When Americans think about inequality, it is often linked to ethnic differences. Sometimes that’s also true in Europe (as with the Roma), but more often the inequality is regional. Perhaps the starkest example lies in Italy, where even in 2007 the south lagged far behind the north. Since then, things have only gotten worse:
According to the Economist, in some respects the mezzogiorno is doing worse than Greece:
The country is, in effect, made up of two economies. Take that 2001-13 stagnation. In that period northern and central Italy grew by a slightly less miserable 2%. The economy of the south, meanwhile, atrophied by 7%.
This is partly because the south grew more slowly than the north before the financial crisis. But the main source of the divergence has been the south’s disastrous performance since then: its economy contracted almost twice as fast as the north’s in 2008-13–by 13% compared with 7%. The mezzogiorno–eight southern regions including the islands of Sardinia and Sicily–has suffered sustained economic contraction for the past seven years. Unicredit, Italy’s biggest bank, expects it to continue this year. The Italian economy is both weaker and stronger than it appears, depending on the part of the country in question.
Of the 943,000 Italians who became unemployed between 2007 and 2014, 70% were southerners. Italy’s aggregate workforce contracted by 4% over that time; the south’s, by 10.7%. Employment in the south is lower than in any country in the European Union, at 40%; in the north, it is 64%. Female employment in southern Italy is just 33%, compared with 50% nationally; that makes Greece, at 43%, look good. Unemployment last year was 21.7% in the south, compared with 13.6% nationally. The share of northern and southern families living in absolute poverty grew from 3.3% and 5.8% respectively in 2007, to 5.8% and 12.6% in 2013.
Downward pressure on demand is exacerbated by the south’s lower birth rate and emigration northward and abroad. The average southern woman has 1.4 children, down from 2.2 in 1980. In the north, fertility has actually increased, from 1.4 in 1980 to 1.5 now. Net migration from south to north between 2001 and 2013 was more than 700,000 people, 70% of whom were aged between 15 and 34; more than a quarter were graduates. Marco Zigon of Getra, a Neapolitan manufacturer of electric transformers, says finding engineers in Naples, or ones willing to move there, is becoming ever harder. According to Istat, Italy’s statistical body, over the next 50 years the south could lose 4.2m residents, a fifth of its population, to the north or abroad.
In one important respect southern Italy is different from Greece. Like eastern Germany, southern Italy is part of a larger and more prosperous fiscal union. For many decades, Italy has been doing the things that American progressives would recommend, pouring lots of fiscal stimulus into the south, to build up the economy. But nothing seems to work. Indeed from Greece to Italy to southern Iberia, the entire southern tier of Europe is doing quite poorly. But why? And what can America learn from the failure of Italian policies aimed at boosting the mezzogiorno?
American progressives will sometimes argue that we have much to learn from the successful welfare states in northern Europe. Perhaps that’s true. But I’d have a bit more confidence in that claim if they could explain what we have to learn from the failed welfare states in southern Europe. Indeed I’d have more confidence in progressive ideas if they even had an explanation for the failed welfare states of southern Europe. But I don’t ever recall reading a progressive explanation. Indeed the only explanations I’ve ever read are conservative explanations, tied to cultural differences.
PS. The mezzogiorno has roughly 1/3 of Italy’s 60 million people, making it almost twice as populous as Greece. In absolute terms, incomes there (17,200 euros GDP per person in 2014) are far lower than among American blacks or Hispanics. In contrast, GDP per person in northern Italy was about 31,500 euros in 2014. And while the gap between eastern and western Germany is narrowing, the gap in Italy is widening. Why?
READER COMMENTS
Paul
Jun 29 2015 at 11:32am
The south of Italy has a greater problem with corruption, and this makes any state functions or interventions more expensive and/or less effective. If Italy had a more minimalist state, and if the south had somewhat better human capital, that problem might not be crippling.
Unfortunately the Italian public sector is quite large, meaning a substantial portion of the south’s economy is locked in a set of highly unproductive (and often corrupt) institutions. Worse, these institutions draw the best and brightest from the south due to their superior compensation compared to the private sector, and have incentives to expand or preserve bureaucratic control over the rest of the economy.
