Italy's Debt is NOT The Problem
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- čas přidán 3. 06. 2024
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Timestamps:
0:00 - Introduction
2:20 - Debt Problem
4:17 - Sponsor
5:43 - Growth Problem
10:13 - Way Forward
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Researched and Written by Dr. Joeri Schasfoort, Oskar Matthey
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Narrated, Produced & Edited by Joeri Schasfoort
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You should pin this comment 😅
Received a request of message via whatsapp from someone pretending to be you. Could you report please?
I researched vocal fry just to figure out if your voice was slowly injuring you, it's that crackling at the end of your sentences. I read way back that the Valley Girl accent can cause vocal chord issues in women, but vocal fry doesn't apparently. Just in case, I still think you should avoid vocal fry at the expense of sounding different because it could make you easier to understand and breathe better.
@@Sernival wow 🫡
Oh yes debt is not problem. We can Made more. #government
Bucking the trend, my son, who is Italian, was born and educated abroad but returned to Italy to stay and make his future there. He works at a rapidly growing medium sized company where everyone must be able to speak English. The government provides an incentive to returning Italians by reducing income taxes in the first years from which he was able to benefit. His latest contribution to Italy is a brand new little Italian.
Oh that's awesome! I hope they are successful. Y'all deserve stability
These days, making little italians is one of the best things italians can do for the country 😂
@@MM-un3ob to be fair though. There are soooo many dogs and so little children. I will never comprehend
Auguri! Greetings from Finland.
Oy vey, with that surname tho...
The UK has such a debt problem that we can only afford tax cuts for rich people
Every recent budget, they've attempted or manage to sneak in another bit of tax "relief" for incredibly well off people in. Last time they tried to eliminate the top rate of tax and this time it's removing the cap on the total amount of money you can put in a pension tax-free (this was already £1m+, so quite a lot of money)
Yet they spend their time fighting Nurses and Paramedics asking for a cost of living pay rise after 13 years of real terms pay cuts, because there's "not enough money"
Not fair! Lets all pay the same amount in taxes! That’s fair.
lol
@@eightspritesyou'd have to level up income as profits and rents are taking 3/4 of some workers income.
@@eightsprites The same amount? Or the same proportion of income?
If you factor in ageing population the situation becomes a whole lot scary.
the future of european demographics lies in immigration of young workers from all around the world. Italy (and other countries) need to adopt a model similar to germany's Ausbildung (government-sponsored job preparation at private companies) that would allow the young migrants to integrate into the economy fast. Having english as a second official language would help that process immensely
Italy's hope then is to drain the brain and appendages from mankind's cradle. But a lot of the Marios seem rather opposed to such a solution.
@@matm4413 The problem is the racism experienced by immigrants means they're less likely to move. EU research shows Italy is one of the most racist countries in Europe for Africans and so skilled Black people from Africa, USA, UK etc. don't want to move to Italy because they don't want to be treated like those Nigerians on holiday in Asti or homeless refugees or the Nigerian man killed on the streets by an Italian or how Italians throw bananas at their current best footballer Mario Balotelli. We don't care if you want skilled immigrants and not unskilled immigrants, we care if you treat them with respect and without a racist attitude and we see that you don't, so we don't want o move there.
Similar stories for Middle-Eastern and South Asian people, too.
Seriously, what is Italy's problem with Mario Balotelli? He was born and raised in Italy and is one of Italy's greatest footballers and he gets bananas thrown at him? Sad.
@@LVArturs Why would they when you consider how they treat Mario Balotelli?
Yet you still let people die in the Mediterranean sea over letting them enrich your economy just because you're either racist or jealous when they go back to their countries to invest their new earned money who's more valuable now to start cheap buisnesses.
And don't give me they will take our jobs bs, that's just an argument to hide racism, or just get ready for becoming new less cool Japan.
Improving administration efficiency would also improve our mental health....
Best comment 😂
Can you imagine? Utopia.
As a chef italian said " if my grandmother had wheels call her bike"
Grande😂
@@DL-fb8jd What does this mean? Also do Chefs make good money in Italy, if you worked in central Italy in a Michellin start restaurant?
One of the major problems about the 'tighten your belt' argument about government debt vs. private debt is the specific things that people want governments to cut, vs. 'belt tightening' examples. Here's a different one. You need to cut back, so you 1) cut back on health care by not going to the doctor regularly (you're in America, in this example) and not paying for medications 2) cut back on education by dropping out of that training course you were taking to get certification for a better job 3) eat less expensive food, which often means canned food or junk food. You're spending less now, but you're going to have to spend way more in the future because your health's going to take a dive, and you've lost out on the chance of making more money. IMO, an apples to apples comparison of 'drink less expensive coffee' is 'raise taxes on the people who are drinking the hyper-expensive coffee'. Health care and education are not frivolous things.
just a small part goes to these kind of things. how about the giant sink holes foreign aid and "climate change"
Exactly. Or to use Joeir's personal example, imagine if he had cut off his internet service, making it impossible to do his job well. Cuts that negatively impact income in a major way can easily backfire.
@@gavasiarobinssson5108 Foreign aid is less than 1% of the federal budget.
100% but I'd like to add an important caveat: healthcare and education can become frivolous when the administrative costs skyrocket out of control if not monitored, so keeping a right reign on administrative costs and addressing any inconsistencies is an absolute must.
Edit: there is also the ever-present issue of increasing taxation on the wealthy high enough they'll just start evading taxes through other legal means, there is a threshold before that happens and any extreme action will run them out completely. It's all a balancing act.
@@gavasiarobinssson5108 Why bother typing that whole sentence when you could have just said "I have no idea what I'm talking about" and made the same impression?
Italian spending on healthcare in 2019: 8.7% of GDP
Italian spending on foreign aid in 2021: 0.3% of GDP
Climate change is harder to measure because I don't think Italy classifies any given part of their budget as being "for climate change". But to get a rough idea, Italy's post-pandemic recovery and resilience plan from the EU includes 191.5 billion euros of grants and loans, 37.5% of which is earmarked for climate objectives, or about 3.4% of Italian GDP. Most of that spending is to do with improving infrastructure, such as improving heat efficiency in buildings and developing renewable energy. How scandalous!
We used to have a US national debt clock in New York City… but it ran out of space
🤣🤣🤣🤣
America at least has a growing economy that's extremely innovative. It has grown by over 10 trillion since the financial crisis
Thank you for your videos and they have good insights. I have lived in Italy for 3 years as an immigrant. From my experience in the country, On top of the problems you have explained, Aging population is another big factor. Working population in Italy is shrinking comparing retired and (1-21 yrs) young adults still in schools and colleges. Thus Italy pays more for social security, healthcare and education than Italy making money. To counter these expenses, Italy government has brought in some measures with varied success.
1. Increase retirement age to 67 - Govt collects more taxes and social security (40% of gross salary, 30% paid by employer and 10% paid by employee) and more people work in the overall economy
2. Reduce service costs(spending on Education and healthcare) - It is really tough as an immigrant to access some of these and you have to wait for 6 months for some appointments
3. Increase Immigration - To attract more immigrants, they have tax-cuts specifically targeted to immigrants. 70% of your earnings can be tax free. Problem here is, Government implements these measures, But officials on the ground make it so hard to deter immigrants from getting it. I had to wait for 2 years and submit countless documents to justify the tax benefit. second problem is that officials on the ground literally roll immigrants over if they don't know Italian and I often needed my Italian colleague as a translator. Italy is definitely not a good place for immigrant white color workers (Sorry, I have no idea of blue color workers).
Overall, Italy have policies in place for growth. But it fails mostly in its implementation predominantly due to inefficiencies within different government functions. Every different government functions needs to work together as a single unit for effectively implementing policies.
This is a similar problem China will get in to 10 yrs (or sooner) down the line especially with its replenishment rate at 1.6 child per parents. With China's current problem, Aging will complicate the matters more. This aspect was not covered in your China video also. I think its good to consider cycle of aging population in a country's macroeconomic analysis and forecasts.
@@fidanturkzade5634 He is a Tamil.
@@himanshusingh5214 oh, ok sorry
Go to Netherlands they have similar tax rebate and it was super easy to get it approved.
“White collar” “blue collar”
I sincerely and politely suggest you have no real clue nor understanding about what you comment upon .
Your videos' sound design is so soft, it's a pleasure to listen all the way.
Very happy to hear that Paul!
Here some other factors that play a big role
- Italy cut back its spending back in the 90s significantly, which resulted in reduced growth and productivity, but a primary surplus, more than any other country in the EEA.
- Germany's Agenda 2010 effectively helped to push their export economy at the expense of several other nations, Italy being one of them. Take a look on the Current Account Balance to GDP Ratio for both countries mid 90s to now. They flipped and yet Italy still managed to recover.
- Government debt is a necessity for every nation. Without it we would all be in big trouble. The problem in this specific case is that the financing on this debt is not equal across the eurozone. Germany for example pays a lower rate on their bonds than Italy. This must actually not be. The ECB has a mandate for price stability, but what do they do? Instead of ensuring continuous solvency of each EU member state that adopted the €, it rather leaves them at the mercy of bond vigilantes and so called rating agencies and then adds fuel to the fire by increasing interest rates in hopes to fight the current inflation, which actually exacerbates the issues. We saw what happened in Greece, where the ECB did nothing and what happened during the pandemic where it did something.
