Notes
1 John Maynard Keynes (1938) “Letter of 1 February to Franklin Delano Roosevelt”; emphasis added.
2 We used detailed data from the OECD Economic Outlook 2014. The subsequent OECD forecasts show a deterioration for the Italian scenario.
Hence, the comments here presented still hold.The first version of this chapter dates back to winter 2014-15, the period in which the Jobs Act by the Renzi Government was discussed and then approved by the Italian Parliament (December 2014), before the Jobs Act implementation with six specific government executive decrees (March-June 2015), and before the resignation of the same government (December 2016).
This chapter was revised in 2016 without major changes and references to the economic and political scenario of 2016-17.
3 We know that in the first half of 2014 many European countries suffered deflation. According to Eurostat (http://epp.eurostat.ec.europa.eu), inJuly 2014, the countries in deflation or with zero inflation were Bulgaria, Greece, Portugal, Spain, Slovakia, Estonia, Italy and Poland. Inflation decreased in 14 out of 27 European countries, and in the Eurozone inflation was 0.4 percent in July (year on year) (Eurostat 2014).
4 Keynes (1936) in the General Theory, bk. 5, ch. 19 on money wages, wrote,
In the light of these considerations I am now of the opinion that the maintenance of a stable general level of money-wages is, on a balance of considerations, the most advisable policy for a closed system; whilst the same conclusion will hold good for an open system, provided that equilibrium with the rest of the world can be secured by means of fluctuating exchanges. There are advantages in some degree of flexibility in the wages of particular industries so as to expedite transfers from those which are relatively declining to those which are relatively expanding. But the money-wage level as a whole should be maintained as stable as possible, at any rate in the short period.
[...] In the long period, on the other hand, we are still left with the choice between a policy of allowing prices to fall slowly with the progress of technique and equipment whilst keeping wages stable, or of allowing wages to rise slowly whilst keeping prices stable. On the whole my preference is for the latter alternative, on account of the fact that it is easier with an expectation of higher wages in future to keep the actual level of employment within a given range of full employment than with an expectation of lower wages in future, and on account also of the social advantages of gradually diminishing the burden of debt, the greater ease of adjustment from decaying to growing industries, and the psychological encouragement likely to be felt from a moderate tendency for money-wages to increase.5 On the mantra on “structural reforms” and their effects, see Zenezini (2014).
6 For a short but useful discussion on austerity policy with a critical point of view on the mainstream debate, see Roncaglia (2011 and 2013). See also Roncaglia (2010a and 2010b) on the role of the economic profession and economic thought in the crisis. In a worthy essay, D'Ippoliti and Roncaglia (2011) discuss the crisis of Italy within the general economic crisis.
7 The aphorism attributed to St. Augustine means that making mistakes is part of being human, but continuing to make the same mistakes is diabolical or evil.
8 We have to note that Roncaglia, as many others classical economists, has always been very critical of the neoclassical production function, and thus of the Total Production Function that is derived from it (see Roncaglia, 1975, ch. 5). Notwithstanding the critics, the mainstream literature continues to make use of this doubtful concept.
9 The OECD finds that Italy has the most flexible labor market among industrial countries, and has reduced job protection without any increase in productivity, with the reduction in protection for workers leading to ever-worse productivity (see Pini, 2013b and 2013c).
10 For a critical evaluation of the Jobs Act, see Pini (2015).
11 For Confindustria (2014), the main national association of employers, this new contract is no longer necessary after the changes on temporary contracts introduced in spring 2014. Confindustria rejects the introduction of a contract with progressive protections, as it prefers no protection at all.
12 Since the 1999 report until the last report in 2016, OECD questioned this thesis, showing the absence of a significant correlations among labor protection law and unemployment rate.
13 “And the history of the last 30 years is a series of love affairs with sometimes sad endings, first with Germany and German-like institutions—until unemployment started increasing there in the 1990s—then with the United Kingdom and the Thatcher-Blair reforms, then with Ireland and the Netherlands and the role of national agreements, and now with the Scandinavian countries, especially Denmark, and its concept of ‘flexisecurity’ ” (Blanchard, 2006a, 45).
In a paper presented for a lecture hold in June 2006, Blanchard wrote on the trade-off between economic efficiency and social insurance:
I argue that the efficiency cost of generous but well designed social insurance need not be very large, and that there is indeed a viable European model, based on three legs: competition in goods markets, insurance in labor markets, and the active use of macroeconomic policy. Europe has performed poorly since the beginning of this century. More and more observers, on both sides of the Atlantic, doubt that there is indeed a viable European social and economic model. I disagree. While I realize that definitive pronouncements on such large issues are unwise, I very much believe that the European model can work. By “European model,” I mean a model that combines economic efficiency and generous social insurance. So, put more precisely, I believe, based on empirical evidence, that the efficiency cost of generous but well designed insurance need not be very large.
(2006b, 1)14 The recent debate would suggest Spain as an example, with Ireland, of the success of structural reforms applied in accordance with European recommendations. Krugman’s (2014) comment on this recipe is as follows:
One other senior Eurozone official attending the Italian forum which gathers together policy makers, business people and academics said: “Structural reforms are key.” Those countries that have made these efforts are performing better: Ireland, Spain and Portugal. Italy and France should think a little bit about this.
Structural reforms are key. Those countries that have made these efforts are performing better: Ireland, Spain and Portugal. Italy and France should think a little bit about this.
For those of us not part of the structural reform cult, the story of Spain is this: the country experienced a full-scale depression when its housing bubble burst; this depression has led to a gradual, painful “internal devaluation” as labor costs come down, making Spain more competitive within Europe; and as a result, Spain is finally starting a slight recovery, with its growth rate in recent quarters (but only in recent quarters) higher than France. To see this as a triumph of structural reform requires preconceptions so strong it's hard to see why you would even bother looking at data.
15 “It is clear that, if over a period of 36 months there are 6 different people who do a job in succession, I think it is better that for those 36 months the same person may have his contract extended. At the end of the 36 months it is more reasonable to assume that a person who has been there 36 months, rather than one out of those six, is hired. Anyone who argues that this increases precariousness is, in my opinion at odds with the facts” (Giuliano Poletti, Rainews, March 27, 2014).
16 See among others Antonietti, Antonioli and Pini (2017); Antonioli, Mancinelli and Mazzanti (2013); Antonioli, Mazzanti and Pini (2010); Addison (2005) and Arvanitis (2005).
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