The new one comes out at the right time book by Lorenzo Codogno and Giampaolo Galli “Economic growth and Meritocracy – Why Italy wastes its talents and doesn't grow“, Editore Il Mulino. In fact, the book identifies the underlying causes of the long term Italian stagnation, highlights the common factor that holds back innovation and that is a misunderstood egalitarianism and a constant devaluation of merit as an element of selection of the ruling class and a factor of success. The new centre-right government, which will in all probability be formed in a few weeks, by following the pages of this volume can focus on the weaknesses of the Italian economy and tackle them at the same time as the economic measures which will also serve to cushion the blow of the gigantic increases in energy prices which risk putting a part of Italian industry completely out of the game. We talked about it with one of the authors of the volume, Giampaolo Galli, an economist and former student of Carlo Azeglio Ciampi at the Bank of Italy and former general manager of Confindustria and Ania, who currently collaborates with the Public Accounts Observatory of the University of the Sacred Heart of Milan.
Let's start with the current situation. Germany has just announced an allocation of 200 billion to eliminate or reduce the impact of rising energy prices on businesses and households. Voices were immediately raised from Italy accusing Germany of selfishness and calling for a common European policy to curb energy prices.
“I understand the frustration, but one cannot fail to notice the contradiction of those who, like the Brothers of Italy, invoke the intervention of Brussels while throughout the electoral campaign they asked for less powers for Europe, propagated their idea of a Confederal Europe, i.e. a set of sovereign nations where each country does what it deems most appropriate. Making Europe intervene more in areas that go beyond its current competences means increasing the powers of Brussels and therefore evolving towards a federal system.
“As regards the merits of the German decision, it must be borne in mind that their debt situation is infinitely better than ours, and even in the last three years of the pandemic and the energy crisis they have spent less than us. So now they have large budget spaces to use. We instead, who have a very high debt (even if Draghi managed to keep it under control), we will have to try to reconcile the necessary support for businesses and the poorest classes with the need not to increase the debt, otherwise we could risk an enlargement of the spread and therefore difficulties in financing our debt on the market, especially now that the ECB has suspended the purchase of public securities and is decisively increasing interest rates”.
To get to a debt like that of Germany you have to grow
Once again it is confirmed that those who are heavily in debt have little room for maneuver to intervene in emergencies. The care of our economy, as explained in the book, concerns the structural arrangements, and in particular the lack of appreciation of merit, to overcome the stagnation to which we have been nailed for about three decades. In short, our evil is the lack of growth.
“There is a graph in the second chapter of the book that speaks volumes. It shows that if we had grown from 1995 onwards like France, our debt, expenses being equal, would have fallen as early as 2011 to the level of 60% of GDP, more or less that of Germany. Our problem is therefore that after the first two decades after the war, when we grew up on the basis of a process of imitating what the more developed countries had done and taking advantage of low wages, we were unable to make the leap towards growth based on internal technological and cultural innovation.
“We did not accept it competition, but also the opportunities, which derived from the great opening of the international market, from the introduction of the Euro which precluded the easy way of devaluing our currency. We have taken refuge in the defense of our particular corporations, we have not been able to value competence and merit. There fear of change it has blocked the country's growth and therefore per capita incomes have also remained stationary, while we have excluded young people and many women from the production process, so much so that our employment rate is much lower than that of other Western countries”.
Merit does not seem to be part of our DNA. And yet, for some years now, many voices have also been raised in the Anglo-Saxon world warning against meritocracy, the arrogance of those who have reached the top. Even in France, for example, Macron himself announced a reform of the ENA, the high school from which the entire French ruling class emerged for decades, because the enarchs have taken on the appearance of a caste, perhaps not very innovative, and in any case no longer tolerated by the great mass of the population.
“In fact, some criticisms, such as Sandel's for example, seem to target rather than the application of rigorous meritocratic principles, the fact that in many cases these are not respected as when American universities are criticized because they also accept students on the basis of sports merits or for donations made by parents to the university itself.