I just don't get the northern countries constantly belittling Italy. This does nothing but increasing resentment towards the EU in the italian population. This comes from a citizen from one of those northern countries.
It really saddens me, I have always dreamed of a United Europe, but instead, we are constantly battling against each other.
@@mattia8327 same :/
@@mattia8327 No thank you. My capital is in my country. If u want to be slave go to Brussels. No one voted for that nonsense and it makes no sense to vote for something like that.
You can be in debt however if you have the correct infrastructure you will make money.
Has someone born in the UK i totally get how people in Northern Europe don't look at italy favourably however there must be a distinction between normal italians and the government.
With meloni in charge finally things are starting to look good for a change
Italy’s refinancing cost would be much lower if they stuck to the 60% debt/gdp rule. They didn’t and that’s why they are in this predicament. Lowering the refinancing cost for Italy would only result in a higher debt/gdp ratio.
Next time you talk about debt to GDP ratios. I hope you mention the interest rates on the debt. Countries should be borrowing more during economic downturns where the interest rates are lower and be reducing spending during boom times when the interest rates are higher.
Agree Dept to GDP is pointless unless u factor in how much you have to pay for it.
so now is "boom times" right??
u got wrong the part about IR.
What about in stagflation though?
The issue is the calculations of GDP itself. A big chunk of the US GDP is made up of interest payments which is not something of intrinsic value, by factoring it out of the calculation, the US GDP would be lower than China's.
You should also have talked about the structure of the Italian debt, the vast majority of Italy's debt doesn't come from international lenders which of course has major economical implications
Yes such making your population poor if your country goes bankrupt
Yeah, it's a Eurozone country and ever since Draghi's whatever it takes direction for the ECB brancruptcy isn't really on the table. Serving debt is still a money drain in the budget but essentially Marco is right, the issue is the poor economic performance. As long as you are indebted in your own currency (here the Euro), you just outgrow your debt and inflation actually helps you. The only issue is that you still have to actually make good investments that will spur growth and the Italian south particularly is infamous for being a money drain.
such as?
I can’t help feel that this video could soon apply to the UK too. In our case rather than adopting the Euro being the issue (which we refused) it was leaving the biggest tariff free trading area, the EU.
Eh, the UK has been experiencing sluggish growth since 2008. Brexit was obviously bad, the slow growth issue predates it.
@@merrymachiavelli2041 that is very true but the 4% hit in GDP growth predicted by the OBR hasn't helped
@@merrymachiavelli2041 I think Brexit made it worse just as the economy was starting to turn round a little bit. People couldn't have forseen Covid and the Ukraine war. If they could, I honestly don't think they would have voted for it.
I read an interesting study that claimed the oversized financial sector of the UK is to blame for this. It's like the resource curse, all the best people that could've been doctors, engineers are instead working on how to help oligarchs avoid that one extra tax.
Britain have had some long term problems. The large financial sector have benefitted at the expense of industry, as the exchange rate has often been set in favor of the former and at the expense of the latter.
The tax cuts for the rich under Liz Truss was an idiotic use of Britains economic resources, and those tax cuts could better have been used for making life better for the many instead of the few. It is ordinary people who are the real job creators - as wage earner/consumers creates jobs, while capitalists love to destroy jobs whenever they can and replace workers with machines to save money whenever possible.
Britain have also suffered from high energy prices that have outcompeted some British industries like glass and cement, so by nationalizing energy and lower energy costs and get rid of ridiculs enviromental standards can those industries and other industries can become competative again.
As Britain is no longer an EU member it is now free to do as much import substitution as it wants and let government subsize and help to create new infant industries - something which in the long run will be an enormous advantage over the EU, and a good enough reason in itself for leaving that club.
And to solve Britains negative balance of trade problem here and now it is easier to get Britons to buy British made products, than what it is to get foreigners to buy British products. So by importing less foreign stuff will the balance of trade become better. And if Britons can buy an almost equally good British product instead of say a French or a German... then you will create more jobs at home and encourage the growth of your own industries.
So far so good.
But if you want to sell stuff to foreigners you have to make a superior product, if I as Swede should buy British made stuff instead of buying from a German competitor. So bit by bit do the new British industries have to get exposed to more and more foreign competition. And once those British industries are strong enough to stand on their own feet without government support, one can do away with all protectionist measures for that particular sector of the economy.
Britains industrial revolution was built on this type of mercantilism, so its time to go back to what have actually proven to work - Unlike the failed Euro experiment which have only delievered the slowest economic growth in Europe for decades, and created a huge economic crash which Europe never had any of since the Great Depression. Plus that the EU is undermiening every attempts of creating any new high tech industries by literarly making governments forbidden from offer subsidies, tariffs and other measures that could help them survive until their maturity stage.
Add to that all other idiocy that the EU stands for... like its convergence pact which makes budget surplus into law - just ask any MMT-economist how smart that is 🙄🙄
And then you have removed all capital controls in the EU which have led to problems that did not exist before - like tax evasion and the race to the bottom in lowering taxes for the rich and big corporations while governments are forced to tax poor people instead to plug budget holes.
And the lack of capital controls also help to create inflation bubbles and economic crashes, as when money from every goddamn country in Europe flowed into places like Spain and Ireland to buy real estate. And when so much money competed for a limited amount of buildings - then of course did prices go up sky high. And when foreigners wanted to move their money to another place, then prices fell like a rock and caused an enormous economic crash which Spain has not fully recovered from until this day.
So the EU needs to scrap the convergence pact, the capital controls, the Euro currency, its ban on tariffs and state support and its dumb doctrine of relaxed regulations for the banking sector.
Otherwise do I think there is a 0% chance that the EU have any economic future at all. Especially not with all foreign competition from countries like USA, Japan, China, India, Brazil, and South Korea which all do not behave like gigantic idiots like the people in Brussels. There are fools in those places as well, but their idiocy is nowhere near the levels of that in Brussels and the harm that cause.
The European left needs to drop its love for the EU and see it for what it is: Economic dogma of the rightwing.
Pensions in Italy are 80-86% of net salary. This is unsustainable.
The downsides of austerity are clear with Italy, and another good example is Greece. The IMF admitted as much, that their demands for more austerity led to much lower economic growth, making the problem worse.
The IMF wants you as debt slaves.
Im going to be a devil's advocate here and ask what else can the IMF do other than requires Greece to undergo austerity? It was pretty clear that Greek government was pretty much subsidising everyone in the Greek economy using borrowed funds and not the Greek's economy growing larger due to productivity per se. So a large part of the Greek economy was basically government debts. When the debts ran out, the Greek's economy will definitely tanked when the Greek government can no longer borrow to contribute to GDP leading to huge drop in GDP, so debt to GDP was going to rise dramatically anyway even if Greek government balance its budget.
So the only real solution is to grow the Greek's economy while maintaining a neutral budget but that's basically impossible when no one is willing to buy Greek's bonds. So unless the IMF take over Greek's government and implement economy policies to improve productivity, implementing austerity is the only possible way.
The same case with Portugal, tho some people on the internet like to claim the austerity measures were successful, the country fell a lot because of them and only started to grow when those measures were abandoned.
IMF is not free money, it’s there for govts to get through after they screw up their economy.
The money comes at a price, cut spending and increase taxes , then you get IMF money to get through this period.
If you don’t like it, either go bankrupt or simply don’t spend beyond your means by borrowing funds to keep up with spending
Without the austerity Greece would have needed to leave the euro. So bottom line: it was needed
(I am assuming the Greeks wanted to keep using the euro)
I swear I don't know anything about deep known Economics, but I love seeing Money & Macro explaining it.
I am working for an Italian company for more than 3 years. The main issue is crazy bureaucracy. Italy should focus on making all processes better and leaner. Invest in schooling and infrastructure with help of low EU yields. Use saved funds to lower debt
If we did not have far right government
They are centre right not far right
Italy is the capitol of bureaucracy & it's insane, I was yelled at at the Poste Italiane for not taking a number when there was no one in line. LOL. My Father who was born in Italy just went through the whole process of re-instating his citizenship because he kind of lost it when his family moved to Canada in the 60s he was practically a baby. The hoops he had to go through was crazy. You need to practically befriend everyone at the commune/town hall others wise they give you the run around. The nepotism in public sector in the south is an enormous problem. He finally got his citizenship reinstated, I'm hoping to apply for mine now through Jus Sanguinis. I believe Italy can have a very bright future, I hope to invest in the country soon. They just need to have an attitude change, stop Mafia bullshit, encourage their young people to be more entrepreneurial and want to get their hands dirty.
@@francescobarale2694
How do you imagine recklessly spending money on making lazy people rich and hardworking people poor, while importing hundreds of thousands of African illegals to pay for (meaning leftwing rule) would improve things?
Meloni etc can be criticised, but there is no alternative.
You had decades of far left governments, blame them@@francescobarale2694
german economist: italy should invest more in infrastructure, education and the south
italians: e grazie al cazzo
hahahah!!!
also Italians: vallo a dire ai nostri "politici"
Much of Italy private sector used to produce items that easily fell victim to globalisation.
So-so quality shoes etc. production was easily priced out of the market when it could be produced elsewhere for a lot less, while high-quality, high-prestige items could compete.
This is obviously also related to small firm size, if the cheaper end of the market had been better capitalized, Italy could probably have retained more production.
What makes a country rich? Is it well paid high productive jobs? or do a country get rich by doing low paid jobs?
What if two industries compete for the same workers? Should the government try to help the low wage sector, or should it help getting high paid jobs into the country?
I suspect you want the low paid jobs, since you cry so much about their loss.
But I do the opposite. I support the murder of them. Because I don't believe a country become the richest country on the planet by selling chewing and rubber dogshit for toy stores. You become that by well paying jobs. When you can make high tech products which everyone wants, and everyone is willing to pay much money to get, and which few other people around the world know how to make so you don't have high competition and can charge high prices from consumers.
And when you have such high priced products to sell, then you can get high profits for the companies, high wages for the workers, and the government can get large amounts of taxes which people can afford to pay.
So did the South Koreans do the right thing when they did choose to murder its shoe industry when it could no longer afford to pay high wages and compete with industry makes mobile phones/smartphones?
Yes it did.
Korea was the larger shoe producer in the world by the 1990s and early 2000's. But not anymore. Companies like Samsung have stolen their workers.
So the neoliberal dogma of tax cuts and trying to getting lowpaying jobs to lowering the barriers to entering the labour market is idiotic things that is taking the country the wrong way.
Instead of wasting money on such crap, its better to try to get people educated so they can take the well paying jobs that are available. Then you can lowering unemployment by getting a better matchmaking between the available jobs and potential workers.
And just following the free market does not make you a world leader in anything. You make that by directed government investments into creating new industries which did not exist before. Like how the US military invented the internet, the computer, GPS, micro-electronics and so on and thereby created innovations which gave birth to the IT industry.
And that is the reason why USA got companies like Google, Apple, Microsoft, Amazon and so on. While we in the EU have no such gigants at all. And our Fortune 500 companies here in the Europe are fewer and older. We do not create any new champions anymore.
And the reason is of course that stupid EU policies and rules have forbidden member countries from doing infant industry protection and letting governments help companies grow up.
Nokia was making a loss the first 17 years of its existence. But the Finnish government showed patience and the company would later on become a world leader in the sales of mobile phones and become the biggest company on Finlands stock market.
But what would all free market guys have said? They would have said that this company is a typical example of how it goes when the government runs things. It have only costed tax payers money for 17 years, and it is about time that we cut funding for this failed shit.
So if we would have followed the advice from free market people we would never have had any Nokia. Toyota would never have existed, because it too only survived thanks to government help the first years of its existence. And without having the US military as a reliable costumer, would never any microelectronics, GPS or internet have been developed either. And without support for small buisnesses the first years of its existence would Apple never be where it is today.
So government support have been crucial in the lives of most of the succesful companies.
Just the same way as parenting and support and help from parents is helping kids to grew up and learn how to take care of themselves. And one day they no longer need any help and can take care of themselves - just like companies.
And sometimes they can screw up in their life, and need a helping hand until they can get back on their feet and take care of themselves again.
Of course there are examples of parents doing their best and still does their kid end up like a lazy useless bum. And the same goes for government support for some companies...
But is that a good argument for scrapping the idea of parenting and helping our children grew up, and just leaving kids to themselves as soon as they have been born?
- Well free marketeers perhaps argue like that. But personally I do not share that idea. I think parenting is a good idea.
I know too little of islam to have any opinion. But I do know that economic thinking have a long tradition in MENA countries. Ibn Khaldun for example could be considered an Adam Smith who lived 400 years before that Scot.
Khaldun believed that the market was a self-regulating system, and he believed that economic specialization increases productivity, and he believed that higher taxes can be counter-productive for a government since it might lead to people losing their willingness to work.
So in a way he was a rightwing economist long before that became mainstream in the west.
From one thing to another, have I also read a little in Charles Issawi's book about the economies of the middle east and North Africa, and was impressed of the early successes of the Arab nationalist regimes and the Turks in the late 1800s and early 1900s.
I think those economies reminded me a lot of the strongly regulated and musch state controlled economies Europe had in the 1950s right after world war 2. And those seen in post-war east asian countries like South Korea.
*"If the EU as a whole did infant industries, it would more than compensate for the fact that individual countries like Germany aren't allowed to make them anymore."*
It is no comfort to me as a Swede if my country lose our entire industrial base, if say Portugal benefits a lot from EUs industrial policy. I don't care if our companies gets outcompeted by German, Greek companies or by Japanese, Iranian or Brazilian. The harm is equally big to my country.
So therefore do I want infant industry protection for my country.
I also don't see the need for a totally open EU economy as the lack of capital controls only leads to bad things.
And I don't think the four freedoms is a good thing either, as it only helps crime move over from one country into another with the free movement of people, and the depopulation of eastern Europe has been devestating.. and so on, but I am getting off topic.. so lets not get into that now.
I do think it is very important that we keep the industrial base alive in this country. It takes 25-30 years to build a new industry, and often it takes even more than that. But destroying it can be done very fast.
So therefore is it important with long term strategic planning which industries we let live and which ones we let die, and which ones we aim to create in the future.
For me have the Corona pandemic strongly confirmed my belief that Sweden must have its own capacity to build hospital equipment and medicine.
Because while 800 persons per day died from Covid in Italy did Germany, France and Czechia decide to steal hospital equipment from other EU countries. So much did the Germans care for solidarity with their European brothers, that they happily let hundreds of Italians die because Germany stole ventilator machines from them and doctors and nurses lacked protective equipment and got sick and died because of this selfish behaviour.
So with friends like Germany can we simply never put all our national security in the hands of other EU countries.
Germany stole hospital equipment which we in Sweden had already paid for. Goods which already had been made and only waited for delivery was stolen.
So having to rely on other EU countries must never happen again.
The next time a much more deadlier disease than Covid can come to Europe, and if Germany steals our hospital equipment again, then the result can be that millions of people in Sweden dies.
I think that would be unacceptable.
So to hell with the EU.
We need to produce our own medical equipment. Just like we should produce our own weapons. Because we can not let tens of thousands of Swedish soldiers die, just because of some stupid German pacifists are blocking arms delieveries from other countries.
We must be able to produce the most important things for our own country in the case we might need it in the future. We cannot hope there will always be nice weather and calm winds.
The extremely bad shape of prepardness for pandemics and war shows how stupid the EU idea is.
Before we joined the EU we had not cut down on our ability to deal with those things - unlike today.
And Sweden is not alone. Basically all countries in Europe have cut down their militaries so much that they got almost no equipment over to send to Ukraine.
I understand that many German and French imperialists wish to buy up all companies on the Swedish stock market and suck out our wealth from this country and wipe out Swedish national identity. That seems to be the goal of the EU. And I am not interested in letting that happen.
I rather have a Europe where every country have their own industrial base. And if Spain, Germany, Italy, Czechia, Romania and France all have their own car makers it doesn't bother me.
I believe competition to be a good thing, and that every manufacturer will specialize into their own niche. We do not an USSR peoples car that everyone in the EU must drive.
@Tracchofyre
*"The days where Sweden could go alone are long past"*
30 years ago is not a long time. The laws of economics has not changed. They are the same as they always been.
Saying anything else is ignorance of history and ignorance of economics.
The main flaws with the EU comes down to two things for me: The anti-privacy/anti-democracy/anti-freedom of speech... and the the other thing is that the EU does not allow its member countries to have any policy freedom at all in economics.
You are only allowed to have economy the EU has choosen for you. Everything else is forbidden by law.
I call that fascism.
And I call that stupidity.
It fascism as democracy no longer matters if you are only allowed to have neoliberal economics. Leftwing economics is forbidden. Mercantilism and nationalism is forbidden... so what then is the point then to go to vote when you cannot change anything?
- There is not point in going and vote. And for that reason have I never voted any EU election the last 20years.
And its stupid.
Stupid because I believe that countries in Europe is better served by an economic model that is not based on neoliberalism.
The EU is anti-technological develoment. And therefore it is also anti-growth. And its stupid policies have caused the Eurocrisis - a problem which we did not have before the EU.
*"We european countries are small and are easy pickings for China, India, USA. We have to stick together."*
European countries can do cooperation or helping each other even if the EU ceased to exist tomorrow.
And the EU (France and Germany) have so far been worthless friends.. they did not help Sweden when China decided to bully it. And they hoped that Russia would have won the Ukraine war.
That is what you get when you choose EU.
"We must not humiliate Russia" Macron, and German chancellors on Gazproms paylist do not mind throwing the Baltic states to the wolves if that is what it takes to serve their own economic interests.
And when the two dominant countries in the EU behaves like this you realize that USA is a better friend for a small country than what France/Germany/EU is.
USA did not steal any hospital equipment from us in the middle of a pandemic - that is what France and Germany did.
USA have not stolen any energy from us - but that is what the EU and Germany does.
It almost seems like that with friends like France and Germany you do not need any enemies.
@@nattygsbord
One way to lose ALL credibility instantly is to rag on the EU, the biggest economic powerhouse in the world.
How much do you get paid per destabilisation-message, Sergei?
tf you talking about? 'Made in Italy' is the major selling point for Italian products because of their known quality, desirability, prestige.
As always, you are the economist that we deserve in national channels. I think your work is essential to actually move past stereotypes and superficial ineffective rhetoric and really solving problems.
Yes.. basically everyone with common sense in Italy will agree that debt is not the problem, the problem is how you spend the money, if you make debt to invest in building the economy then it's "good debt", however governments are not really good at doing that lol
Exactly
Can you do a video on the UK economy? I think we’ve incredibly stupid over the last 7 years.
I would love to see this.
been following you since the courses i took at the uni in Groningen and i must say your explanations are so clear, it's no wonder i passed these courses first try!
To the point, easy to understand, and links for further reading. Great job Joeri!
I love my country but it's so difficult for young people to find a nice and well paid job. I graduated at university and nothing have changed, in Italy you can only find a job as a waiter or generally in the turism sector, here no one care if you study… Now I’m planning to take a master but onestly I think that nothing will change.
Job as a waiter, that's usually paid the lowest they can pay you and usually on fixed-term contract so they can pay you even less as most of it is paid by the government
Potremmo vivere tutti di turismo con un Paese cosí bello
I'm Italian and I would say yes the problem is not the debt, it's the growth but education is not the solution.
Although the percentage of people holding a degree is low, it is far higher than the amount of job places where that education is needed that's why we have one of the highest brain-drain rate in Europe with any sign for improvement. Unfortunately, in recent years, has been common in the news find articles about top graduates "proud" of finding job for 500€/month as trash collector for cleaning companies operating in cities where renting an apartment costs 2000€/month - at least is work and it's legal.
Back to the economy, the goal of every developed country should be to develop high value added products, and leverage the difference between value produced and cost of production before the economic competition brings down the prices.
Unfortunately, Italy from a geologic point of view is very poor of raw materials required from those industry: silicon, metal, petrol and any other combustible for energy, so the only way to get some competitive edge on the prices is to get them in via cheap infrastructures which, unfortunately, were also cut with the austerity.
So what's remaining? turism and low value-producing activities like artisanal work that don't require almost any high education.
The issue with that the are sectors where you are facing the whole world competition on a tight balance between quality and cost, so the easy way is to dump salaries, but with salaries as rock bottom who will afford that quality?
Finally with salaries a low levels a lower amount of people will be able to save and and even lower amount will afford to become an entrepreneur.
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I think also the "Big companies" is a false problem and should be avoided as hell, as happens that companies become too-big-to-fail as the social consequences of a failure can be dire for entire areas where theses institutions are almost the sole employer, that makes them money-black-holes where money is poured with little or no benefit we have too much of that in Italy, an example is the infimous Alitalia (30 years without a profit), FIAT, ILVA (steel producers), ASPI (motorways).
The backbone of German economy is also small and medium sized companies. The problem is more the institutional setting. If the Mezzogiorno keep up with North Italy, the problem will be solved. There's a region every province in the Mezzogiorno has its own criminal organization. (Cosa Nostra, Stidda - Sicily, Camorra - Naples, Ndrangheta - Calabria, Sacra Corona Unita - Apulia)
@@ravanpee1325 I agree and not, in the sense that the institutional setting is lacking, to put it nicely.
However I still think that criminals organizations thrive because of a lack of legitimate opportunities, and that's a constant that was present before the unification of Italy and got worse because are always the wealthy people to leave first.
@@gabrielebianchi8976 Yes, but the solution is not to spend gouvernment money for bs projects..e.g. in Spain people dropped out of college to work in construction, because so much money flowed into the construction sector to build ghost towns
I didn't know that the situation is so bad in Italy. I thought it was much better.
Bigger companies means having higher investment in research and development which leads to having higher productivity which leads to extracting higher value from raw resources! That's it!
You're right by saying that we are crippled with a lack of raw material but anyway we still have our intelligence! Look at South Corea or Netherlands or Taiwan or Singapore, all those countries has the same issue we have but they tackled it with high productivity.
Before we had the "Human Resource", cheap labourers from southern Italy, now thanks or due to Euro and Asian countries we can't do this anymore.
I have family living in Italy, so that aside from other reasons, I’d like to see the Italian government make the necessary efforts to grow and prosper. Especially for the future generations’ sake
The Italian government making the necessary effort for THE FUTURE GENERATION?😂 They can't even finish the four years mandate, imagine them thinking about the future generations.😂
Very similar story in UK. Even with austity measures our debt to Gpd level has gone up because of flatlining growth. Most probably caused by said austity and lack of investment.
I don't understand 'austity'.
Do you mean 'autism'?
@@sansdents7559 I meant austerity.
I remember 9 years ago I calculated the same thing while i was working on my degree in economics. Excellent job, absolutely correct. The narrative about southern Europe which has been pushed by EPP is complete hogwash.
lol, did you factor in negative pop growth ?
There are a LOT of boomers aching to retire and rambling about that nonsense while a whole lot less young people are there to take over and pay off their debt for them, meanwhile boomers argue they need more free cake for themselves like they always did.
Excited to watch! Thank you :D
Italy has always had an export driven economy and it was facilitated by a depreciating Italian Lira. When Italy adopted the Euro, the economy was put in a straight jacket for which it was never prepared. Also, the Euro has a major flaw in that it is undervalued relative to the EU North and overvalued for the EU South, leading to overproduction in the North and overconsumption in the South. If you read the meeting minutes of the 1992 Maastricht Treaty, you find out that Germany wanted the Euro currency in order to protect it's manufacturing industries from competitive currency devaluations from its major European competitors like Italy and France. That may be one of the reasons why Germany is so disliked in the European South and considered embarassingly hypocritical in its moralizing critique of its European partners.
Another major economic impediment is the legal frame work in which companies operate in Italy and the thicket of laws and regulations simply strangles entrepreneural initiative and business development. To accelerate growth, Italy needs to reform and substantially reduce the regulatory state so it can unleash its repressed entrepreneural dynamism. Italy is stuck with the Euro, but it is within its own control to reform its laws. The country should reread its economic history and assess how it can recreate the framework that lead to the economic boom of the 1950s and 1960s.
Excellent points which this analysis missed "the Euro has a major flaw in that it is undervalued relative to the EU North and overvalued for the EU South, leading to overproduction in the North and overconsumption in the South" "Another major economic impediment is the legal frame work"
Fully agree. This is beautifully illustated in Dolomiti SuperSki. The best lifts are build all in the same location (val gardena) because it’s so bussy.
Therefor more spending on liftst in that location.
Many other great places suffer from this. Are better en nicer to ski (less crowed f.e). Cheaper. But suffer form lesser lift-quality.
The main problem is the government spends huge amounts of money on pensions. Way more (as % of GDP) than almost all other countries. There are plenty of cases where the grandpa in his 70s earns more than his grandson in his 20s working full time.
Another problem is that government legislation favors small business, this creates a series of problems: it stifles business growth, if you try to grow your business, you get more regulation and rules to follow causing business to remain small. Small business is less productive so it leads to lower wages. Also it's more common for small businesses to commit tax fraud, as it's easier to coordinate with a few people than with thousands.
Great video Joeri! Would love to see one about why some experts think Canada will be the worst performing developed economy for the next decade or two.
You mean Peter Zeihan? Don't listen to a non-expert who consistently makes poor analysis of history, economics and politics.
Why? It has natural resources, takes migrants, borders with the largest and one of the most dynamic economies in the world, has sky-high HDI. Should be doing fine...
What hack economists have you been reading? Canada is one of the best positioned countries there is for the next 100 years. Rock solid banking system, one of the most highly educated countries in the world with high population growth and some of the most natural resources in the world…
The experts don't think we're very productive, and also don't think our government is doing anything to fix it. The OECD paper that some people have been citing breaks Canada's underperformance in GDP growth down to two main, lagging factors vs the rest of the world: "Trend Labor Productivity" and "Capital per Worker". Essentially, our workers aren't as productive and we don't invest enough into capital assets for our workers (hmm wonder why they aren't as productive).
(love your videos btw hoser)
@@LVArturs Because people read Peter Zeihan without realising he's peddling BS.
Do you have a video talking about austerity measures in general? I've seen people say that austerity measures never work, I don't know how real and how hot is this take. I'd love to have your opinion on this.
Really interesting. Thanks for sharing
Good video, thanks for the analysis.
It would be great a video about the spanish case. Low industralization, same debt problem, but seem to be growing however.
Nice video. Thanks!
I don’t think italy is a lost cause, in fact I think you brought up great points for how it could reform; the problem is:
A. Getting Italy’s domestic politicians to agree to revamp the bureaucracy to make it more efficient and effective. That’s a tall order as Italy has notoriously fractious politics. And
B. Getting buy in from other EU member states, especially northern ones, to fund such a growth strategy.
They already did B, but not as buy ins, but as handouts.
Trowing more money just doesn't work. While Italy isn't as bad as Greece it has some similar problems. It's more of an low trust society with quite a bit of problems in governemnt too.
No matter how much money you throw at bad system, it will give bad results, just with bigger losses. And when we are talking about complex econmic issues with different interest, that money in "bad" system usually goes to people that are making the system so, thus just reinfocing the status quo.
Overall, most critical thing is to actually make effective reforms, then even without money given few years you would get results.
I, on the other hand, think it is a lost cause and 11 years ago I emigrated to Germany. Like me in the last decade half a million Italians have emigrated. Italy is a beautiful country, but immobile in the best cases and decadent in the worst; every time I go there on vacation I find the population older and angrier. In my opinion there is no hope, and I would not be surprised if there is a default in the next 15 years.
@@marchesiamatteini the demographics is screwed. You have a the bulk of the electorate in pension-age, or in proximity to it; the same people also have the largest share of wealth and income, but are the least productive part of the population. Public expenditure for pensions is crazy high, the biggest one by a margin, yet politicians can't really fix that since that would mean political suicide.
