Introduction and Policy Recommendations
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Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Italy is shown below. The ratings herein are based on the following rating scale:
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2017. Used herein with permission]
To read a disclaimer about the analysis in this file, scroll to the bottom of the file.
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Comparison of Italy's economic policies to MIEPA criteria as prepared by native Italian student, Antonio Lo Fiego, studying in San Francisco in Spring 2017.ITALY - ANTONIO LO FIEGO
RATING SUMMARY: POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE 1 5.0 15.0 15.0 100% 2 3.5 10.5 15.0 70 3 3.0 9.0 15.0 60 4 2.5 7.5 15.0 50 5 1.5 4.5 15.0 30 6 4.5 13.5 15.0 90 7 4.5 13.5 15.0 90 8 3.8 11.4 15.0 76 9 2.0 6.0 15.0 40 10 4.5 13.5 15.0 90 11 3.0 9.0 15.0 60 12 5.0 15.0 15.0 100 13 2.0 4.0 10.0 40 14 5.0 10.0 10.0 100 15 3.5 7.0 10.0 70 16 1.0 2.0 10.0 20 17 1.0 2.0 10.0 20 18 1.0 2.0 10.0 20 19 2.0 4.0 10.0 40 20 3.7 7.4 10.0 74 21 3.0 6.0 10.0 60 22 1.0 2.0 10.0 20 23 5.0 10.0 10.0 100 24 5.0 10.0 10.0 100 25 2.0 4.0 10.0 40 26 4.0 8.0 10.0 80 27 5.0 10.0 10.0 100 28 5.0 10.0 10.0 100 29 4.8 4.8 5.0 96 30 3.5 3.5 5.0 70 31 1.5 1.5 5.0 30 32 1.2 1.2 5.0 24 33 5.0 5.0 5.0 100 34 1.5 1.5 5.0 30 TOTAL 109.5 244.3 365.0 66.9% ===== ====== ===== =====
Return to MIEPA's Home PageITALY - ANTONIO LO FIEGO
1. Freedom from internal control: 5.0
Italian citizens are free to assemble, establish social and political associations, and organize demonstrations. They also enjoy a high level of personal autonomy as well as freedom of residence, movement, and work. While access to funding is complicated and it is what ultimately obstructs new activities, here are no institutional barriers to the entrepreneurial Activity.
2. Freedom of speech: 3.5
The Italian Constitution of 1948 guarantees freedom of speech in Italy, after the extreme censorship applied during the Fascist regime of Benito Mussolini. Nevertheless, there are instances of censorship throughout the recent history of Italy, in which there were Ňincreased government attempts to interfere with editorial policy at state-run broadcast outlets, particularly regarding coverage of scandals surrounding prime minister Silvio BerlusconiÓ (Freedom HouseŐs Freedom of the Press report). There is also a lack of defined laws that prevent conflict of interests for the major broadcasters, RAI and Mediaset, owned respectively by the government and by Fininvest, former Prime Minister Silvio BerlusconiŐs holding company.
3. Effective, fair police force: 3.0
Police force can be consistently relied upon by anyone in the country and corruption risks are low due to its centralization. However, one third of Italians perceive the police force as corrupted and unfair, as there are numerous cases of police brutality and yet unsolved cases of unjustified manslaughters. Police brutality is also present, and its extents are still echoing from the aftermath of the 2001Ős Genoa G8, in which 93 protesters were indiscriminately beaten, arrested and subsequently tortured in a detention center, with 61 of them severely injured, 3 in critical condition and one in a coma. It was later discovered that 25 officers falsified evidence concerning the raid and planted Molotov cocktails and other weapon to justify the police actions. The European Court of Human Rights ruled police brutality as torture and demanded immediate action from the Italian government.
