×

Fill out the brief form below for access to the free report.

  • George W. Bush Institute

    Our Ideas

  • Through our three Impact Centers — Domestic Excellence, Global Leadership, and our Engagement Agenda — we focus on developing leaders, advancing policy, and taking action to solve today’s most pressing challenges.

I'm interested in dates between:
--

Taking Action

Advancing Policy

Developing Leaders

Issues

I have minutes to read today:

Programs & Issues

Taking Action

Advancing Policy

Developing Leaders

Issues

Publication Type
Date
I'm interested in dates between:
--
Reading Time

I have minutes to read today:

The Italian Job: Improving Productivity and Employment

July 8, 2012 3 minute Read by Ike Brannon

As regularly as the resetting of the Mayan calendar, the Washington Post's business columnist Steve Pearlstein has a prescient column. Pearlstein's normally a cranky liberal who sees little that the government can't fix with a few more dollars, but in his recent visit to Italy he managed to intuit that the country's woes go beyond a short-term budget problem or the faltering faith of creditors. Thanks to a maze of bureaucratic regulations and political — as well as cultural — forces that conspire to keep businesses small, Italy's productivity has not kept pace with its European competitors, costing them jobs and putting downward pressure on wages. Friday's Wall Street Journal deftly illustrated the depth of the country’s productivity problem: Fiat, its biggest private employer, produces roughly as many cars in a single plant in Poland as it does in all of Italy, with one-third the number of workers. And at significantly lower wages. In the short run, the lack of productivity growth means that attracting and retaining jobs, especially well-paying ones, becomes much more difficult. Of course, such an enormous difference is simply unsustainable in the long run. Fiat and other Italian companies that hope to compete in a global market have to dramatically improve productivity or else continue to move their operations abroad. To do so means the Italian government has to get serious about reforming its unemployment insurance laws (no small feat in a country where the last labor minister who tries this was gunned down for his efforts) as well as simplify the maze of regulations that limit the ability of companies to decide how to run their operations. Failing to do so promptly would have implications that go far beyond being cut off from global credit markets; like those of every other country in Western Europe, Italy’s long-term entitlement obligations currently dwarf its short-term deficits, and it cannot hope to meet them without greatly increasing productivity and employment in a hurry. New French Prime Minister Francois Holland was given the same message by his national auditor just last week, along with a recommendation that the government start getting its national budget in order and start thinking about policies that produce sustainable long-run economic growth rather than hoping to goose the economy with some dubious spending schemes. It's a warning that the Italians would be wise to heed as well.


Author

Ike Brannon
Ike Brannon

Ike Brannon served as an Economic Growth Fellow of the George W. Bush Institute from 2012 to 2015. He has a Ph.D. in economics from Indiana University and a B.A. in math, Spanish, and economics from Augustana College. View his full bio

Full Bio

Related Articles: