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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.
TARIFF-IED: Trade Talk with Matthew Rooney
This week, trade relations between the U.S. and India are continuing to escalate. Earlier this month, the U.S. stopped granting India special trade privileges by taking away the Generalized System of Preferences (GSP) program, and India has responded by enforcing more tariffs of its own. The George W. Bush-SMU Economic Growth Initiative Director Matthew Rooney breaks down the trade conflict: For more information on trade groups and the global economy, visit www.bushcenter.org/scorecard.
How Trade Spreads Holiday Cheer
It is projected that the average American household will spend more than $1,000 during the holidays this year.
Deporting Salvadorans May Lead to Economic Decline
We should think carefully about a policy whose major impacts are likely to be reductions in employment and economic activity here at home, and increased instability and lawlessness along our borders.
Bush Institute's Laura Collins Talks Immigration on Good Morning Texas
Last week, Deputy Director of Economic Growth at the George. W. Bush Institute Laura Collins spoke with Good Morning Texas about immigration myths. During the interview, Collins had the opportunity to set the record straight and address common misconceptions about legal immigrants living in America today. The segment was inspired from facts released earlier this fall by the Bush Institute in the third edition of America's Advantage: A Handbook on Immigration and Economic Growth. Watch the full Good Morning Texas interview here.