Saturday, 12 September 2009

Facing the Ghost of Hyperinflation

(m.john16, Faces)

Here we are, September 2009. A year later the Lehman Brothers bankruptcy, with some countries announcing that their GDP is bouncing and economists debating on how and when an exit strategy has to be put into effect by the central banks in order to soak up the liquidity poured until now in the financial markets, soon before inflation becomes too sharp and late enough to allow the recovery to take place.

After recalling what happened to bring us here, we will check the conditions of the US, Europe - and Italy, of course - in order to understand what the chances are for the patients to recover (1). We will then ask ourselves how the doctors think to stop the needed injection of public money into the system before it kills the patient. In the end, we will try to explain why things will never be the same again.


What Happened?

Well, it is impossible to cut the long story short, but US citizens used to spend more than they had got, purchasing loads of consumer goods made mainly in Asia and Europe. They simply bought on credit, borrowing huge amounts of money through credit cards and mortgages. This huge global imbalance was counterbalanced by governments, businesses and private citizens worldwide investing in American bonds and shares and thus preventing the dollar from falling down as it would have done otherwise.

The financial system fuelled this dangerous game by transferring debt risk from the balance sheets of the banks into a large variety of highly-engineered financial products sold both to private and public investors. Subprime lending and credit derivatives were the main tackles which made this job possible. Pushed up by an obscure architecture, stock markets and house prices grew at unprecedented levels. Instead of preventing these dangerous bubbles from growing, the Federal Reserve kept interest rates down claiming that in the long term the invisible hand of the market would have solved the problem on its own.

Actually the market did it, but as Mr Laurent Cordonnier explained in September 2008 - while commeting on the rise of oil and food prices which came before the great turnmoil - citizens worldwide are now experiencing how the subsequent adaptation process is incredibly cruel and tough (2): "As for people, they do not adapt themselves... Neither people do it nor those economic actors for which prices are not arbitrage variables (cheese or cake?), not speculative stakes (bear or bull?), but bills determining the costs of their activities, the truth of their investment projects, the revenues whose they can dispose of, and above all their own living standars."

By the summer of 2007, while house prices began to sink, it became clear that banks were showing signs of difficulty. Northern Rock, Countrywide Financial, Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddy Mac and AIG are the most famous victims of what happened then, along with the state of Iceland. Credit, which had been extremely large for a while, suddenly became very short. Not trusting each other any more, banks stopped borrowing money and the whole worldwide financial system seemed to be about to collapse.

After refusing to save Lehman Brothers, on September 2008 the Federal Reserve and the US Government changed their strategy and began to bail out the banks at risk of defaulting, through a US$ 700 billion recovery plan. The Bank of England and the European Central Bank firmly sustained this effort and, as a consequence, by the end of 2009 interest rates worldwide fell to nearly 0%. In the meantime, the financial crisis had become an industrial crisis: American and European consumers, frightened by the effects on their savings, houses and pensions heavily cut their expenses. Previsions for GDPs level for 2009 fell heavily.

While the memory of the Great Depression of 1929 was wrapping up the world, in November 2009 Mr Barack Obama defeated Mr John McCain at the U.S. Presidential Elections. When in charge, the Democrats enlarged the public support to the financial system deciding an additional US$ 787 billion stimulus package and disposing the bail out of General Motors. In a context of very high volatility, by January 2009 the stock markets worldwide have first fallen 20% and then risen 40%. The main reason of this rise is the idea that the quantitative easing issued by central banks and governments could bring the world economy back to growth.


The U.S.

During the second quarter of 2009 the GDP fell -0.3% compared with the previous quarter (stats.oecd.org), proving that the recession is slowing but it is still there. In the meantime, the number of banks at risk of default rose from 305 to 416 and the fund protecting depositors came at its lowest level since 1993 (3).

In August the White House revised its previous estimates for the economy. The U.S. will run a US$ 9 trillion deficit over the next 10 years (US$ 2 trillion more than expected), unemployment will reach 10% within 2010 (it was 9.4% in July) and GDP will fall by 2.8% over this year (instead of 1.2% as previously expected) (4).

With a deficit to GDP ratio of 11.2% – the highest since 1945 – President Barack Obama may be forced to raise taxes within 2010 mid-term elections (5), a measure which is – needless to say – highly unpopular in the U.S.

The problem is that credit markets have begun to signal a risk of U.S. government default, which was something incredible just a few years ago (6). The idea of seeing the US defaulting - as Iceland unfortunately did on last October forced by the craziness of its banks and the firmness of its main creditor, the UK Government - is as threatening as a nightmare. Would the US citizens react so calmly and peacefully as the Icelandic people did? We do not know and we would not like to make the test.


Europe

As the OECD report showed in August, in the second quarter of 2009 the crisis slowed its pace in most European countries, which by the way actually kept falling. With two relevant exceptions: Germany and France, which came back to growth with a GDP higher by +0.3% than in the previous quarter. It is early to say that they are really recovering, since their annual GDP is still lower by respectively -5.9% and -2.6% compared with the second quarter of 2008, but they seem at least well on their way to do so. In the meantime, the Euro-zone interest-rate futures started to foretell that interest rates will go up earlier than expected, meaning that a recovery is possibly near (7).

As a matter of fact, both in Germany and France households didn’t get as much heavy mortgage or credit-card debt such as in the US, the UK and Spain (8) and this is by no means one of the reasons of their good reaction to the cure.

But if we focus on Germany, according to the analysts last spring’s upturn was caused mainly by government subsidies for scraping old cars and by employers keeping their workers on shortened hours instead of firing them (9).

The case of France is pretty similar. If we look at Europe as a whole, according to Eurostat, in June industrial new orders increased 3.1%, outdoing the November 2007 level. But bookings were 25.1% lower than in June 2008, showing that a lot of work is still to be done in order to come back to growth (10).

As for trade, the euro-zone countries actually showed their biggest trade surplus in two years in June, but levels of trade are still low compared with last year (11).

Eurozone bank lending to business and granting loans to households showed still low in July (12) when, as reasonably as shockingly, the Swedish Riksbank became the world’s first central bank to introduce negative interest rates on bank deposits (13).

In August the output of the private sector stabilized, ending a 14-months period of contraction, while manufacturing output showed a first increase since May 2008 (14).

In early September, the ECB decided to keep its key policy rate at 1%, pointing out that the timing of the exit strategy will be decisive to handle on the one hand the need to sustain the economy and on the other hand the aim of keeping inflation under control (15).

The problem with Europe is that, the US being its main export market, the only way to lead the recovery is developing the internal market as well as exporting more in Asia. But if on the one hand many European countries such as Germany are traditionally frugal consumers, on the other end China and India are more concerned on exporting and developing their own markets rather than lowering trade barriers.
With a social system much more stable than the US, the European Union has still to face deep differences between its members: if the euro protects the less virtous countries – mainly Portugal, Italy, Greece and Spain – Europe is not still a flexible and integrated market, with deep linguistic, legal and political barriers. Moreover, the weakness of Southern European countries can affect and weaken the more stable Northern European countries.
The Scandinavian countries, even though geographically more exposed to the weakness of the Baltic region, are definitely the model to follow: being highly competitive and flexible, and their makets being open to foreign investors, these countries have to grant high wages to workers, in order to keep the quality of their products high. Their social systems - which are collectively described as the Nordic Model - are characterized by high taxes, good public services and a fair distribution of richness.


Italy

Coming to Italy, the less ‘Scandinavian’ country of Europe, in the second quarter of 2009 GDP fell -0.5% compared with the first quarter of 2009. Italy seems tragically unable to join France and Germany in their effort to recover and lead global growth (16).

