short term, the former are a necessary condition of the latter. In fact, if it is hoped that the 'strong' countries of the European Economic and Monetary Union (EMU) will end up increasing their demand, Italy must prepare itself to be able to seize the opportunity; on the other hand, an increase in domestic demand requires an increase in real wages, which our companies could only bear thanks to increases in labor productivity. In this latter regard, it is sufficient to consider that the recession, which has lasted almost uninterruptedly in Italy since the last months of 2008, has caused the most prolonged fall in disposable income (in real terms) since the Second World War. This has generated a serious decrease in 'real' consumption which, in turn, has prompted many companies to postpone investments. In addition, public budget consolidation policies have constrained related spending and, in particular, investment in infrastructure. Without a shock on the supply and demand side, Italy will not be able to break out of this vicious circle.
FIRST online – What is the possible shock?
MESSORS – I still think that, theoretically, the best solution would be an immediate and substantial increase in European investments, financed by expanding the EU budget (or by creating an EMU budget), and/or a increase in German consumption. These positive shocks on the demand side would ease the European recession and facilitate the task of the peripheral countries (including Italy), which would have to continue to adjust - gradually - the imbalances of their public budgets and implement those structural reforms capable of strengthening the their medium-term competitiveness.
FIRST online – Unfortunately, however, this does not seem to be what is happening and once again Europe is missing out.
MESSORS – Indeed, in the EMU there are no signs of a relaunch of aggregate demand, nor are there any other initiatives to fight the recession. The minimal concessions, obtained in this regard by the French President Hollande at the end of last June, were not the beginning of a process but a will-o'-the-wisp. Precisely for this reason, however, it becomes even more necessary and urgent for Italy to try to get out of its own vicious circle on its own. Only in this way will it be possible to stem the social cost of the recession and prepare for the hoped-for future European recovery.
FIRST online - How?
MESSORS – Without the government abandoning the processes of rebalancing public finances and removing the many 'environmental' inefficiencies, the social partners should implement a new pact for productivity. If Italy does not cease to be the rear of the European Union in terms of average growth rates of the various forms of productivity, it will be impossible to create a system with our companies of excellence, to obtain adequate levels of employment especially for young people, safeguard the future well-being of our families. To strengthen the productivity dynamics of the Italian economic system, our businesses must be ready to accept a demanding challenge: betting on their ability to implement organizational innovations and thus obtain multi-year increases in productivity, which bring us closer to the European average, and in any case transfer part of the fruits expected of their employees in the form of real wage increases. It is obvious that, by making this bet, companies unable to actually achieve the agreed increases in labor productivity in the foreseen period will see their profits decrease or disappear and will have to restructure or exit the market. The government's role is to set up truly universal social safety nets to prevent the costs of this restructuring from worsening the situation of the workers.
FIRSTonline – The goal is clear and it is to make a pact to raise productivity as a function of greater competitiveness from which everyone (workers, efficient companies, the country) can benefit, but a pact between the social partners and the Government seems practicable a few months before the elections and in the midst of an already heated electoral campaign?
MESSORS – I am aware of the complexities (above all 'political') of a “planned productivity” project, such as the one I have just sketched and recently presented at the ASTRID seminar; but the crisis will certainly not wait for the Italian political system to find a satisfactory long-term structure. The important thing is to immediately give the right signals; then, during the work, it will be seen how far the social partners can go without government commitments that go beyond the date of the elections and which cannot be assumed by President Monti.
FIRST online – And how should the great negotiation start?
MESSORI – I imagine three stages. The first, reserved for the social partners at national level, is used to: enter into a commitment to "planned productivity" for a given time horizon (not less than five years); set a minimum bar, so as to avoid widening the gap in the average dynamics of labor productivity in Italy compared to competing European countries. The second phase, reserved for the corporate social partners, envisages establishing – at the individual company level – the actual terms of the bet: the agreed rate of expected productivity growth and its translation into wage increases. The third phase, which implies a return to national bargaining, is made necessary by the risk that the second phase will involve only companies that are already efficient and/or highly unionised. In the third phase of national negotiation, the social partners and the government should define those incentives ("carrot and stick") that make it too expensive for individual companies, which did not participate in the second phase of negotiation, to stay out of one of the company agreements of the second phase and thus not to sign the "planned productivity" contract.
FIRST online – And does the Government intervene only on the sidelines of the third phase?
MESSORS – No, I think the Government can play a decisive role in at least three fields. In the first place, as I have already mentioned, it should launch universal social safety nets and active labor policies capable of absorbing the negative effects of productivity increases on workers' living conditions. Secondly, the Government has the task of removing or mitigating the negative externalities that weigh on the competitiveness of companies and which range from excessive bureaucratic costs to infrastructural deficiencies, from public administration failures to distortions in training and research, and so on. . Finally, if it has the necessary financial resources, the government could ease the tax burden on labor and businesses.
FIRST online – Do you really think that the social partners are ready to embark on such a complex negotiation in which giving seems more certain than having?
MESSORI – The difficulties are obvious but it is essential to make everyone understand that, if productivity grows without unilateral increases, there are great advantages for everyone in the short and medium term. If Italy faces the crisis defensively, rent-bearing positions will become even more pervasive than they already are and decline will be inevitable. In the latter case, the bill will fall above all on the shoulders of the weakest sections of the population.
FIRST online But who pays? It is clear that a pact like the one you are proposing has a high cost for the public budget: where does the Government find the resources?
MESSORS – The only unavoidable cost is that of universal social safety nets, because the reduction in taxes on labor and the tax wedge is residual and is part of the process of improving environmental conditions. In any case, covering a universal shock absorber system is a major issue. The solution can perhaps be found in the so-called Giavazzi plan on cutting incentives and subsidies for businesses. At least in the first version of that plan, savings of the order of 10 billion euros were generated. This is a sufficient figure to finance the costs that would be generated by a pact for "planned productivity".