There's Also the Baby Making and Norwegian Wealth fund options:
1. Universal Daycare for all babies and children under the age of 18 (payoff for this is in 30 years😅)
2. Fund all Retirement through an government investment fund who's performance is measured against inflation+2% and the US Stock market indexes, (excluding the DOW.)
3. Raise Full Retirement benefits to 75-80 and use the money saved to increase pregnancy, disability care, and home assistantants. Disability care in this case would basically just act like early retirement or partial retirement for those with conditions that qualify as a disability. (Parkinson's, Altimers, Dementia, chronic pain, paraplegic, etc.)
4. Universal Nursing and Italian education for anyone who promises to work as an Italian Nurse for at least 10 years.
5. Ultra high Voltage Electricity access to North American, Middle Eastern, African, indian, and Austailian Solar electricity. I have done some Excel charts and written a paper before hos the Lower cost of Solar Energy combined with an international Ultra High voltage Power grid, (Ultra high voltage is is above 800kV and Usually 1000kV-1100kV when AC. Ultra high voltage AC would be better for dynamic global power markets ranther than the more Directional Nature of DC due to the reduction of producer/consumer negotiation. Though I understand that UHV DC power is generally safer and uses less materials, the Dynamic Market pricing gains outwayed some the materials/saftey equipment costs unless we can digitize/miniturize the 747 size tranformers, multimeters, and conditioners required to measure and management UHV power.)
Thank you for your presentation , I watched all of it .
Great explanation! Some of the thesis that you argue here are a good case for MMT.
Good video. Would have been nice if you made a distinction between the ways a government can use it's spending. Is it for short term consumption or long term investment. All they way forward solutions are investments, which most economist will no see a problem with increasing debt for that purpose
Great video. I think now it's time for EU to step up, and help Italy in kickstarting a new italian growth, this is their Duty as you shown in this video, because while roughly 50% is Italian internal factors that contributed to the stagnation, by joining the EU they lost their competitive edge by non being able to devale their currency, thus favoring northen European countries Economies, and moreover Italy acted according to these countries who were bugging Italy for years for austerity measures.
Italy, beside all the slander, is a net contributor for European countries. thankfully after covid some good signs has been show with the NextGenEu, but it's not enough, there's a need for a common, european-wide, share of knowhow and governing expertise
The EU is going to do nothing other than attempt to save their asses at the expense of Italy, similarly to how it handled the Greek situation.
How much has Italy contributed to my country and what we need?
Last I checked they were the last to block sanctioned the genocidal tyrant Putin who murdered two of my friends, because Berlusconi and his friends want to rape children in a very hot room, made hot by burning cheap Russian gas.
Criticise me all you like, but "We in Italy don't even want to lose € 1 to help you" doesn't make me feel like I should give up a lot of my wealth for Italy.
Real answer : TFP total factor productivity multy decade decline, why? Well thats the question... And i am pretty sure it's not about unproductive public spending cuts
Hey Joeri, I like your content a lot. As you've referenced the dezernat zukunft article, do you by any chance speak (or can read) german? There is a great book by Joscha Wullweber called Zentralbankkapitalismus. Unfortunately it's currently only available in german. I'd love to see some content about that. It's about how the money market and the shadow banking sector have replaced the regular bank credit sector over the past two decades and how that destabilizes the financial sector and also how the central banks have changed their monetary policy (unconventional monetary policy) to not only act as a lender of last resort but also as a market maker of last resort. In my opinion this topic is very much underrepresented in the public discourse.
you didn't mention the two primary factor of gdp growth: 1) population growth 2) productivity growth
at the end gdp is number of people multiply by productivity.
the population of Italy is decreasing and the productivity is lower than the one in the countries you mentioned.
There’s an excellent book by Mark Blyth: Austerity A History of a Dangerous Idea. He also has multiple great videos in the same topic here on CZcams.
Do you think in the context of the US debt problem the country needs broader austerity policies (be it reducing spending or raising taxes), schemes to spur growth, or something different entirely?
I"m from Rome and I can testify that we do not have a debt clock at Termini (the train station mentioned in the video)
That's a true but lacking analysis.
- Debt might have not increased much compared to other EU countries, but it was high to begin with. So, cutting on debt is necessary.
- Italy's Primary Balance has been one of the best in Europe, indicating that Italy has growth potential, but it's suffocated by debt interest rates.
- Italians are old, so you can't expect much resilience (investments on the future, reconfigurations, etc) after a big economic blow.
Money&Macro could you do a longer video on South Africa's Economic situation. We haven't really seen you cover much on Africa. The Short you did on Eskom left us wanting
Loved this video, and finally, a bit of clarification. ❤ However, tons of multinational has move in countries with low salaries ( Poland, Romania, Portugal , etc), which cost lots of jobs losse.
well now, the divergence of output between the two parts of the country - one much more integrated with Central and Northern and the other at a geographical disadvantage but with all the advantages of Mediterranean potential developments needs more consideration. As a G7 member Europe and an EU motor specific GDP per region is much more significant in EU terms. Another factor to consider when mentioning Italian Public Debt is the still strong link between saving and ownership of debt by Italian residents.
Small family enterprises are often described being the backbone of Germany's economy - because they have to be more competitive and therefore more efficient and innovative than many big stock corporations. Of which Italy has also some. Family enterprises also have in most cases more of a long-term view than a corporation forced to publish positive quarterly reports for its volatile shareholders and led by hired managers. Therefore size of companies seems not to be the real problem, as long as the market rules set by the law encourage and protect competitiveness.
Italy has also a growing infrastructure problem (like Germany also): Austerity politics meant in both countries less money for maintaining roads, railroads, buildings and other infrastructure and therefore slow decay. Future generations will be forced to rebuilt it all nearly from scratch. Delaying maintenance is also a kind of growing debt, it is only easier to hide than "official" debt in the form of loans, but it is also a "harder" debt because there can be no debt reduction with that kind of debt, only steady debt growth.
Small businesses are universally less efficient
@@williamthebonquerer9181 Totally false, surely you are a libertarian who thinks that everything should be a monopoly.
It was also found that in the United States private companies invest more in R&D than publicly traded companies.
Germany, France, Poland all have a network of small and large private companies. I agree with your comment.
Italy needs a less bureaucratic state for new entrepreneurs and Small business, and to achieve a more efficient state with spending.
@@tasky479 small business generate less GDP per person per hour it's not rocket science, stick to the point don't argue about beliefs you for know reason believe I have
@@williamthebonquerer9181 Small family businesses are everywhere the backbone of countries which need not be developed. SFB contribute most to the development of the country. Besides, they are also the ones that are taxed more than large companies, such as Microsoft, Amazon and Apple.
As a Italian, I can say that the biggest problem is the tremendous presence of the government in the economy, that combined with corruption, inefficiency and very low competence by the politicians, destroyed every possibility of an economic growth. The fiscal pressure is too high for the quality of the public service, but austerity, like you say in the video, is not the only solution. The solutions aren't simple : improve the amministration, upgrade the burocracy, give more economic freedom, cutting the taxes and at the same time investing A LOT in education. Only with work and time we can resolve our situation.
Same problem, here in Portugal.
I'm an Italian expat. My country of origin has several structural problems indeed and it's a systemic issue that cannot be fixed by only tackling one thing. You are correct. My father's income had decreased in the 1990-2018 timeframe, which is ridiculous. So growth is indeed one of the issues. There should be a systemic reshape programme boosting education, healthcare, high tech and infrastructure (heavily cut in the last 3 decades) joint with an enormous effort for monitoring of correct plan implementation and resources allocation. Money laundering practices and embezzlement should be minimised as well the interference of criminal organisations, which is entrenched in the system. To guide the resources allocation efforts I would go therefore for a eu-level top down plan after a careful analysis of the potential the territory has. (Yes I'm terrified that the next gen eu plan will not yield it's full potential benefits)
Back on the main topic: one of the other issues I see, however, that youth is not being prioritised due to a demographic pyramid, which skew politicians towards accomodating older generations, who, in turn, due to the age and even culturally, are inclined to short-term thinking & are adverse to novelty. The sheer dominance of older generations and its shortsightedness is quite evident in the job market: on the one side in the low digitisation - that creates low competitive businesses (you are correct there: since the enterprises' tissue is composed by micro family led businesses with less than 10 employee everything new is difficult to implement/no skills available/scaling is not possible) on the other hand, the salary generational gap (millennials vs boomer) is insane.
I know that this does not apply to Italy only but Germans, Dutch, Danish, French etc I speak to, would normally get shiver, if I point out that Master educated peers can only get stages & fixed term job opportunity who are paying less than the minimum rent for the city they job is located into - I was offered myself a 6 month stage to hire opportunity for 500 euro/month in Milan (I am highly educated and speak +5 languages). Even for the lucky who have family located in big cities, who might go for those indecent proposals, hoping to get hired... when they get hired, the starting salary is hardly above the 20-25k/year, which is 30/40% less than what you can do in the neighbouring countries, or the same that they could do in Spain, where the cost of living is lower.
The schemes that pushes expat to go back to Italy are a nice, relatively new idea, but are insufficient to enact real growth. High skilled labour cannot infuse higher productivity in the country if the above mentioned systemic reforms are not on the table and, above all, if there is no will to change the way people think though a cultural reform.
All and all, even if I see some positive progress here and there, there is not enough momentum, it's scattered and weak.