According to Confcommercio, private consumption will fall -1.9% by the end of 2009. Italian households began indeed to feel the pinch in late 2007, well before their neighbours. Since then, car spendings have fallen -15.1%, public transport -7.4%, electric household appliances -7.1%, books -9.4%, newspapers -11.3%. As for food, fish consumption has fallen -5.4%, while bread, pasta, fruit, eggs, milk and cheese have fallen -3%. Clothes have fallen -1.8%, shoes -2.2%. Barbers and hairdressers have fallen -5.8%. Private consumption has increased only in cell phones (+15.4%) gardening and house services (+15.4%) and house textiles (+4.7%) (17).

In Italy, as in any other Western country, unemployement is bound to rise in Autumn: according to CNEL 500,000 jobs are at risk, while CGIL foresees an unemployement rate of 9.3% (18).

According to Confindustria, it will take five years for Italy to recover eight years of lost GDP, while the European average is three year to recover the losses of the past four. The debt to GDP ratio is projected 117.3% in 2009, 123.2% in 2010 and 132.2 by 2014. (19).

While it becomes clear that deflation is not on its way (20), the inefficiency of Italian markets makes prices rebound more here than elsewhere (21).

Italians can hope that Germany, whose economy is bouncing back, increases its imports. But as Mr Enrico Cisnetto explains, it will take a very long time before Italy could benefit the slow restart of the European locomotive (22). The truth is that while the biggest European economies – Germany and France – are coming back to growth, Italy is sinking.

Here is the paradox of a country which, in spite of still being considered to be the seventh economy of the world, entered the crisis before the other countries and falls more than its competitors. Moreover, while you would expect prices to fall, in Italy they unreasonably grow more than elsewhere in Europe. The main problem with Italy is not the current crisis, even though it makes its problems tougher to bear.

As the chairman of the Banca d'Italia, Mr Mario Draghi, pointed out in a recent public speech: “The future of the Italian economy will depend more than ever on the solutions of its old problems. The structural problems of our economy, large and known for some time, take root in the most various fields: the formation of human capital, the efficiency of public administration, material and immaterial infrastructures, competition, territorial unbalances, the job market. Some of these problems lay also on contexts which are not economic, but which are able to influence heavily the performances of the economic system, such as social protection, justice and organised crime” (23). “Opening to capabilities, talents, worths and competition – added Mr Draghi – is the main mean to contrast corporations, unearned incomes, hangers on which bear heavily on the growth of the country” (24).

All the more reason, if an era of lower consumption is really next to come, Italy will find hard to reshape its output complying to the new context. As Mr Giuseppe Berta says, indeed, on the one hand the car industry could take advantage of it, producing mainly rather low emissions small cars. On the other hand, those sectors which traditionally focused on top spenders – such as fashion, jewelry, furniture and the Made in Italy as a whole – could suffer much more (25).

As a citizen as well as a taxpayer, I would expect that the Government would seriously work to handle the situation and remove the obstacles which prevent the country from growing. Unfortunately, instead of explaining how he will cope with the problem, the Italian Finance Minister Mr Giulio Tremonti decided to attack the economists on grounds that – as if they were magicians – they were unable to foresee the crisis and now they would be denying themselves. As a consequence, he said, they should keep silent for one year or two (26).

A solid group of Italian economists (27) answered the Finance Minister on the Corriere della Sera: “If [the Finance Minister] grant us the right to speak, we would like to debate with him: the events of Italian economy and its obscure troubles; the reasons which make him think that Italy is bound to recover better than the other countries, even though it fell into the crisis well in advance and in worst conditions. We would like to know his opinion on a stagnation, indipendent from the political cycle, which has been lasting for fifteen years. We would recall that during the years in which he was in charge of the economic policy (from 2001 to 2005, when his first economic programme promised ‘a new economic miracle’, and in 2008) Italian growth has been lower than European growth by more than 5%. In short, we would like to know how he will turn into reality his hopes for the future of the country.” (28).

When illness comes, nothing is worst than a patient that refuses the cure: the Italian Government is actually bringing the drunkard to drink. The risks for the future are clear: economic stagnation, debt default, hyperinflation, political turnmoils and the traditional Italian way to survive. The desparate emigration of the youngest generations, while at home a new dictator is found to replace the old one.


Is the Cure Really Working?

Let’s go back to the patients who are likely to take their medicines. Is the cure really working? Just partly, we must admit. Central banks and governments made an unprecedent effort to pour out liquidity on the financial markets, thus preventing a sharpest fall in world GDP as it actually happend during the Great Depression. Probably their effort has not shown all its strenght, because it takes time to make this money to turn into consumptions and investments.

The problem, anyway, is that the causes which determined the crisis have not been removed: the worldwide banking system is still as opaque and unfair as it was before. While the G20 is focusing on the more than right aim to cut down bankers bonuses, nothing has been done to prevent banks from hiding their balance holes and from spreading untrustworthy debts into the markets through securization (29).

As Mr Kenneth Rogoff explains, “The fact is that banks, especially large systemically imporant ones, are currently able to obtain cash at a near zero interest rate and engage in risky arbitrage activities, knowing that the invisible wallet of the taxpayer stands behind them. In essence, while authorities are saying that they intend to raise capital requirements on banks later, in the short run they are looking the other way while banks gamble under the umbrella of tax payer guarantes.” (30).

Here is a more effective explanation of the recent rise in the stock markets: “driving asset prices higher this year has been quantitative easing, whereby governments purchase assets, mainly bonds from the private sector. Because households in the Anglophone economies are so indebted, this has done little to stimulate consumption. Instead, it has put money into the hands of the investment institutions from which central banks have purchased bonds. This has been recycled into equities and commodities” (31).

It seems that we have forgotten history. The crisis was determined by the end of the double-bank system in 1999, when in the US the Gramm-Leach Bliley Act allowed commercial banks and investment banks to merge, leading to the current financial services industry.

The separation between commercial and investment banks had been set in 1933 by the Glass-Steagall Act, in order to prevent a Great Depression to happen again: after 66 years of difficult stability, it took only ten years for speculation to bring the world into disaster again.

Once re-established the separation between the two fields, investment banks should be forced to control risks rather than to speculate. As a consequence, the G20 should tighten regulation and Governments should consider the option of nationalising the investment banks, which at a certain extent has actually happened in the UK and the US. But the managers who failed have to be removed from their places and those who committed crimes must be severly punished. Because the world should know that if there is no justice, then there is no future.


The exit strategy dilemma

And here is the question that everybody makes. How the doctors will decide to stop the cure and raise the patient from bed before it falls asleep once and for all?

In August the vice-chairman of the Fed, Mr Don Kohn, declared that there is no contradiction between keeping interest rates low for long and taking care of inflation, altough this attitude may change if the recovery comes (32). As a matter of fact, last month the Bank of Israel was the first in the world to raise interest rates after the crisis went off, moving from 0.50% to 0.70%. With an economy rising at 1% last spring and inflation rising at 3.5% in July – the inflation long-term target being between 1% and 3% – this move was highly reasonable. Norway, Australia, Canada, India, Czech Republic and South Korea could follow quite soon if the recovery shows to be consistent (33).

Where is the problem, then? The problem is that we do not know the strenght of the supposed recovery, the time it will take to start and the inflationary reaction that could spread as a consequence of it. In order to kill inflation, the central banks could kill the recovery and bring the world back into the abyss of stagnation.

As Mr Nouriel Roubini explained, “policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into a stag-deflation (recession and deflation). But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation [recession and inflation] [...] In summary, the recovery is likely to be anemic and below trend in advanced economies and there is a big risk of a double-dip [W-shaped] recession” (34).

The Nobel Prize Paul Krugman is not afraid of inflation. The Fed has actually been giving large amounts of money to the banks and bank reserves have risen, but when they start to lend again, the Fed can stop providing liquidity: “If banks start to shift these reserves out of the deposits of the Fed and into the economy, then the Fed would need to soak up the money either through borrowing or by selling off bank assets it has acquired”. On the other hand, he says, the stimulus package can correct recent savage cuts in public services such as education, healthcare, fire-prevention and infrastructure: “Slashing these services made no sense from any point of view” (35).

Mr Alberto Alesina warns that “the truth is that nobody knows exactly what is going to happen within the next few months” explaining anyway that he thinks the worst is over: “I do not know, for instance, how the 787 million dollars fiscal stimulus [...] has really worked to stop the GDP from falling. That money has been appropriated, but it has been spent only partially. And it will take months for that money to really circulate and work out its effects... The good thing is that when these extra funds will be cut, there will be no great harm for the economy, as well as no great help came from them. The risk of keeping on spending too much public money would be incredibly higher for the economy” (36) .

Mr Luigi Zingales is not optimist: “The financial markets always anticipate the recovery and now there is a lot of liquidity and zero rates. But there are many elements of risk. Interest rates are so low that they could be deceptive. After the 2000-2001 crisis, Mr Greenspan kept the interest rate low for too much, and thus he inflated the mortgage bubble. Now the ECB is right in signalling that it will have to soak up liquidity, at the right time, in order to avoid inflation.” As for the impacts on the US and Europe, Mr Zingales says that “It could be even worst for the US, which pumped much more liquidity into the market. But the US have partly exported its recession abroad and this will be mainly a European problem. Once, the Americans supported the world economy with their private consumption. They bought German cars, Italian clothes, etc. Now private spending has collapsed and American economy is instead sustained by public spending, which does not support European export. Emerging markets are supporting global demand, but I do not think that this is enough for Europe.” (37).

Given for granted that the Fed – as well as the ECB and the BOE – is able to choose the right time to raise interest rates, in order to avoid a high inflation, the problem is courage. As Mr Alan Greenspan recently explained, indeed: “The Congress has almost never been favorably disposed towards a tightening of monetary policy [...] We do not recall the Fed ever receiving a letter from the Congress, imploring them to raise rates. Letters pressing for lower rates are too numerous to mention.” (38).

Thinking along the same lines, Mr Marc Faber foresees that the big crisis is ahead of us for four, five or ten years: Mr Ben Bernanke and Mr Jean-Claude Trichet will have to ration credit before it is too late. But real economy is still bad and to put a sick body under the shower you need lots of courage, since the sick could then fire its doctor (39).

Mr Warren Buffett is thus right in recalling how inflation is always the less difficult way out for politicians: in order to cut down a huge public debt, the Congress should sooner or later raise taxes or cut down expenses. But MPs, thinking on their possibilities of re-election, will probably prefer to let inflation rise on its own: this measure does not need to be voted, indeed, and no single MP can be seen personally responsible for it (40).

Mr Claudio Scardovi and Mr Stefano Gatti recall how hyperinflation worked in Italy between 1946 and 1947: coming out of World War II with an incredibly heavy public debt, Italy experienced an annual inflation of about 180%. Inflation was brought under control in a few months, but only after having almost erased the public debt. Even though this scenario is not the most probable, as the two economists admit, it is as well very unlikely that governments will be able to save money and cut public debts by raising taxes and lowering public expenses (41). This means that inflation will come back and do its work: shifting money from creditors to debtors.

The fears of inflation, which is not imminent but clearly possible and highly probable, are shown by commodities, gold, equities and long-term bond yields moving all higher, as they actually did in early September (42).

The ghost of hyperinflation is hiding behind the door. We do not know when it will come out, but we can reasonably fear it. And when it will, the weakest social groups will be strongly affected. Even if they keep on spending their whole life in supermarkets and shops, those poor unready souls who now seem to ignore the problem will unfortunately wake up in a strongly different world.


Why Things Will Never Be the Same Again

The US and the UK, whose spending fuelled previous world growth, are suffering balance-sheet recessions: their consumers realized that they are too indebted and saving is now their main priority (43).

If China and Europe do not increase their internal demand, global demand will slow down as soon as US public stimulus expires (44) .

According to the IMF, world GDP should fall -0.9% in 2009 and rise +2.5% in 2010. At the end of 2010, the world would be +1% richer than it was in January 2009. But this is not true for the most developed countries, which will be -4% poorer than before (45).

As Mr Tommaso Padoa Schioppa explains, the ties set by the economy, society and environment should push us to hope for a moderate world growth, which should be led by emerging countries in Asia and Latin America. This growth should be kept under control by a worldwide system of laws, taxes, expenses, incentives and environmental rules in order to make growth sustainable and really possible (46).

Most of us witnessed the world financial crisis and the following recession casting our minds back to Economics, the masterpiece of Professor Paul Samuelson which has nourished several generations of students. The more we went back to his plain and effective explanations, the more we had to be worried about the future. Since we still believe in that book, we think that rather than minimizing the problem, it would be better to be fully conscious of it and work to remove its causes and to face its consequences before it is too late.

As for Professor Samuelson, is old tongue keeps on spreading words as young as only truth is: “The Great Depression was more intelligible than the current crisis: that one was a traditional economic crisis; this one is still a crisis about whose nobody knows the real ramifications. The ratings have no meaning and nobody is able to keep the market under control. [...] We are dealing with a system which is based on sheer lies: even if you make control tools, without transparency you do not control anything. [...] All these rescue operations increase the monetary base. The day will come when these amounts of money – which had been brought to the USA at barely inexistent rates by countries such as China and Japan – will go back there or will be invested in other markets. Maybe it will not happen neither tomorrow nor in the following two or five years, maybe between 2015 and 2020, but at some time it will be understood that the American consumers will not be able to spend as they did in the past. At that point, a muddled escape from the dollar will take place, with catastrophic consequences for the economy and world security. I fear that we have to get ready for an era of great social tumults on a worldwide scale” (47).


"'Even so, I want you to know, brother Sancho,' [said] Don Quixote, 'that there is no memory that time does not erase, no pain not ended by death.'
'Well, what misfortune can be greater,' replied Panza, 'than waiting for time to end it and death to erase it? If this misfortune of ours was the kind that could be cured with a couple of poultices, it wouldn't be so bad, but I can see that all the poultices in a hospital won't be enough to set us straight again'.
'Stop that now and find strenght in weakness, Sancho' Don Quixote responded, 'and I shall do the same'".

(Miguel de Cervantes, Don Quixote, I - XV, translation by Edith Grossman).

_________

(1) In doing so, we will focus our analysis on the data released by the International Monetary Fund: "Contractionary Forces Receding But Weak Recovery Ahead", World Economic Outlook Update, July 8th 2009. Given that China (+7.5% GDP projected in 2009), India (+5.4%) and the main emerging markets are still growing and that the future is shifting there as it did at the end of the XIX century - when it moved from France and England to the US and Germany - it is better indeed to check at the US (-2.6%), Europe (-4.8% for the Euro Area) and Italy (-5.1%). We would not talk about Japan, which recently showed a robust quarterly growth of 0.9%, while its projected GPD for 2009 is still a deep -6.0%. Even if the recovery remains vulnerable, because export demand and fiscal stimulus by the government could not last (ft.com), after a long time of stagnation Japan is probably finding its way to become the financial capital of Asia as the United Kingdom did in Europe during the XX century (ft.com).
(2) "Les gens, eux, ne s'ajustent pas... Ni les gens ni l'ensemble des agents économiques pour qui les prix ne sont ni des variable d'arbitrage (fromage ou dessert?), ni des enjeux de spéculation (ça va monter ou ça va baisser?), mais des factures qui déterminent les coûts de leurs activités, le bien-fondè de leurs projets d'investissement, les revenus dont ils peuvent disposer, et finalement l'ensemble de leurs conditions de vie." Laurent Cordonnier, , "Est-ce la fin du 'laisser-faire'?" Le Monde Diplomatique, September 2008, pp. 6-7.
(3) Chung, Joanna, and Guerrera, Francesco, “Number of US Banks at Risk Soars”, Financial Times, August 28th 2009, page 2.
(4) Solomon, Deborah, “White House Projects Bigger 10-year Deficit”, The Wall Street Journal Europe, August 26th 2009, page 4.
(5) Rampini, Federico, “Deficit americano nuovo spettro dei mercati”, la Repubblica, August 24th 2009, page 15.
(6) Hilsenrath, Jon, “Fed Talks Aim at Threat of Deficits”, The Wall Street Journal Europe, August 24th 200, page 1.
(7) Koeppen, Nina and Roth, Terence, “Europe Outlook Brightens”, The Wall Street Journal Europe, August 14th 2009, page 1.
(8) Walker, Marcus and Villars, David-Gauthier, “Europe Moves to Join Asia-Led Recovery”, The Wall Street Journal Europe, August 14th 2009, page 3.
(9) Smith, Geoffrey T., “ECB Is Wary on Europe Despite German Upturn”, The Wall Street Journal Europe, August 26th 2009, page 2.
(10) Winning, Nicholas, “Euro-zone orders rise, suggesting output growth”, The Wall Street Journal Europe, August 25th 2009, page 2.
(11) Winning, Nicholas, “Eurozone trade surplus increased in June”, The Wall Street Journal Europe, August 18th 2009, page 2.
(12) Atkins, Ralph and Pimlott, Daniel, “Lending Fears Dent Recovery Prospects”, Financial Times, August 28th 2009, page 1.
(13) Ward, Andrew, and Oakley, David, “Central banks keep close eye on Swedish negative rates move”, Financial Times, August 28th 2009, page 23.
(14) Winning, Nicholas and Parkinson, Joe, “Output stabilizes in euro zone”, The Wall Street Journal Europe, August 24th 2009, page 11.
(15) Emsden, Christopher and Roth, Terencee, “ECB Holds Rate Steady”, The Wall Street Journal Europe, September 4 2009, page 2.
(16) De Rold, Vittorio, “L’Ocse vede la ripresa, Italia in ritardo”, Il Sole 24 Ore, August 20th 2009, page 5.
(17) Nese, Marco, “Dal pane ai libri, tagli ai consumi. Per i telefonini continua il boom”, Corriere della Sera, August 18th 2009, page 5.
(18) Petrini, Roberto, “Bce: ‘La crisi non è finita’. Commercio, allarme lavoro”, la Repubblica, August 17th 2009, page 17.
(19) Dinmore, Guy, “Italian Business Doubts Some Sectors Will Recover”, Financial Times, September 10th 2009, page 5.
(20) Smith, Geoffrey T., “Euro-zone declines in price are slowing”, The Wall Street Journal Europe, September 1st 2009, page 2.
(21) Bozzo, Gian Battista, “E per la Bce è la conferma che non c’è stagnazione”, il Giornale, September 1st 2009, page 18.
(22) Cisnetto, Enrico, “Ma quale svolta”, Il Foglio, August 14th 2009, page 2.
(23) Draghi, Mario, “Istruzione, lavoro, parità Nord-Sud: tre leve per ripartire”, Il Sole 24 Ore, August 27th 2009, page 3.
(24) Mania, Roberto, “Draghi: la crisi sta rientrando ma molte imprese sono a rischio”, la Repubblica, August 27th 2009, page 6.
(25) Berta, Giuseppe, “Non consumeremo mai più come prima”, La Stampa, August 17th 2009, page 25.
(26) Mania, Roberto, "Tremonti: 'Anche ai lavoratori parte degli utili delle imprese'", la Repubblica, August 29th 2009.
(27) Giorgio Basevi, Pierpaolo Benigno, Franco Bruni, Tito Boeri, Carlo Carraro, Carlo Favero, Francesco Giavazzi, Luigi Guiso, Tullio Japelli, Marco Onado, Marco Pagano, Fausto Panuzzi, Michele Polo, Lucrezia Reichlin, Pietro Reichlin, Luigi Spaventa.
(28) “Gli economisti e la crisi: ‘Ecco perché non possiamo restare in silenzio’”, Corriere della Sera, September 3rd 2009, page 14.
(29) Penati, Alessandro, "Per le banche è di nuovo festa", la Repubblica, September 12th 2009.
(30) Rogoff, Kenneth, "Why We Need to Regulate the Banks Sooner, Not Later", Financial Times, August 19th 2009, page 7.
(31) Plender, John, “Why the Policy Response to the Financial Crisis Falls Short”, Financial Times, August 19th 2009, page 22.
(32) Guha, Krishna, and Hole, Jackson, “Bankers content to keep rates low”, Financial Times, August 24th 2009, page 3.
(33) Sorrentino, Riccardo, “Israele inaugura il rialzo dei tassi”, Il Sole 24 Ore, August 25th 2009, page 11.
(34) Roubini, Nouriel, “The risk of a double-dip recession is rising”, Financial Times, August 24th 2009, page 7.
(35) Krugman, Paul, “Nobel Economist Calls for More Public Spending for Real Economy”, Financial Times, August 24th 2009, page 7.
(36) Grassia, Luigi, “‘La ripresa arriverà ma soffriremo ancora’”, interview with Alberto Alesina, La Stampa, August 18th 2009, page 3.
(37) Grassia, Luigi, "Ora fa paura l'inflazione", interview with Luigi Zingales, La Stampa, August 14th 2009, page 3.
(38) Wessel, David, “U.S. Economy Is Better, but Not Healthy Yet”, The Wall Street Journal Europe, August 13th 2009, page10.
(39) Fubini, Franco, “Il fantasma della nuova bolla e il dilemma dei tassi da alzare”, Corriere della Sera, August 19th 2009, page 3.
(40) Buffett, Warren, “L’America ormai è fuori dall’emergenza ma attenti al deficit”, la Repubblica, August 20th 2009, page 6.
(41) Scardovi, Claudio and Gatti, Stefano, “Dopo la crisi spunterà lo spettro superinflazione”, MF, August 21st 2009, page 7.
(42) Oakley, David, “Sign of the Times as Deflation-Inflation Debate Rages”, Financial Times, September 9th 2009, page 27.
(43) “World Recovery Is Not Yet in The Bag”, Financial Times, August 25th 2009, page 6.
(44) Munchau, Wolfgang, “How Toxic Finance Created an Unstable World”, Financial Times, August 24th 2009, page 7.
(45) Feltri, Stefano, “La crisi sta davvero finendo? Le tante ragioni per essere pessimisti”, il Riformista, August 12th 2009, page 1.
(46) Padoa Schioppa, Tommaso, “Utopie dannose e utopie utili”, Corriere della Sera, August 19th, 2009.
(47) Pontoniere, Paolo, “Ma il mercato resta fuori controllo. Colloquio con Paul Samuelson”, L’Espresso, September 17th 2009, page 124.

