Tuesday, September 25, 2012

What Italy's "Stop the Decline" New Political Party Can Teach Us

I never thought political parties in Italy would have anything constructive to say about how things should work in the U.S. But then again, maybe it's time we stop and listen to what the "Stop the Decline" party has to say about creating the conditions for economic growth.

Italian Politics After Monti says it plainly:

"The good news is that Italy is safe. Even Moody's, in a report last month, conceded that if Italy continues its planned reforms, it could return to pre-crisis levels of GDP as soon as 2013. But safety—remaining in the euro zone—is not enough.

The bad news is that Italy still lacks a long-term plan to spur growth and investment, beyond the implementation of short-term crisis measures. Even if there were such a plan, Italian politicians in the past have consistently shown themselves unable to rise above petty squabbling and rivalries, which they must in order to achieve serious long-term reform. . . .

A new player, called Fermare il Declino or Stop the Decline, is emerging from this vacuum of political ideas with new proposals and faces. The movement gathers professors, entrepreneurs, professionals, journalists and Italians concerned about the future of the country. Since Stop the Decline first published an appeal in six national newspapers at the end of July, more than 22,000 people have joined the movement.

Although most of its founders are professors of economics, this is not a utopian initiative of the "best and the brightest" seeking a voice in newspapers, blogs and conferences. The movement represents a breaking point in the Italian political scene. Recent polls suggest that more than 50% of Italians are anxious for change but do not know who to vote for. A new movement could obtain 20% of seats in the next parliament and thus have a serious impact on future policies.

While other parties promise vague reforms in a distant future, Stop the Decline's approach is coherent and clear-cut. . . .We propose 10 structural reforms to jolt Italy's economy:

1. Reduce the debt.

2. Cut public spending as a percentage of GDP by at least 6% within five years.

3. Lower Italy's overall tax burden on the private economy by 5% over the next five years.

4. Liberalize protected sectors, including transport, energy, telecommunications, and privatize state-owned television stations.

5. Replace subsidies to inefficient companies with more unemployment benefits.

6. Eliminate conflicts of interest between business and government; increase transparency in business taxation and regulation; establish robust protections for whistle-blowers who expose corruption.

7. Ensure prompt access to efficiently administered justice; promote judges on merit rather than seniority; improve jail conditions.

8. Increase labor-market flexibility to create jobs for women and young people.

9. Improve the education system by encouraging competition and meritocracy; increase government funding for research based solely on merit.

10. Delegate more power and responsibility to local governments, while maintaining their accountability.

Some of these changes may seem obvious to citizens in other countries, but in Italy they would be nothing short of revolutionary. . . .  But the fact is these are the practical changes that Italy needs to keep its economy from backsliding even further.

Italy has long had one of the slowest-growing economies and some of the highest tax rates in Europe. Its large and heavily politicized public sector is plagued by crony capitalism. Its rigid labor market has led to one of the world's highest under-30 unemployment rates. . . .

Italy needs to change. If not now, when?"

Summing Up

Ditto for the U.S.

That's my take.

Italy advising us -- who'd a thunk it?

That said, their prescription makes lots of sense, so we should definitely give it a try.

Good ideas have no nationality. Besides, that's the way we used to do things, and it worked really well for all Americans. And it will again, given a chance.

Thanks. Bob.

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