4. Private property: 2.5
There are numerous groups of laws protecting private property, but, as evidenced in various reports by different institutions, they are not as effective as the other big economies. It is easy to register real properties and it takes an average of 14 days, while in the case of intellectual properties, SIAE (Italian Society of Authors and Publishers) is the only copyright collecting agency. Nevertheless, public authorities can take property and lands without any title or expropriation procedure, when these properties can be of a discretional public interest to economic and social development or urgent social needs. This has recently happened during natural disasters such as earthquakes and floods, with the government seizing hotels and other structures, as well as during the construction of new highways and railroads, when buildings where in the way of the planned expansions and were expropriated, paying a lower amount of compensation than the market value to the owners.
http://www.epicenternetwork.eu/blog/could-italys-economic-stagnation-also-be-due-to- a-failure-to-protect-property-rights/ https://www.export.gov/article?id=Italy- Protection-of-Property-Rights
5. Commercial banks: 1.5
Italy is ranked 122nd out of 138 countries in the financial market development according to the World Economic Forum. The entire banking system is underperforming and filled with bad loans. Monte dei Paschi di Siena, the oldest operating bank in the world, has a high risk of bankruptcy. This and numerous other zombie banks make it almost impossible for startups and innovative companies to access funding, burdening the entire economy and leading to higher unemployment rates, especially for young people. The government has approved a bank-saving action of up to Ű20 billion for 2017. The spread between Italian bonds and German bonds continues to increase.
http://reports.weforum.org/pdf/gci-2016-2017/WEF_GCI_2016_2017_Profile_ITA.pdf https://www.forbes.com/sites/kenrapoza/2017/03/09/are-investors-betting-on-an- italian-banking-crisis/#6285778f6916
6. Communication systems: 4.5
Italy is two-faced for what entails the communication systems. Italian businesses are on the top of the EU for the innovative use of ICT systems such as cloud computing solutions, while 95% of the companies with more than 10 employees has internet access. On the other side, private consumersŐ internet speed is well below the European average and some areas of the southern part of the country are not covered by network access. Communication systems such as radio, television and printed media are ubiquitous.
http://ec.europa.eu/eurostat/statistics- explained/index.php/Information_society_statistics_-_enterprises http://ec.europa.eu/eurostat/statistics- explained/index.php/Information_society_statistics_-_households_and_individuals
7. Transportation: 4.5
Italy has the worldŐs 13th largest railroad network, connecting the vast majority of the north and center part of the country and consistently developing in the south. Traveling by train is the easiest, most accessible and cheapest option for residents. Italy has one of the highest motorization rates in the world, standing at 679 vehicles every 1,000 inhabitants. The motorway system is toll-based, managed by private corporations but owned by the government, and it is over 4,000 miles in length. The majority of freights are transported by road, with the remaining part transported by trains.
http://ec.europa.eu/eurostat/statistics- explained/index.php/Freight_transport_statistics http://ec.europa.eu/eurostat/statistics- explained/index.php/Transport_statistics_at_regional_level
8. Education: 3.8
Italian education system, although scarcely founded, is centralized and accessible to everyone. It is completely free up to high school level, with a national net enrollment ratio of 94%. At tertiary level, Italy has a participation of 9.5% Italy has the oldest continuatively operated university in the world, the University of Bologna, founded in 1088, and its educational approach has sparked the Bologna Process, a European effort to standardize higher education in three specific cycles (Bachelor/Master/Doctorate) and ease the recognition of their qualification among the European Union.
https://www.unicef.org/infobycountry/italy_statistics.html http://ec.europa.eu/eurostat/statistics- explained/index.php/Tertiary_education_statistics
9. Social Mobility: 2.0
Italy has an historical problem with nepotism and lack of meritocracy, with public sectorŐs jobs being allocated through personal relationships and, in various cases, bribes. This drove many graduates from every level of institution to look for employment opportunities abroad. While it is easy for low-income individuals to receive higher levels of education, the lack of opportunities for young people hinders their possibility to improve their social position.
http://www.italy24.ilsole24ore.com/art/business-and-economy/2015-08-06/nepotism-and- lack-of-meritocracy-drive-away-valuable-talent-trained-at-considerable-cost-- 130217.php?uuid=AC4ayqd http://www.economist.com/news/special-report/21564417- measuring-social-mobility-father-not-son
10. Freedom from outside control: 4.5
Italian citizens are judged by the Italian law only and the Ministry of International Affairs, also known as Farnesina, has extradition treaties that are highly regulated and strongly enforced. General laws are in line with European Union guidelines, but there is no strong outside control.
11. Protection of Domestic Enterprises: 3.0
Italy main imports are due to the lack of natural resources in its territory, importing goods such as mineral and chemical products. On the other side, there are a limited number of effective actions to lower imports for key industries, such as automotive (imported extensively from Germany) and industrial machinery. On the other side, the Italian government can exercise a veto right with respect to the acquisition of companies operating in the energy, transportation and communications businesses by a buyer which is not an EU entity, thus protecting, in small part, some rising industries of the country.
http://atlas.media.mit.edu/en/profile/country/ita/ https://content.next.westlaw.com/9 -500-7799?transitionType=Default&contextData=(sc.Default) &__lrTS=20170505194501691&firstPage=true&bhcp=1
12. Foreign currency transactions: 5.0
The Euro is the only currency accepted in Italy, hence all the transactions have to be made in Euro. Foreign payment cards are widely accepted but transactions are automatically converted in Euros.
13. Border control: 2.0
Italy's border control for immigration is ineffective and poorly organized. The country's flawed system is exploited by immigrant smugglers, creating a bridge to the rest of Europe. Immigration hotspots, like LampedusaŐs port, are extremely overcrowded and immigrants are detained in inhuman conditions for long periods of time. Drug smuggling prevention is effective, and the black market for counterfeit products is in constant decline.
https://www.law.ox.ac.uk/research-subject-groups/centre-criminology/centreborder- criminologies/blog/2016/12/border-control http://www.businessinsider.com/italian- spending-on-counterfeit-goods-2014-10 1
14. Currency: 5.0
The currency of Italy is the Euro, the official currency of the Eurozone, used by 19 countries out of the 28 in the European Union. The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. The Eurozone is the 3rd biggest economy in terms of GDP after the United States and China.
http://www.bis.org/publ/ rpfx16fx.pdf https://www.ecb.europa.eu/stats/policy_and_exchange_rates/banknotes+coins/circulation /html/index.en.html
15. Cultural, language homogeneity: 3.5
Since the fall of the Roman Empire, the Italian territory has been a mixture of different cultures and influences from all over the world, reflected in architecture, culture, and local dialects. While Italian is spoken by the vast majority population (97%), many rural towns, especially in the south, just speak variations of it. Other spoken languages are English, French, Spanish, and German, with minorities speaking Arabic and various Slavic languages.
The total foreign resident population is 8.2% of the total population as of December 31st, 2016. The majority of the immigrants come from Romania, Albania, Morocco, and China, but there is also a consistent part of immigrants from Central African countries. Christianity is the major religion, with 71.4% of the total population being Christian, while 3.1% of the population is Muslim, 0.4% Buddhist and 0.6% are from other religions. The remaining part is either agnostic or atheist. In recent times, in light of the rise of populist and alt-right parties and the Syrian refugee problem, there have been increasingly high tensions and xenophobic tendencies.
http://www.articlemyriad.com/doesnt-italy-homogenous-national-culture-reasons-lack- strong-national-identity/ https://www.istat.it/en/archive/immigrants http://www.worldatlas.com/articles/the-religious-demographics-of-italy.html
16. Political effectiveness: 1.0
According to a World Bank database, Italy ranks last in political effectiveness in the Euro area, in a survey that accounted for policy implementation, government credibility, measured perception of public services and independence from political pressures. The World Economic Forum’s Global Competitiveness Index report ranks Italy 136th out of the 138 surveyed countries for effectiveness of government regulation and legal framework.
https://www.bloomberg.com/news/articles/2016-08-08/italy-ranks-last-in-euro-area- government-effectiveness-chart http://reports.weforum.org/pdf/gci-2016-2017/WEF_GCI_2016_2017_Profile_ITA.pdf
17. Institutional stability: 1.0
Italy has had sixty-five administrations from 1946 to 2016, which means an average length of 12.8 months per administration. The historical tendency to coalition governments and the lack of clearly led major political parties created a government turnover that is hard to be found in the other major economies in the world. The majority of the parties in Italy have internal “wings”, led by different exponents of the party, that follow different lines from the central organization, effectively undermining the decision making power of the party as a whole.
18. Honest government: 1.0
Corruption is a major problem in Italy. Although associating with organized crime is punished by the Criminal Code of the Italian republic, many public procurements, especially construction and infrastructures, are highly infiltrated by exponents of criminal groups like Cosa Nostra, Camorra, and ‘Ndrangheta. In fact, Italian public officials have often been found in relationships with organized crime groups. Moreover, although being among the highest paid political classes in the world, there have been several cases of use of public funding for private use and other similar practices.
19. Common laws: 2.0
The judicial system of Italy is poorly operated, extremely slow and highly inefficient. While the law is equal for everyone, corruption is present, and the complicated bureaucracy tampers with the ability of courts and prosecutors to effectively counterattack the risks of abuses of power and bribery. It is hard for companies to be competitive because the complex legal framework blocks new business opportunities.
20. Central bank: 3.7
Banca dŐItalia is the Central bank of Italy. From 2006, it is completely independent from the government and free of political control, in accordance with the European Central Bank directions. It is part of the European System of Central Banks from 1998 and part of Eurosystem. Following the 2005 Bancopoli scandal, in which the then governor Antonio Fazio facilitated the takeover of Banca Antonveneta for the Italian BPI against the Dutch ABN AMRO, Banca DŐItalia lost the antitrust authority in the credit sector, that now is shared with the Antitrust Authority.
21. Domestic budget management: 3.0
ItalyŐs government budget deficit has been, on average, 3.43% of the GDP in the period that spans from 1995 to 2016. The 2017 deficit goal is set at 2.3% although 1.8% would be the goal that meets European Union rules that require a yearly cut of the structural budget deficit by 0.5% until balance is reached.
22. Government debt: 1.0
Italy has a government debt of Ű2.25 trillion, which corresponds to 132.7% of the national GDP. Following the 2008 crisis, the unsustainable growth of the debt led to a halt in private capital inflows and the low inflation has not helped the current debt situation.
23. Economic statistics: 5.0
ISTAT (Istituto Nazionale di Statistica - National Institute of Statistics) is the biggest provider of statistical information in Italy, including, but not limited to, economic censuses, surveys, and researches. It is also an active member of Eurostat, the European UnionŐs statistical branch. It has been recognized as an advanced and innovative center for statistical research, and it has been the first institute to incorporate the width of black economy in their official countryŐs economy size estimations, as requested by the European Union.
24. Protection of public health and safety: 5.0
Life expectancy at birth in Italy is 83 years, higher than the OECD average and among the highest in the OECD countries. Infant mortality is at 3.9ä and tuberculosis cases are 6 every 100,000 inhabitants. ItalyŐs healthcare outcomes, quality and efficiency are uniformly impressive and among the most specialized in the world. Although planned surgery and hospitalization waiting times can be long, especially in bigger cities, these are completely free of charge for everyone, regardless of income or status.
25. High wage policies: 2.0
Italy does not have a minimum wage as wages are based on industry-wide bargaining between companies and labor unions, with the average household net adjusted disposable income per capita being $25,004, lower than the OECD average. There is also a high disparity between the average income of the Northern part of Italy and its Southern side, with the North being more industrialized and advanced and the South struggling with higher unemployment rates and agriculture-based economy.
26. Environmental protection: 4.0
Because Italy is a member of the European Union, its environmental policies largely fall under EU environmental legislation. The country is succeeding in numerous, publicly-funded projects that address sustainability, climate change, pollution, biodiversity preservation, and environmental hazards, as well as in adopting new institutional framework for water conservation through changes in the nationwide water supply system.
27. Strong army: 5.0
The Italian Armed Forces expenditures account for 1.3% of the GDP, standing at $37.7 billion. They are composed of four branches, namely the Italian Army, the Italian Navy, the Italian Air Force and the military police force, called Carabinieri. The Guardia di Finanza (Financial Guard) is another part of the military force, but it is not an official branch of the Armed Forces. It operates under the authority of the Minister of Economy and Finance, it controls a large fleet of airplanes and ships and it deals with financial crimes, smuggling, and drug trade, as well as patrolling ItalyŐs territorial waters.
28. Foreign trade impact: 5.0
As of 2016, the net export of good and services accounts for 3.6% of the GDP: exports represent 29.7% with $436 billion and imports represent -26.1% with $372.2 billion. Automotive and motor vehicles, production machinery, food and textiles/clothing represent the major categories exported, while the lack of natural resources in the territory forces Italy to import natural gases, oil and materials.
29. Management of foreign currency budget: 4.8
ItalyŐs current account is still positive even if the gap narrowed to Ű1.19 billion. The strong export market and positive SMEsŐ production growth are good signals for the economy. On the other side, private consumption (measured by retail sales) is decreasing, dragged down by high unemployment rates. https://www.focus- economics.com/country-indicator/italy/current-account
30. Layers of Collective action: 3.5
Italy has a long and complex history of independent associations, starting from the Guilds of Florence that organized and supervised the economic life of the city from the 12th century. Nowadays, Italy has over 44 thousand among registered and unregistered volunteering associations, with over half of them operating in social work and healthcare. The main field for Italian volunteers is education and culture, with over 35% of the formal volunteers (operating through an organization) engaged in these activities. While a considerable part of the funding comes from private donations, some volunteering organizations, and especially the registered ones, rely on government funding. City councils, on the other hand, are largely entwined with the government. 74% of the elected officials in cities and regions are from the national political parties, with the remaining 26% representing the independent parties.
31. Pro-business climate: 1.5
Italy is ranked 50th in the world in the 2017 World Bank’s Doing Business report, which places it among the last ones in the OECD High Income group. Bureaucracy is considered among the most complicated and inefficient in the world and it is coupled with the highest business taxations in the European Union, putting high pressure especially on SMEs. With the latest approved Government Budget, though, there have been small incentives to SME’s to boost competitiveness from Italian firms, mainly focusing on increased tax and accounting concessions, such as subsidies and tax breaks.
32. Government enterprises: 1.2
Italy has started a privatization of most sectors, although retaining 100% of the ownership of the main train operator Trenitalia, 100% of the national road network company ANAS, 99.56% of the national broadcasting company RAI and 64.7% of Poste Italiane, the Italian Posts offering also banking and insurance services. Moreover, the government detains around 30% of several key industries, like oil and gas (ENI, 30.1%), electricity (ENEL, 25.5%) and aerospace, defense and security (Leonardo S.p.A., 30.2%). State- and regional-owned or controlled companies are subject to the same tax policies of the private companies. Numerous government-controlled enterprises are not self-sustainable, as the losses for the financial year 2016 amounted to $978.2 million, $287.1 of which sustained by the fully government-owned companies. The government subsidized these companies with over $87 billion over the last three years.
https://www.export.gov/article?id=Italy-Competition-from-State-Owned-Enterprises http://finanza.lastampa.it/News/2017/01/15/unimpresa-debito-aziende-pubbliche-a-83- miliardi/N18yMDE3LTAxLTE1X1RMQg
33. International Security Agreements: 5.0
Italy is a founder and leading member of the European Union and plays a significant role in numerous institutions. It enjoys prominent international security as a member of the United Nations, NATO, and OSCE and a non-permanent member of the United Nations Security Council. It also supports international activities in terms of deployed troops in UN operations all over the world.
http://www.nato.int/cps/en/natohq/nato_countries.htm http://www.osce.org/participating-states http://www.un.org/en/sc/members/ http://www.un.org/en/member-states/index.html
34. Protection of domestic enterprises from government mandated costs: 1.5
According to the 2016/2017 World Economic Forum’s Global Competitiveness Index, Italy takes 136th spot out of the 138 countries in the study in the category Burden of Government Regulations, with the most problematic factors being the high company tax rates that are astonishingly higher than the average G8 rates, resulting in reduced competitiveness against foreign enterprises, and the inefficient government bureaucracy. The high cost of financing, due to a bank system filled with low- performing loans and recent bailout requests from banks like Monte dei Paschi di Siena (the world’s oldest bank), is also preventing companies to access capitals to improve the current situation.
DISCLAIMERAll the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.
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