Sunday, 9 August 2009

Digging into the Mud of Italian Politics

(Photo: Sogni dall'esilio - 26, by rinoplatania)

The European Elections, which took place on June 6th and June 7th 2009, determined a stop in Mr Silvio Berlusconi's plan to strenghten his grasp over the country and enforce his power once and for all (corriere.it, ilsole24ore.com and repubblica.it).

During the days before the elections, Mr Berlusconi declared several times that his party - the People of Freedom - was to reach at least 40%, while some polls showed a possible result between 43% and 45% (corriere.it). In the history of the Italian Republic, the still unbeaten record of political consensus at the European Elections was set by the Christian Democracy, which in 1979 gained 36.45% (diariodelweb.it).

In spite of controlling almost five out of seven of the main national broadcasting TV channels, a large part of the press and the advertising industry (democracynow.org), Mr Berlusconi was actually unable to confirm his prediction. For the first time since 1994, when he first became Prime Minister heading a large and divided coalition (wikipedia.org), Mr Berlusconi had indeed to face troubles coming more from his own field than from a weak and uncertain opposition.

While showing himself walking through the ruins of the earthquaked city of L'Aquila (youtube.com, guardian.co.uk and corriere.it), where he then decided to move the July 2009 G8 meeting formerly scheduled in La Maddelena island (iltempo.it and dazebao.org), Mr Berlusconi was heavily attacked by la Repubblica, one of the most popular Italian newspapers, held by his former business rival Mr Carlo De Benedetti.

Having made his private life a model of success (Mingioni, 2004) and private lives the essence of its television empire (mediaset.it, endemol.com and wikipedia.org), Mr Berlusconi was indeed struck by a journalistic inquiry asking him first ten tough questions about his acquaintance with Miss Noemi Letizia, an eighteen-year-old girl from Casoria and - later on after the elections - other ten questions about the apparent abuse of political power and the presumed use of public means to provide himself with call girls (see also Guy Dinmore on ft.com).

As a result, the People of Freedom got only 35.26% (29 seats) at the European Elections, while its xenophobic and anti-immigration ally (irr.org and indipendent.co.uk), the Northern League, rose to 10.2% (9 seats).

It is actually hard to say whether Mr Berlusconi, aged 72, is at the end of his political career. What is clear is that the Center-Left opposition led by the Democratic Party is far from taking advantage of his difficulties.

After theorizing that Italy was ready for a two-party-American-like political system, made by the People of Freedom and the Democratic Party itself (partitodemocratico.it, corriere.it and europaquotidiano.it), the Democratic Party helped the Center-Right in passing a law which rose to 4% the threshold to get seats at the European Parliament (bbc.co.uk). At the elections the Democratic Party - now led by Mr Dario Franceschini - fell to a dramatic 26.13% (21 seats). In spite of any effort to minimize (corriere.it, unita.it) the actual defeat (europaquotidiano.it), the Democratic Party is indeed victim of a chronic crisis of identity which had brought his former secretary, Mr Walter Veltroni, to hand in his resignation on last February (bbc.co.uk, france24.com and corriere.it).

Mr Antonio Di Pietro's Italy of Values party, which made a lonely parliamentary opposition to the regime, was able to get 8% (7 seats), doubling the votes it gained at the general elections of 2008.

The Union of the Centre, representing the view of the Catholic Church and led by one of Mr Berlusconi's former allies, Mr Pier Ferdinando Casini, decided to run alone and got a remarkable 6.51% (5 seats).

The remnants of the Left were divided into two lists collected almost at random. The first one, an Anticapitalist List putting together the Communist Refoundation Party, the Party of Italian Communists, the Socialism 2000 movement and the United Consumers movement, gained 3.38% (0 seats). The second one - the list Left and Freedom putting together the Democratic Left, the losing faction at the 2008 Congress of the Communist Refoundation Party, a secessionist minority of the Party of Italian Communists, the Federation of the Greens and the Italian Socialist Party, gained 3.12% (0 seats).

To underline the divisions within the former Center-Left coalition, which had won the general elections in 2006 bringing Mr Romano Prodi back to the position of Prime Minister before he fell again in January 2008, the Radical Party decided to end his alliance with the Democratic Party, running alone and gaining 2.42% (0 seats).

If we want to understand the reasons of such a deep political crisis within the Center-Left field, we should ask ourselves what really happened during the last fifteen years. Even though Mr Berlusconi is now weaker - as the editor-in-chief of la Repubblica Mr Ezio Mauro explained (repubblica.it) - his power seems indeed still far from falling. The rise of the Northern League shows that Italians are more likely to face their problems looking for an enemy in immigrants rather than criticizing their own lifestyles and re-establishing a context of private and public morality. As Mr Geoff Andrews wittily pointed out recently: "Italy's problems do not end with Berlusconi" (ft.com).

The problem with Italy is actually more cultural than political. The Italian society is stratified and divided. During the 'First Republic' era (1946-1994), three main parties were able to catayze the different layers of society: the Christian Democracy, the Italian Communist Party and the Italian Socialist Party.
The system was locked for about fifty years, because owing to the cold war the Italian Communist Party was prevented from taking part in any government coalition, and corruption spread more and more among the ruling Pentapartito, a coalition adding to the Christian Democracy and the Italian Socialist Party three little parties: the Italian Liberal Party, the Italian Republican Party and the Italian Democratric Socialist Party.
After the fall of the Berlin Wall in november 1989, the Italian Communist Party decided turn into the Democratic Party of the Left (later on Democrats of the Left).
Between 1992 and 1994, when the Tangentopoli scandal showed how deep and wide corruption had spread amongst the government, almost the whole Pentapartito disappeared.
Mr Silvio Berlusconi, a close friend of Mr Bettino Craxi, the former leader of the Italian Socialist Party, took advantage of this political turnmoil founding his Forza Italia party and taking to power the post-fascist Italian Social Movement, the Northern League and later on the Right wing of the former Christian Democracy.
The Democrats of the Left party, on the other hand, lost its chance to evolve into a modern Left party able to represent workers as well as the different plural laic minorities it should have defended.
The Italian Communist Party had been a wonderful democratic laboratory. During Mr Enrico Berlinguer's era (1973-1984), indeed, the party had proposed a political alliance - the so called 'historic compromise' - with the Christian Democracy, in order to protect the country from any Chilean solution and from the growing strokes of Right and Left terrorism. At the general election in 1976 the party reached its record of consensus with 34.4%. In 1978 the party was ready to support a coalition government when his main interlocutor, the President of the Christian Democracy Mr Aldo Moro, was kidnapped and then killed by the Red Brigades. After having publicly criticized in Moscow, in 1969, the invasion of Prague by the Warsaw Pact, in 1980 Mr Enrico Berlinguer broke with the Soviet Union. Mr Belinguer, who had reapetedly reported the issue of morality - the so called 'questione morale' - as the key problem of Italian democracy, died for a brain haemorrage in 1984.
Instead of going ahead along this way, the Democrats of the Left anxiously decided to gain credit among the business community, the Catholic Church, and the different elites controlling the national institutions. As a result, the more the party came to power the more it lost its touch with its political base. It was in this context - a worthless debate lasting several years concerning the alchemy of political alliances and absolutely speechless about the things to do in order to benefit the country - that the Democrats of the Left gave birth to the Democratic Party in 2007, merging with the heir of the Left wing of the former Christian Democracy, the Daisy Party.