“Certainly selection based on merit isn't perfect either, but it's better than all the alternatives, those based on relationships or recommendations. These are selection systems that remind us of feudalism or nepotism. The fact is that if Italy has failed to make the leap towards modernity of a competitive economy this is due to the general rejection of merit-based evaluation. In schools, teachers did not want the Invalsi test, in Universities the contributions for research designed to reward the best ones instead ended up with the weakest ones with the justification that in this way they helped to reach the others. The fact is that in all international rankings none of our universities reaches the level of excellence. And without top research centres, it is not possible to have innovative companies capable of competing and winning on international markets”.
The Right's program makes demagogic promises but does not reward innovation
We have fully fallen into the so-called "trap of middle-income countries" which are unable to make the leap towards innovation for fear of dismantling what they have achieved up to that point and not having faith in the ruling class that should guide him towards the new.
“Some countries have managed to make this leap. South Korea in the nineties changed its industrial model based on large conglomerates, focusing instead on innovative companies both technologically and in terms of governance. Germany did the same, which at the end of the 90s was the sick man of Europe. The social democratic government has launched a series of reforms to make the market more dynamic and enhance merit, imposing a series of sacrifices (such as the abolition of the thirteenth salary for civil servants) in view of a better future. And people accepted.
With us, on the other hand, politics has chased fearswithout winning them. Even today, the program of the Right follows this same line: the aim is to lend a hand to very small businesses and the unproductive tertiary sector; tax relief (flat tax) is promised to self-employed workers who are an abnormally high number in Italy compared to other countries, the labor market is left in its plaster cast, thus favoring the de-verticalisation of businesses and undeclared work. In short, the opposite of what would be needed is being done, i.e. helping companies to grow, rewarding innovative ones which, thanks to their merit, gain space on international markets, and reducing space for companies that are based on (political) relationships and which perhaps manage to prosper but, as a study by the Bank of Italy has shown, are not very innovative and leave no space on our market for new and modern companies”.
We always return to the problem of reforms. We have tried many in recent decades, but have not succeeded. Along the way they were emptied of the most innovative steps so that public opinion could only see the inconvenience they were causing without being able to enjoy the advantages of a more efficient system.
“The road is traced by Pnrr. There are reforms there. Some started to be completed and implemented and there are also the means to make investments that can immediately support the economic situation and in the medium term increase productivity and therefore the growth rate of our country. We must return to the themes of improving the school and University focusing on merit, i.e. providing, for example, the principals with real managerial powers, to reward their teachers, or evaluating judges not only on the basis of seniority but on the merits of their work. There are systems for doing this, but the CSM has refused to apply them. And perhaps it is no coincidence that our Justice, in addition to being slow, is unreliable".
Abandoning the egalitarianism of one is worth one to value merit and competence
This system of ours based on the egalitarian automatisms imposed by the various corporations has in the end created a great distrust on the part of citizens towards the entire ruling class. The social capital which represents the glue of a community and which is indispensable if ambitious objectives are to be achieved has not been built. Our policy does not seem equal to the underlying problems of our country. Where do we start from to get back on top?
“There are certain cultural barriers that come from our past history and post-war political arrangements. We've had parties like the DC and PCI who shared a broadly egalitarian ideology. Then we had 68 which lasted longer with us than in other countries and which strengthened the rejection of the market and merit. We remember the request of 18 for all students! Then, once the first Republic fell, we continued to produce political parties which, even if they proclaimed themselves liberal, did little to modernize the system by challenging the corporations. Then we ended up at 5 Stars and to the slogan "one is worth one" which is a farcical descendant of egalitarianism, of the refusal of merit and competence. But if we can follow the program outlined by the Pnrr we can initiate a breakthrough. Citizens' distrust of the institutions could diminish as the concrete results of the planned reforms and investments begin to appear.