Its a thorn issue and I'm not sure there will be a way to fix it - sadly.
One story to tell.
The difficulty in getting employees to return emails and phone calls in Italy. It takes almost four months to close a property purchase in Italy.
Step into most City Halls in Italy and what do you see? Black binders and a lot of paper. Walk into an Italian bank and workers do not want to make eye contact with you since that means they will need to interact with you. You go online and the info is out of date. I can't tell you how often a site will tell me it is open and I get there and it's closed.
Look at reviews from Italian's on parks in their cities.
The lack of technology, the reliance on doing things the way they have always done it with paper and stamps, the problem of showing up on time and working without you having to be there.
Italy is the most breathtaking Country in Europe. There are times I am stunned by it's beauty.
But the unwillingness to change is very frustrating.
I don't think you need a gaming computer to play Red Alert, so I agree that you can cut some costs on that front 🙂
Cutting social services causes more problems than that going into debt. Thanks for the excellent explainer.
Unfortunately in the majority of the 2000s we had Berlusconi, you can only imagine how much a billionaire likes cutting welfare.
@@Iknowthismeme He normalized fascists and layed the groundwork for the current terrible, openly fascist government and the stumbling, bumbling baffoons who came before her.
No it doesn’t…
I will say though, cutting the military, or removing (most) tax breaks (or cuts), or eliminating corporate welfare, or slashing elected officials wages, causes no problems and let’s you keep welfare and be debt free… I wonder why hardly anyone does that…
Except it mostly doesn't cause that, and the whole paper discussed was a bold-faced lie.
@@sulimanthemagnificent4893
Yeah, ask Ukraine and Georgia what could possibly go wrong if your military is fatally weakened by brutal budget cuts.... :laughing:
Guy I used to know recently died of lung cancer before age 50. Leftwingers cut the military budget, so no protective gear for people like him who operated the trash burn pits. But hey, I am imagine some leftwingers were able to buy a LOT of beer from the money saved by his death.
Very interesting point! One of the other factors limiting our economy is certainly the unbearable tax burden on the private sector. This leaves basically zero enterprise freedom and that's why many people like me have sadly left the country
Please make another video about Italy economic situation 🙏
Italy is also aging fast...there is a massive bump in the 50s to 60 year olds...and is nearing approaching retirement. That is more payments on social security, shortage of labor, and much more debt.
Skilled immigrants mainly come from Africa, Asia and the Americas nowadays, the problem is the racism experienced by unskilled immigrants in Italy means they're less likely to move. EU research shows Italy is one of the most racist countries in Europe for Africans and so skilled Black people from Africa, USA, UK etc. don't want to move to Italy because they don't want to be treated like those Nigerians on holiday in Asti or homeless refugees or the Nigerian man killed on the streets by an Italian or how Italians throw bananas at their current best footballer Mario Balotelli. We don't care if you want skilled immigrants and not unskilled immigrants, we care if you treat them with respect and without a racist attitude and we see that you don't, so we don't want to move there.
Similar stories for Middle-Eastern and South Asian people, too.
Seriously, what is Italy's problem with Mario Balotelli? He was born and raised in Italy and is one of Italy's greatest footballers and he gets bananas thrown at him? Sad.
@@jasonhaven7170 People will always be ignorant and self destructive...an example is during Covid and how suddenly everyone thought they had a doctorate in medicine just cause they read a journalistic article on the internet.
@@jasonhaven7170 Why would Italians want a massive influx of immigrants? A degree of xenophobia to keep migrant streams managable is in every country's best interest. It's not a sustainable solution to demographics, unless you're keen on destroying your own culture in the long run. They'll have to ride it out on their own if they want any chance of coming out intact, if battered, at the other end - a fact that East Asian countries seem well aware off and that most Europeans seem to wilfully ignore.
@@danielvillalba5375 I hope future Italians will be less racist.
@@jasonhaven7170 this comment is a bit racist and not totally true tbh. From italy.
I lived in Sicily/Naples from 1997 to 2007. When we traded our Lira for Euros I noticed a number of economic changes. Examples: A mall was opened in Catania (French investment), a discount store opened on my drive to work, larger supermarkets opened, Omnitel (French) rapidly took 1/2 the cell phone market. BUT the local weekly flea/food market prices remained low, a friend with a local small business indicated small businesses were closing, Italians continued to not trust banks and would invest savings in unused vacation homes. The point I'm trying to make is that all three southern European economies, Spain, Greece and Italy adjusted to the Euro with similar difficulties. There are cultural aspects to consider. In Italy I learned why Mexicans with their ginormous sombreros are not lazy, they, like their southern European cousins are avoiding sunstroke. Eating at 9pm and taking a siesta from 12 to 4 (and then working until 8 pm) are ingrained cultural adaptive strategies that airconditioned supermarkets and malls imperfectly address. As you near the equator, investments will have a different outcome as compared to more northerly climates where planning and order are a more ingrained aspect of survival.
Northern Italians are more "industrious" than from Rome south. Mandarins more than Cantonese. Indus valley more than the southern dravidians. Yet Singapore and South Korea are outliers. Is rapid urbanization with it's air conditioning creating northern climate equivalencies?
Interesting food for thought🤔
@@marvinegreen North Italy have better access to water resources and is closer/belongs to the economic center of Europe, the blue bannana. While previusly the economic center was in the mediterranean.
@@MrJuanmarin99 Yes, very good points and I'd add: When the Phoenicians colonized Carthage and the Romans expanded their empire - in both cases there was an increase in urbanization, but more importantly, specialization of labor derived from urbanization. When comparing Mexico, with its increasing population, increasing specialization (and the benefits of NA free trade) and urbanization - in comparison to the 3 southern European economies - leads me to the supposition that the economic benefits of specialization derived from urbanization supported by population growth can account for all of the examples forwarded so far.
Italy (even Southern Italy) is far away from the equator.
you made this easy to understand for me.
good video!
Glad to hear that!
Sounds like nitpicking at first, but it does make sense to make that distinction apparent, since it clearly affects which measures and changes should be implemented.
As an Italian, what I would recommend is to create special tax free industrial and trade zones in some areas of the South, which are closer to major Universities (Naples, Bari and Palermo). The Italian economy does not grow because of the oppressive bureaucracy and punitive tax system.
Exactly and Italy's economy is very North/South divided. While the North of Italy is one of the richest and most productive regions in Europe. There needs to be a great incentive to reduce unemployment in the Southern regions of Italy. Which gives Year-round long jobs and not just seasonal tourist jobs. Tourism is great for the economy but shouldn't be the sole income of a region.
Luckily for Italy they have some well sized cities even in the south that can act as catalysts for economic development in this region. It would just require proper management and incentive from the government.
@@ainsley4204 ...and battling organized crime! You know, sicilian Mafia, campanian Camorra, calabrian 'Ndrangheta, apulian United Sacred Crown... they are like a cancer to the Italian system!
Ah yes, other fiscal easing on the south which has been already surviving for the last 100 years on the massive tax transfers from the productive north, what could go wrong.
Altri privilegi che andranno sulle spalle di altre persone.
Davvero una bella idea.
Ma se nel sud evadono un fottio, lo so pure io che sono isolano
Uhm the problem is that the world economy has shifted from a manufacturing based economy to a more tech based economy. Italy is a country of art. We used to be good at making stuff (cars, clothes, pharma, food). while the IT sector is growing I can't name any big italian tech company or product that I use every day. And no, the phone doesn't count even if it was invented by Meucci
No country in Europe has a main tech giant in that sense
Facebook Apple instagram google CZcams Microsoft are all American companies that went global
Could you explan why is debt (stock) in lets say euros and GDP (Flow) in euros/year, used as the ratio. This seems as a sacrilegious use of ratios. Would it not make more sense to have the debt service / year over GDP as the ratio?
You could use assets to debt as well. But, these are hard to measure. Gdp is a flow that determines for a large part debt sustainability. Similar to how banks may look at your income (flow) to determine how high your mortgage may be (stock). Debt service may be better... But, can change quite unpredictably with interest rate changes. Maybe that makes it too difficult
Can I ask what you think of the theory of degrowth in terms of the economies?
3:00 and we conclude Italy's debt in 2002 wasn't already too high? The entire argument hinges on that conclusion.
You can probably argue that failing their debt obligations could make much more problems to growth than making some budget cuts to generally lower the risk of it
I find it quite interesting, I'm from Germany and here we have proponents for different fiscal policies, one of the major driving forces is the current liberal party, to whom the standing minister of finance belongs.
Under their pressure it has gone as far as introducing a so called "debt break" into the German constitution, limiting the amount of debt possible to create, even worse they have repeatedly lobbied for the ECB to increase interest rates on government bonds for countries. We used to have years where the debt taken by our government was so highly prized that the government would make a bit extra of negative rates, or barely incur any interest at all, meaning we could easily take on new debt without any problems and service it in Euros no problem.
Thanks to these two changes taking on new debt now when it is critically important to invest in new digital infrastructure, structural change in the economy, and the environment, we have essentially hamstrung our own economic potential to move resources.
From my experience, in the northern European countries we are taught to spend frugally, but then we are led to believe that government debt works the same as private debt of a person or company, when it isn't that simple.
The government can have trouble with debt of foreign countries, denominated in foreign currency, but the state is the one creating money in the first place, it can't really go bankrupt in it's own currency.