Unfortunately, the Democratic party had actually lost its way well before being born, denying that democracy concerns regulating conflicts. For fifteen years we have been witnessing the idea that every citizen bears the same interests. Claiming to represent at the same time workers and businessmen, laics and catholics, reformers and traditionalists, the Democratic Party has become representative of nothing but its own interest to hold what is left of its power. This uncertain and useless attitude has brought the comic artist Maurizio Crozza to coin a new word, 'maanchismo' - meaning "the attitude to express at the same time an idea and its contrary" - in order to represent the rhethoric style of Mr Walter Veltroni, the former secretary of the Democratic Party (treccani.it, repubblica.it and vodpod.com).

Secondly, the Democratic Party - as well as its founding parties, the Democrats of the Left and the Daisy party - did not face clearly and openly the inquiries which shook the political debate during the last years: mainly, the Bancopoli scandal whose preliminary judge Ms Clementina Forleo was then transferred from Milan to Cremona; and the inquiries Poseidon, Why Not and Toghe Lucane, led by the magistrate Luigi De Magistris, who was then transferred from Catanzaro and thus decided to run for the European Elections (Luigi De Magistris is now MEP for the Italy of Values party).
The same weakness was shown by the Democratic Party in dealing with the inquiries involving the former President of the Abruzzo region, Ottaviano Del Turco, and the current President of the Campania region, Mr Antonio Bassolino.

This passive attitude towards the action of the judiciary clearly prevented the Democratic Party from confronting the Centre-Right coalition on matters of morality and in the name of the sacred principles of the Italian Constitution.

The strenght of the Right began with the weakness of the Left governments which ruled the country from 1996 to 2001 and from 2006 to 2008. Five effective questions made on il Venerdì di Republica by Mr Curzio Maltese are thus worth to remember (partitodemocratico.it):

  • "Can our leaders point at a European reformist party which in such an emergency and having five years at its disposal would not have passed a bill regulating the conflict of interest?".
  • "What other opposition in Europe has ever criticized public gatherings against the government run by its political rivals?".
  • "Is there another European case which can be compared with these two political suicides?".
  • "Is there somewhere in Europe a reformist party which a politician like Ms Binetti could think to join?" [Ms Paola Binetti is a member of the Democratic Party who claims that omosexuality is an illness].
  • "What must we - the electors - do, in order to get rid of a failing leading group, given that in contrast with your European collegues, you are not able to step aside?".
Mr Ilvo Diamanti outlined that the once instable and now almost forgotten alliance between the Democratic Party and the Italy of Values is hopeless (repubblica.it), because Mr Antonio Di Pietro's party is at the same time a "bus of social and political discomfort" and a "democracy watchdog", while Mr Dario Franceschini's party has proven unfit to take the chance to become a majority force. Moreover, as Mr Ilvo Diamanti explains, at the local elections which took place toghether with the European Elections, the movement led by Beppe Grillo and the Left lists were often able to get 3% to 4% to the prejudice of the Italy of Values itself.
We have good reasons to think that in the mid term there is no other way but to put together the Italy of Values party, the Beppe Grillo movement, some intransigent leftist indipendents seeking to leave the Democratic Party and the remnants of the Left. But in order to make this new alliance possible, the dwarf-like-leaders of the ten and more micro-parties of the Left have first to step back. If they do it, it will be possible to launch a bottom-up Constituent Assembly for a New Left. If they don't, the game is over, now and forever.
Who will rule the country after the collapse of the current regime? The Right will be surely ready to replace Mr Silvio Berlusconi. Will the Left survive his fall?
"La questione morale non si esaurisce nel fatto che, essendoci dei ladri, dei corrotti, dei concussori in alte sfere della politica e dell'amministrazione, bisogna scovarli, bisogna denunciarli e bisogna metterli in galera. La questione morale, nell'Italia d'oggi, fa tutt'uno con l'occupazione dello stato da parte dei partiti governativi e delle loro correnti, fa tutt'uno con la guerra per bande, fa tutt'uno con la concezione della politica e con i metodi di governo di costoro, che vanno semplicemente abbandonati e superati. Ecco perché dico che la questione morale è il centro del problema italiano. Ecco perché gli altri partiti possono provare d'essere forze di serio rinnovamento soltanto se aggrediscono in pieno la questione morale andando alle sue cause politiche. [...] Quel che deve interessare veramente è la sorte del paese. Se si continua in questo modo, in Italia la democrazia rischia di restringersi, non di allargarsi e svilupparsi; rischia di soffocare in una palude."
["The issue of morality does not end with the fact that, there being thieves, corrupt men, extortioners at the high ranks of politics and the administration, it is necessary to find them out, to accuse them and to put them into prison. The issue of morality, in nowadays Italy, makes no difference with the occupation of the State by the ruling parties and their different wings; it makes no difference with the war of gangs; it makes no difference with the idea of politics and with the ruling methods of those people, which simply have to be abandoned and got over with. Here is why I say that the issue of morality is the center of the Italian problem. Here is why the other parties can prove to be forces of renovation only if they let fly at the issue of morality by going to its political causes. [...] The destiny of the country must be the real concern. If it goes on as it does, democracy in Italy is at risk of tightening, not of widening and growing; it is at risk of suffocating into a marsh."]
(Enrico Berlinguer, interview with Eugenio Scalfari, la Repubblica, July 28th, 1981).

Monday, 22 June 2009

Good Bye Berlusconi!

By Kristján Ketill Stefánsson (A teacher and a member of The Left-Green Movement in Iceland).

Between the 23rd and the 31st of May 2009 my girlfriend and I had the opportunity to drive around East and West Liguria. We stayed in Levanto, Genoa and Menton, France.

In this short post I will try to describe some of the things I found fascinating and scary in comparison to the Nordic / Scandinavian reality I am used to.

We started our journey in Reykjavik, Iceland, on a typical cloudy, rainy, day with temperatures 9 degrees Celsius. After a brief stopover in England we landed in Milan in 32 degrees and not a cloud to be seen (they were probably all in Iceland).

Already at the car rental the first thing I noticed was that Italians do not seem to respect the Scandinavian virtue of waiting in a line while others are being served. This was an ongoing theme whenever we needed public services at tourist information offices, car rentals etc.: Italians serving other Italians while the foreign tourists waited patiently.

The same law seemed to go for the traffic. When I drove in an aggressive manner (for my taste) others gave room for me in the traffic. Careful behaviour was not tolerated.

We reached Genoa that evening and got lost in the narrow and steep one-way streets. Desperately I put down my map and asked an old Italian lady where we could find our hostel. She said that she lived close by and she could join us and show us the way. A wonderful thing to do but would probably never happen in Iceland.

For the next three nights we stayed in Levanto and took the trains and walked between the five villages of Cinque Terre. The landscape and the villages are beautiful with the terraces olive and lemon trees, and steep cliffs plunging into a clear and bluegreen sea. In the evening I read and tried to watch some of the famous nationwide TV channels controlled by the Prime Minister himself [Silvio Berlusconi]: Italia 1, Canale 5 and Rete 4.

These channels all seemed to broadcast brainless reality and game shows that seem to concentrate on degrading women into stereotype sex objects. Very disturbing to think that this giant instrument to form public opinion is being used by the Prime minister to lessen critical thinking of the public and withholding a masculine and sexist society.

The elections for the European Parliament where coming up and we saw posters from the different political parties both in Italy and France. In Italy we came across one of the the most disgusting political message I have ever seen in my life. A poster from Lega Nord (North League, LN) stating that native Italians will be driven from their country by the immigrants like the native Indians in North America. To my horror this sick and xenophobic party managed to get 10.2% of the vote into the European Parliament and as much 28.4% in the region of Veneto.

I love Italy, the food, the art and the people. The people of Italy seem to want the same things as people in Iceland. To have food, clean air, peace and the secure notion that their children will enjoy at least the same richness in life as we do today. I met many lovely Italians and shared long meals with them. Three things disturbed me in the way some of them phrased their English and all incidents had to do with people of foreign origin.

1. The first thing was how the immigration of women from Ecuador to Genoa to work in taking care of the elderly was considered the
first "flow" of immigrants
. Were there no immigrants in Genoa before? And is a flow not usually a bad thing?

2. Another thing was the statement that the craft of building the legendary terraces of Cinque Terre are now lost. In my foolishness I pointed out that I saw a number of men building and maintaining the walls while walking there a few days earlier. The explanation was that the ancient craft was now in the hands of Albanian immigrants and not native Italians. Are people of Albanian origin not worthy of becoming Italians?

3. The third thing was more general in nature. That was when talking about diversity many Italians put “the problem of” in front of the word. Is diversity the problem?

If we are going to build a sustainable world for our children to live in social injustice must be fought in every corner of the world. Italy has only kept 3% of its promises for developmental aid in Africa (all.Africa.com). At the same time Italian companies are being caught dumping dangerous waste into African waters (tlaxcala.es).

Wake up Italians! Wake up from the sleep of post-fascist propaganda and save Italy before it is too late. Do the world a favor, take active part in politics and say Good Bye to Berlusconi.

Wednesday, 11 February 2009

A Young Wave Will Sweep You Away

(Photo: Italian schools on strike, by Giampaolo Squarcina)

On January 8th, 2009, the Camera dei Deputati passed a bill reforming University introduced by the Minister of Education Ms Mariastella Gelmini (repubblica.it). The Senate had ratified the same government decree on November 29th, 2008 (lastampa.it), while the general reform of Italian school had been previously announced through the Decree 133 on August 6th (universinet.it, "Capo V - Istruzione e Ricerca") and the Decree 137 on September 1st (parlamento.it).

According to the Government, these are the main purposes of the reform (repubblica.it):

  • cutting down waste of money. Universities spending more than 90% of their budget in wages will not be able to hire new staff. More than 500 mln euros will be granted to universities assuring the best courses, research, quality, effectiveness and efficiency. These indexes will be assessed by two national committees, CNVSU (1) and CIVR (2);
  • making competitive examinations more transparent. New professors, lecturers and researchers will be selected by commissions of regular professors picked at random on a national list;
  • punishing loafers and idlers. Professors will be included in the previous list only if they publish anything within 2011. Otherwise, their wage increases according to seniority will be reduced to a half;
  • recruiting young researchers. Since many regular professors are approaching the retiring age, universities will be able to replace half of them by hiring about 4,000 new researchers;
  • advantaging meritorious students. 190 mln euros will be spent to grant more scholarships and halls of residence for university students.