There are obviously issues with inflation should a country create more money than there are productive capacities, but the way we look at government debt in Europe really needs to be a greater part of the educational system.
oh wow this economist is a genius ... who would have thought about those changes
Debt isn't bad, as long as you are making money. I mean if interest is 5% and you are making +10% that's profit, just very crude example. But you need to be able to use that debt wisely.
Overall, debt for normal people is generally not that good, but if you are doing business it's just another instrument to make money.
unfortunately, it is hard to invest in Italy (because of geography and corruption) and the government keeps making bad decisions.
@@mattia8327 That's true. Italy unfortunately has similar problems as Greece, just with bit more robust economy and problems aren't as bad.
@@mattia8327Italy should adopt US style capitalism for a while to rejuvenate the economy
Debt also is the problem. Steady debt growth without gdp growth is unsettling. Additionally there should be metrics such as the debt growth Year(present)/Year1 between the countries to really understand the difference between countries. The graph you represented with what i proposed would most likely should debt to gdp ratio actually be much lower for italy than other countries.
Sees C&C remastered
I see you are a man of culture as well
Wish this video talked more about possible solutions, or what could've been done differently
Think he mentioned that: Increasing GDP growth would help making the debt easier to pay off. And without the stupid Euro currency one could use a bit of inflation to reduce the debt and increase exports so the debts gets easier to pay off. One could also plug the holes in the tax system and making it more effiecent - and thereby getting in more taxes which could pay the debts off.
Larger companies (for example with tax incentives), less corruption (for example propose an efficient EU anti-corruption force), better schooling of the whole population, not just the elite (total population high school and upper secondary education is significantly below OECD mean, which correlates well with productivity = fix it).
@@nattygsbord if Italy were to be able to inflate their dept problems away permanently, they would have to inflate until they reduce their salary levels to purchasing power of places like Bulgaria, Romania inside the EU and China outside, because that where a lot of the low-cost production that Italy has lost has disappeared to.
One would probably argue that most people in Italy would prefer to move up the value scale, not down.
@@martinlund7987
I think of inflation as a short term tool to just temporary regain some competativeness. And I think people prefer some inflation with low unemploment rather than "price stability", high unemployment and slow growth.
Because that is what the idiotic EU dogma has given Europe the last 20 years of low inflation.
It was promised that that low inflation would make the risk of an economic crisis lower and that growth would be higher when economic planning would become easier thanks to low inflation.
But all what the EU clowns have given Italy is an Eurocrisis and extremely slow growth.
And you have never done away lowering living standards to help exports or the "beggar thy neighbour" problem either.
Germany is just doing an internal devaluation instead.
It slash the welfare state and the social safety net, so people have to take extremely badly paid jobs in order to survive.
And thanks to that can German companies pay extremely low wages. And with low wages can they get lower production costs, and outcompete companies in other countries - and steal jobs and economic growth from other countries like Italy.
In the past could Italy use inflation as a shield to protect itself from scumbag countries like Germany.
But now because of the Euro currency can it no longer print its own money and remain competative when other countries are cheating the system.
So the end result what the EU have got from its low inflation is a Germany where 20% of the population lives in poverty.
And you have countries like Italy with the slowest GDP growth in the world after Haiti and Zimbabwe. And men who live in their parents home long after they are 30, and can only start a family late in life and live an unnecessarily more unhappy life than they could have done if Italy had been able to adopt common sense economics instead of this stupid EU crap.
@@martinlund7987 it's a dog eating his tail. To apply all the things you mentioned you need money, and if you are like the Italian government the only way of getting them would be to borrow money, but then the debt will rise even more and it will become an endless spiral of investing and borrowing money.
If you go to north Italy, you see a prospering and modern nation. If you go to the south, you're basically in the developing world. You can see regional differences in other countries, but italy is quite extreme. I wonder if investing into the south more (but smartly of course)wouldn't do the most important thing: get people out of poverty. Who cares about national figures if people live in dire circumstances. The thing politicians always seem to miss when making their budget is that investments are not just a minus in your figures, but an essential part of modern economies if done right. That also means not just investing into trains, it's not 1950 anymore
The things is that Italy has been investing (for hundreds of years), yet it is not developing. The probolem is deeper than just money, it could be geography/globalisation/corruption/willingness to work and expand businesses. Honestly I dont know, but it needs to be found and fixed.
@@mattia8327 Not hundreds of years the investment program in the South actually started in the 50s and lasted for two decade and it did closen the gap between the north and the South a little, then it was cut.
That said I am from Sicily and I believe that there should be a brand new plan for the South different from the 50s, unlike in the 50s we all know what mafia is now and how to fight it also we are in the EU, so there should be an increased spending towards anti mafia forces and policies, this will first of all create jobs but most importantly will cripple the mafia.
Once the mafia is eradicated the competitive advantadge the lower wages in the south bring (I know plenty of engineers which would accept a lower wage if it means they can work in Sicily) and the EU funds allocated to poorer regions should kickstart its growth even without big investment plans from Rome (the bridge would be nice though, there are 9 million people in the rest of the South and 5 million people in Sicily, a bridge would unite the markets meaning bigger more competitive companies will eventually appear thanks to a bigger home market)
I'm from USA i prefer south Puglia the best
@@mattia8327 it's a more complex issues than my comment suggests for sure, but I don't care much about nationalism. If my country is #1 at everything but I'm having a bad life, why should I care. The south has some serious issues, I think they should focus on fixing that (organized crime made them dirt poor). Aggregate numbers on a national level are seldom a good starting point for real improvement, getting the details and complexity right = better road to success. The command economy approach has not worked out well historically
@@Giovis968 going there on vacation or living there without a job and prospects are two very different things. It may not be quite as run down as say Sicily and there has been some improvement, but it's just not doing well compared to the north
that's my C&C guy, love your vids man
Is GDP a fair assessment of the debt of a country? Would it be better to base it on as the percentage of the fiscal budget serving the debt payment?
The debt problem is a problem only if the country cannot print that money its in debted in. If a country in Latin America is in debted in US dollars its in serious problems, but if it is in debt in its own pesos then its not such a big problem. If Greece is in debted in Euros its in problem, but if it could make its own Drachma its not such a big problem.
The next thing to consider what type of debt do the country have. Is it the government who is in debt? Or is it the banks or large companies? Or is it the people?
I would say that private sector debt is a serious problem, while government debt is not a serious problem. You do not have a printing press at home, but a government does. A company can run out of money and cease to exist, but a country last for centuries.
The normal way to solve a private sector debt problem for a country, is for the government to take over that debt from the private sector, since it have more economic muscles to deal with it and can print some new money to pay off the debt if nothing else helps.
I also think how the money are spent is interesting. Is it for investments for the future it is wisdom to borrow. But if you are borrowing money just for consuming pointless crap then will only you create problems for your country. Its a little bit like borrowing money so you can go to university to study so you could get a well paying job afterwards - that is an economically smart way of handeling money. But if you just borrow money to buy a plasma TV, a new car and living a luxury life on the credit card then you are handling your money in an unsubstainable and stupid way.
So the best way to use money is probably investments in infrastructure, science and so on.
All those things do I think matters more than the debt-to-GDP ratio in itself. A high national debt is not much of a problem in my opinion if you have borrowed the money in your own currency and if that money is borrowed by the government and used for things that improve economic growth in the long run. The GDP is growing, assets in the private sector is growing when governments go into debt, and when the GDP is growing you can more easily pay debts off in the future when the country is richer.
But if households are in debt and cannot pay the bank so they lose their homes, then it is a very hard blow to people living in the country. And when Greece and Argentina owes other countries money it becomes difficult to pay those debts off.
Greece debt to GDP during its crisis years was 200%, which is a lot, but not more than USA which also had 200% but USA never got into any debt problems, because its debts were mostly in dollars which it could print, while Greece could not print Euros. Japan have a debt to GDP of 800%. But nearly all of its debt is held by japanese citizens so this is therefore less of a problem.
*"Would it be better to base it on as the percentage of the fiscal budget serving the debt payment?"*
I continue on my text above, by saying it is not always unproblematic when a large share of the government budget goes to servicing the national debt. From one perspective is this not a problem. Uncle Sam owes the American people money, because it is the American people he have borrowed money from.
So Uncle Sam taxes the American people. And the money he gets do he use to give back to the American people so that his debts can be paid off. So the money just flows around inside the country in a circle. You will therefore never have any problems of paying off a national debt of even 200%. Britain did that after the Napoleon wars.
People got taxed. The British government repaid the money it have borrowed from rich people. And the rich people did then spend that money on buying luxuries and paying their servants. And then servants and workers paid taxes which were drawn from their wages, so that the government could pay off even more of its debts to rich people.
So as you see, when a large share of the government budget goes to paying off debts - what you do is basically taking money from poor people and giving it to rich people. Since it is usually rich people who have more assets than debts, and therefore own things like Government bonds.
So having a high national debt can mean that a country have an unfair wealth transfer from poor people to rich people.
And it is usually the rich and powerful people who have much influence over a government. So of course do those people try to influence politicians that those debts should be repaid down to the last penny, regardless if it is in the best interest of the country or not.
Foreigners are usually more easy to tell them to throw themselves into a lake because you are going to refuse to repay them in full. But telling that to rich and powerful people inside your own country is dangerous - because you are messing around with some of the most powerful people in your country and they can have you killed if you upset them too much.
But on the other hand are the common people interested in economic austarity and the suffering and lower standards of living that will bring, and the harm to the economy of an entire country just because of a few greedy people wants to make as much money as possible.
So there will be a collision course. And in the worst case you might get a civil war, or a revolution by people who rightfully hates rich people, or you might get a military coup and a dictatorship which forces people to shut up and pay off the government debts to the rich elite.
You are ONLY talking about Government Debt which is High, and mainly owned by the Italians themselves. A big issue that has been going on forever, is that many Italians Don't Pay Taxes, so the government doesn't collect this money, which is Huge. In Italy, vs other countries, tax evasion is a national sport and way of life. Italians live far below their Actual Means, and therefore have the LOWEST PERSONAL DEBT of Any Country in the World! You heard right, The Lowest in the entire world. Very Low Corporate Debt as well. Italians are also Huge Savers of money. The People of Italy Actually Rank 2nd in the Entire World in terms of PERSONAL REAL WEALTH, ranking only behind 'Hong Kong', an 'administrative region' of only 7 million people, and I am not really a believer they rank behind them. Their is a Huge Black Market(underground economy) in Italy, about 20% of stated GDP 'guestimated', while definately this number is Low. All this affects the calculated GDP, which is Actually Much Higher. So certainly no one needs to be concerned. What you are showing is only Govt. Debt, that is high mainly due to these factors I have stated. The Truth, behind the scenes, is that the Italian People are doing Extraordinarily Well, and have almost always been. Of course in Italy it also a national sport to complain about things, Anything. I Surley know this being Italian myself. So to summarize, based on the evidence I stated, being true, basically the data you use as a snapshot, is Actually MEANINGLESS to explain the true condition of the country. However, I understand you use this data because it is the basic data generally used to give an idea of things for all countries. Problem is, in Italy's case, which is Unique, it doesn't explain anything and further digging is definately required. O Ya, Italy does pay slightly higher bond yields than Germany for 'doing business' this way, and gladly so, as it's citizens, in general, retain much more of their very vast wealth. Regards and cheers.
I agree that Italy has a growth problem. However, even if you could implement messures that would grow the Italian economy in the short term you will inevitably run into mass retirement at some point, due to the aging population of Italy.
To solve Italy's economic woes, than, wouldn't it be better to pay down the debt before the economy starts to shrink?
It would be better to start with institutional reforms to remove all of the bureaucracy instead of making more debt and pay higher interest in the future
more polices to encourage families and babies being created and bring immigrants compatible with Italian culture
I was born in Italy and now I live in Manchester and from my experience the main problem is the lack of innovation in the public sector and their unwillingness to change. I invite you to use their online services, you will see how impracticable they are.
In my uneducated opinion I think a number of the points made in this video explains some of the United Kingdom's growth problems, when you consider 2008 austerity cuts, lack of meaningful investment, wasteful administration / procurement contacts, North / South divided etc..
Italy’s public debt used to be far worse post world war 1.
it's very tricky indeed, I am not an economist so take everything with a pinch of salt, anyone in Italy that studies and get specialized in something is likely to leave Italy for the us or some places with higher salaries so reducing investments in schools almost makes sense as long as there is no place in the italian economy to value these highly skilled people, for how I see it maybe Italy should try to become a new manufacting hub so it can employ more people and maybe conglomerate some of those famous small business into something more meaningful, what industries? Probably those that suffer less the work costs like chips, and high value components, Italy is improving impressively in the digital areas compared to years ago and even the internet infrastructure has substantially improved, there are some good infrastructure projects being made like tunnels and other things that could link better Italy with itself and the central economies of europe, also oil pipelines are being built through the mediterrain and from north africa, that could help too, not all is lost but the goverment really needs to boost manifacturing in the country and reduce unemployement (and so social safety nets costs), also any measure that could make people have more children would be absolutely necessary, the goverment should restart mass building of homes to create affordable housing and employe more people for those constructions.
Hi Money and Macro,
the person you pull up at 17 seconds into the video is NOT a journalist. The older guy with the white hair is Professor Hans-Werner-Sinn and he is a professor emeritus from the Ludwig-Maximilians-Universität of Munich (a university in munich). He is a (in Germany) well known neoliberal economist and his focus is public finance / public economics.
Yes. But, I think that he is such a pop Economist (see on screen just under him) that he plays the role of an econ journalist a lot.
In hindsight , I should have said pundit.
The video ignores two big ELEPHANTS in the room: demography and "mal governo"
There is one major structural flaw in Italy when it comes to small companies playing an important role. This is a regulatory issue. When a company gets over a certain size, I think it is 50 employees, all kinds of requirements come in on diversity and other labor issues. This is just another example of stupid regulation in the EU. Just changing this regulation would increase productivity. I am sure there are lots more.
Does anyone know what game is he playing a 6:21?
The main issue is that public administration is now composed by old folks and in very little number. Due to budget cuts in the last 20 years there hasn’t been new hiring, and the people retiring have not been replaced. The staff has become slimmer and slimmer and now for any procedure that requires approval takes double or triple the time. And these folks old folks that are now 55+ are the workforce of the public administration are supposed to digitali e and make it more efficient? No way. Austerity has caused much more damage than a rebalance of the spending.
Finally someone addressing the problem of austerity policies! Debts aren't a problem if the government invests it cleverly. Definitely, Italy and the EU should invest more in weaker regions. The EU desperately needs a better, more progressive fiscal policy for that however, which will likely be blocked by the "frugal" countries.
You mean you want money from the frugal ones. Work for it! We have already enough parasites in the EU.
Why would you assume that suddenly the policies of italy would result in growth instead of furhter increases in government spending Not beneficial to italys growth. It makes the northern States effectively the risk takers for Italys debt. Its Like saying investing in a Bad company is good because it only needed more Money To do well, which is pure speculation
@@abctutnichtweh1 Well, if the bad company you want to invest in is actually the third biggest company in your market and has highly qualified staff, maybe it is indeed just the lack of adequate investment. Italy is the third largest economy in the Eurozone, thus too important to let it fail. So, investing is pretty much the only reasonable option which will actually benefit the northern states.
@@lesand5484 the thing is that the South has been getting investments for decades (maybe even hundreds of years) from the Northen States and it has hardly developed. As an Italian I can say it is not simply a matter of money, there is geography/globalisation and corruption involved.
The frugal countries are called frugal not because they don't spend a lot, but because they make a point about knowing what makes sense to spend money on.
That has been a problem in southern Europe. Borrowed money more often went into useless projects or in case of Greece was simply consumed.
The 'frugal' countries will understandably remember this pattern for some time.
growth problem is one perspective but maybe another way to look at it is that governments have this expectation of growth which I don't think is sustainable in the long run. Sure, some innovations have resulted in greater efficiencies using the same resources but this is not something which can continue forever and yet governments and financial analysts project using constant growth.
Loved the video. Pedantry: "it's" is not the possessive form, rather the contraction "it is", you wanted "its" in that title about their economy.
I wonder if austerity of a specific kind where spending cuts are combined with high or raised taxes are what's really detrimental to GDP growth and spending cuts combined with tax cuts would be a better method.
Whilst you lean toward justifying state spending as an effective way to elevate GDP, you ignore completely the fact that state spending is rarely, if ever efficient. With a constant desire to aggrandise spending to achieve personal promotions, the pressure is always on increasing budgets at every level. Moreover the 'entitlement' of significant numbers of civil servants leaves them with a perpetual victimisation complex as they go about their day desperately trying to avoid anything remotely like responsibility. So they feign work, try to look busy & avoid meeting clients or even answering the phone to avoid having to deal with real world problems with their attendant possibilities for evaluation or task responsibility. Gaining technical or backroom jobs becomes an ideal situation, hiding in little rooms desperately waiting for their shift to end. In a dramatic attempt to appear to be doing something genuine, whom do authorities cut in reality? Of course the ones designed to cause the most pain to the public, front line services. And so the funding merry-go-round goes on, with diversity officers and internal assessment departments sitting in their warm hiding places like giant parasites, contributing nothing but irritation to the nations they so massively under-serve. All the while leaving the tax millstone around the neck of the productive parts of the economy. Long may the party reign undisturbed tavarich.
Italys total debt is too high, so it hampers economy growth in the long run. Because of demographics, they will end like Japan, if they won't get any influx of young people. Demographics and Efficiency are the main drivers of economies. But without young to midage people, efficiency can't make up the deficits in the long run. That's it. Short term and mid term economic legislations maybe painting another picture, but they are no solution to the problem.
Indeed thats the main reason about this situation.
But since our new government went on power, it started providing money and economical aid for privates and citizens.
We have spent just the 16% of the PNRR for now, so we can expect that those money will be used to revitalize the economy.
Especially now that GDP is growing and the debt is falling down.
By the way, our debt is an internal debt so we risk no bailout at all. We can continue to experimentate over national economy for long.
Especially considering that citizens are still wealthy and keeps most of their money away from State taxes.
If the government spending is too high to support in the longer term, then the cuts have to be made despite obvious negative economic impact. And, if the government spending has been "too high for a longer term," there is a crowding out effect on the economy (more people work in gov sector vs. In the private sector where these would create real value) and also a skill gap (different skills and working style required by provate secor vs. Public secotor) and consequently l, after reduction in the government spending, both of the above effect present themselves as negative productivity growth while the population is reskilled for private sector jobs (this assuming that there is willingness among people and environment to support this).
Probably is a lost cause especially with a rapidly aging population compounding on its existing issues.