Has this bill any chance to change and improve Italian University? Since no reform can be judged out of its context, it is better to check how things really are.
First: Italy spends on secondary school less than France, the UK and Germany. According to Eurostat, Italy expenditure for secondary school – including university – is quite low. Spending 2.12% of its GDP on it, Italy is ranked 17th within the EU27. Denmark stands 1st in this ranking with 3.11% of its GDP devoted to secondary school, while Italy is behind the main Western European countries: France is 6th with 2.67%, the UK is 11th with 2.47% and Germany is 14th with 2.27% (3).
Second: many Italian University professors were hired hurriedly and without assessment. Mr Enrico Santarelli explains how on 1980 – as a consequence of the 1973 Malfatti decree – the Italian University hurriedly turned into professors a legion of lecturers, in the aim of facing a high demand determined by the liberalization of education following the protests of 1968. Those new professors, not summited to any kind of assessment, soon became a powerful and hyperprotected caste. Since most of them will retire by 2015, the risk is to make the same mistake again, replacing these old professors with a half legion of inadequate and far less paid researchers. Between 1998 and 2007, while students increased in number only by 5.48%, professors increased in number by 24.1%. As a consquence, there is actually no need to buy the whole stock now: the system had better to hire new researchers gradually and granting them enough money so that the best ones can come forward (lavoce.info).
Third: Italian University professors are older than their European collegues. Mr Giuseppe Caputo reports that 55% of Italian University professors is over 50. In the main Western European countries this index is significantly lower: 38.9% in France, 29.8% in the UK, 29.6% in Spain and 29.2% in Germany. Italian professors retire at 72 instead of 65: during the last seven years of his career an Italian university professor costs about 840,000 euros, the same amount of money spent to pay a researcher for twenty-eight years (lavoce.info).
Fourth: indipendence and competition between Italian Univerisities is low. Even those who partially agree with the reform, such as Mr Gianni Toniolo, explain that the system is too static to benefit from the change. According to them, universities should be completely free to manage their didactics, expenses, organization and human resources. The system, indeed, would benefit more from competition amongst different universities than from homogenous national rules (4).
In short, compared to their European counterparts, Italian universities are relatively poor and spend a lot to pay old professors hired without assessment, while indipendence and competition between universities as well as between professors is low.
In spite of the need for a change, though, the reform has actually succeeded – as Mr Serge Quadruppani explains – in gathering the opposition of most students, researchers and university rectors, whether they support a competitive system or they do not (5).
Here is the impressive track record of the protests. Students, parents and teacher of primary and secondary school move first: they occupy several school buildings in September, in order to express their opposition to the general reform of school proposed by the Government in late August (corriere.it). On October 7th, in Rome, La Sapienza University is occupied (precariispra.blogspot.com). Two days later, the University of Pisa follows (globalproject.info). On October 15th, 1000 protesters occupy Termini Railway Station in Rome (repubblica.it). Following the general strike of the autonomous trade unions, on October 17th (globalproject.info), the Universities of Boulogne, Milan, Turin, Naples, Padua and Palermo are occupied (repubblica.it, ilgiornale.it, mattinopadova.gelocal.it and siciliainformazioni.com). The movement opposing the reform takes the name "Onda anomala" (Anomalous Wave).
The verbal reaction of the government is firm and uncompromising. On October 22nd, the Prime Minister Silvio Berlusconi declares: “We will not permit that schools and universities are occupied. [...] This is a violence. I will summon Mr Maroni [the Minister of the Interior] to give him instructions on how the police has to take action. The State has to affirm its role, granting the rights of students who want to have access to their classes.” (6).
On October 24th, the former President of the Republic Francesco Cossiga explains: “Mr Maroni should do what I did when I was the Minister of the Interior. [...] Letting [university students] do. Withdrawing the police from streets and universities, and making provokers of no scruples to infiltrate the movement and let the protesters ravaging shops, setting cars to fire and devastate the towns. [...] Afterwards, backed by popular agreement, the sound of sirens and ambulances should overhang the sound of police's and carabineers' cars.” (7).
As Ms Gaia Benzi wrote on Micromega, the Center Left reaction to the protests is simple: making oral violence normal, so that the violence of laws can be then seen as normal (micromega.it).
On October 29th, during a demostration in Rome, the police lets a group of fascists join Piazza Navona in a van jammed with sticks: some 13-year-old students are kicked, while their teachers and parents try to protect them (repubblica.it). On November 15th and 16th, following a huge demonstration, the movement holds a general assembly and writes down many texts proposing a bottom up reform of Italian University (stop133.wordpress.com). In the meantime, the Onda has encouraged CGIL, the main Italian trade union, to set up a general strike on December 12th (repubblica.it). In the meantime, the mobilization for the strike has urged the Ministrer for Education, Ms Mariastella Gelmini, to lighten the reform of primary school and to put forward to 2010 the reform of secondary school (repubblica.it).
Why so many protests? What better than cutting down waste of money, making competitive examinations more transparent, punishing loafers and idlers, recruiting young researchers, and advantaging meritorious students?
If you want to find the solution to the problem, you should focus on the two more disadavantaged social categories involved: students and researchers, which means the young generations. As well as in the Middle Age and in 1968, those who are students today will be potential professors tomorrow. What do they think of the reform?
According to the movement, whose main slogan is indeed "We’re not likely to pay for your crisis", the key issues on the field are money and justice. Students and researchers are afraid that the reform will make Italian University even more unequal and unfair than it is today.
Every Italian student knows that he will join any profession only if his parents or someone within his family already did it in the past. Provived that there are always some honourable exceptions, in Italy architects, lawyers, doctors, chartered accountants, journalists, notarists and so forth – as well as university professors – are members of castes chosen by a top-down co-optation process. Every young Italian knows that his university degree will make him earn from 500 to 1000 euros a month for most of his life, provived that he is so lucky to pass through several stages and precarious works. Otherwise, he will have to shift to some less skilled and less interesting job.
All the more reason, you pay University taxes according to your parents’income. As a rule in this country, if your parents are workers or law-abiding professionals you will pay all your taxes. Otherwise, if your parents belong to the club of Italian tax dodgers – whose remarkable score in tax evasion is about 200 billion euros a year – you will pay less at the local public university or you will be able to pay something more and join a prestigious public or private university in Rome, or Milan.
The situation is not different for researchers. Since you are not likely to become a university assistant or professor, unless your father’s friends are professors too, you will not afford to be a researcher for twenty or thirty years at 800 euros per month, living in a continuous struggle to make ends meet. As a consequence, if you are really determined and you can afford it, you will rather leave the country and try to pave your way abroad. Otherwise, you will look for a job on the private or public sector, turning yourself into a spare-time intellectual.
The result is simple: an unfair and unequal university system makes often the worst students to become professors. The disease which is suffocating the country is indeed the same in education, justice, politics and business.
That is why more and more students and researchers are opposing the reform. They know that whatever change will be done, the economic basis of their exclusion will not change. According to this pattern, while French students protest to defend their future and to protect an education system which is fair, equal and effective (6), Italian students protest for the same reasons of Greek students (7): they know that their future has been stolen by the older generations and that their school will condemn them to poorness.
Moreover, if this unequal system is associated with different conditions and more competition between universities – as liberal economists agreeably claim – but without the warrenty of the same conditions and rights of access to every student, the result will be worst than the present condition: there will be nothing but poor public universities for unskilled workers and rich private universities for a few overpaid professionals. That is why, on my opininion, the system has to be liberalized from the bottom, not from the top. The only way to make the Italian University system more competitive is by making students really free to choose their future.
You will not be able to reform University, unless you reform and fully liberalize professions first. Professional registers should be abolished and confined to the matter of ethics and deontology. Succession taxes should be reintroduced and hardly enforced.
Any reform should focus more on students than on professors. The Governement should grant every student the same opportunities to study and, as a consequence, much more money should be spent for university students. If they are granted a monthly wage as it is in many European countries - provived that they really study and pass every exam - students are indeed free to move and choose the best universities, sharing their education experience with part time jobs and useful professional practice. Every student should be then free to choose the town where he wants to study and the courses he would like to attend. Best universities can make their exams very hard to pass if they want to select the best students, so they do not need so many entry barriers as they impose today.
By all means, provided that university professors should retire at 65 instead of 72, those who retire should not be immediately replaced. New researchers and professors should be selected gradually and indipendently by each University, according to a severe assessment process and granting them a wage wide enough to compete on the European work market.
Since the University reform is far from being a success, we must anyway hope that protests against it will give birth to a new generation of leaders who will be able to replace and heal the political cancer which is actually killing the country.
Le generazioni successive hanno finora conosciuto, specie nel nostro paese, un destino ben diverso rispetto a quella che ha vissuto il ’68. Quella venne alla maturità in modo pubblico e anche un po’ chiassoso, queste sono giunte e stanno giungendo all’età adulta nel silenzio e nel relativo disinteresse diffuso. Quella crebbe in una fase di sviluppo storicamente irripetibile e finiti gli anni del movimento si trovò saldamente insediata, se non proprio ai posti di comando quanto meno in buone posizioni sul mercato del lavoro specie intellettuale. Queste hanno vissuto decenni di occasioni ridotte e di aspettative limitate, trovandosi generalmente escluse, in quanto generazioni se non in quanto singoli individui, da tutte le posizioni significative nellle istituzioni, specialmente in quelle culturali.
[Up to now the following generations have known, especially in our country, a very different destiny from the generation who lived 1968. That generation came to maturity publicly and even a bit noisily; these ones instead have become and are becoming adult through silence and a relatively diffuse indifference. That one grew up during a period of development which can not be historically repeated and, when the years of the protests ended up, found herself steadily installed if not in command at least in good positions on the job market, especially within the intellectual job market. These ones have lived decades of reduced opportunities and scanty expectations, founding themselves generally excluded – as generations if not as individuals – from every significant position within the institutions, especially within the cultural institutions.]
(Peppino Ortoleva, I movimenti del ’68 in Europa e in America, 1998).
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(1) CNVSU, Comitato Nazionale di Valutazione del Sistema Universitario Statale.

(2) CIVR, Comitato di Indirizzo per la Valutazione della Ricerca.

(3) If we replace the GDP percentage with the Purchasing Power Standars, which "take into account the general price levels in each country and are the most appropriate unit when comparing expenditure figures between countries", the snapshot is pretty similar. Spending 6,312 PPS on secondary school, Italy is ranked 10th within the EU27. Austria is ranked 1st with 8,296 PPS, France is 4th with 7,519 PPS, the UK is 5th with 6,963 PPS and Germany is 7th with 6,566 PPS (Eurostat, 5% of EU GDP Is Spent by Governments on Education, “Statistics in Focus”, 117/2008, p. 6).

(4) Gianni Toniolo,"Più selezione per i docenti universitari", Il Sole 24 Ore, January 9th 2009.

(5) "En Itaile, l'onde, la vague et la marée", Le monde diplomatique, January 2009.

(6) “Non permetteremo che vengano occupate scuole e università. [...] È una violenza, convoco Maroni per dargli indicazioni su come devono intervenire le forze dell'ordine. Lo Stato deve fare il suo ruolo garantendo il diritto degli studenti che vogliono studiare di entrare nelle classi e nelle aule.” (corriere.it).

(7) “Maroni dovrebbe fare quel che feci io quando ero ministro dell'Interno. [...] Lasciarli fare [gli universitari]. Ritirare le forze di polizia dalle strade e dalle università, infiltrare il movimento con agenti provocatori pronti a tutto, e lasciare che per una decina di giorni i manifestanti devastino i negozi, diano fuoco alle macchine e mettano a ferro e fuoco le città. [...] Dopo di che, forti del consenso popolare, il suono delle sirene delle ambulanze dovrà sovrastare quello delle auto di polizia e carabinieri.” (articolo21.info).

(8) Eddy Khaldi: "La droite privatise le rapport à l'école", L'hebdo des socialistes, January 3rd 2008, pp. 10-13. Interview by Fanny Costes.

(9) Valia Kaimaki, "Aux banques ils donnent de l'argent, aux jeunes ils offrent... des balles", Le monde diplomatique, January 2009, pp. 4-5.