Sustained structural and public sector reform would alas not be any sort of quick fix, as it’d surely take quite some time for the educational and capital investment deficiencies of the south to be overcome.
R Richard Schweitzer
Jun 29 2015 at 12:14pm
If the circumstances are “cultural,” as many suppose, then the search should take us to how individual motivations are formed (from their very infant beginnings) in that sector of Italian society; and, how does that differ from the similar formations in other sectors.
There is some basis for argument that a part of the differences can be traced back to the formation, and factors that maintained the existence, of the Kingdom of Naples.
What is worth comparing is how the sources of formations of motivations changed for those emigrating to the U S from that region; how different their roles in the social structures.
Juan
Jun 29 2015 at 12:17pm
I’m from the north of Spain and know a few italians. Gonna try to give some food for thoughts about it.
1. North of Italy, and north-northeast of Spain (Catalunya and Basque country) are very different from the rest of the country. And wealthier. People in the north of Italy feel closer to central Europe than to Sicily, as an example.
2. North of Italy, Catalunya and Basque Country have been trying to become independent for years.
No way.
Economic transfer has become an endless pouring of money in the south. Nobody expects that will stop eventually (unless they become independent).
3. And now, something interesting: while conservatives get along with the situation, left progressives are far more bellicose on independence.
That’s interesting, since the progressive left there fits exactly the traditional SJW profile. For example, northern left progresssives in Spain highly support inmigration, and at the same time they highly oppose continuing inside Spain. Left in Basque Country even considered to create a specific identity card to separate basques from spanish people.
So… my two pennies? In my opinion, in a few decades, when the consequences of massive inmigration are unstoppable and fully evident, conservatives will adapt to it and will get along, and by then left progressives will become beligerant about creating some kind of new Apartheid.
Scott Sumner
Jun 29 2015 at 1:27pm
All three comments were quite interesting.
Question for Juan. How do “conservatives” in the Basque region and Catalonia feel about independence? As I recall the supporters of independence in northern Italy are on the right (i.e. Northern League.)
Aidan
Jun 29 2015 at 2:03pm
As a Northern European living in Italy, I would note the following three points that might help to answer your question:
1. The Italian welfare state is pretty different from those in Northern Europe. For example, there is no meaningful unemployment support in Italy: you only get it for six months, and then only if you’ve been fired from a job for which you had a (very difficult to find) permanent contract. So in comparing German and Italian welfare states can be a bit like comparing apples and oranges.
2. A huge amount of the state largess flowing into Southern Italy ends up being fed into a the local patronage system, in which political loyalty is rewarded with secure state jobs. I remember once reading that there are more people employed in forest-fire prevention in Sicily than in Canada. Even if that’s apocryphal, it’s telling.
3. Much of the South’s economy is divided into local monopolies enforced by a mixture of political corruption and outright violence. I.e., the mafia.
Farzana Hossain
Jun 29 2015 at 2:24pm
During the 21st century, North and central Italy grew as South Italy declined. The South even grew slower before the financial decline. Italian economy is strong on one side as it is weak on the other. Part of the reason is because the rate of unemployment was so high in South Italy leading to the lowest unemployment rate in the whole Europe. More females are in the work force in the North than South Italy. As the rate of unemployment increased, the rate of poverty increased in South Italy. Some other reasons behind the poor financial situation in the South are low birth rate and emigration to the North. The gap in GDP per person and low investment are reasons why Italy is going through financial crisis. The main highway across Sicilly falling apart made it harder for people to commute. Technological innovation is very low in Italy compared to the other countries in Europe especially in the South. The rate of corruption is high in the South which is causing a lot of disparity. Regional financial disparity is common in many countries especially third world countries like Bangladesh where cities are developing faster than the villages and poverty, unemployment, emigration are some of the factors that are causing a big disparity in those places.
Juan
Jun 29 2015 at 4:02pm
Scott,
Both in Catalunya and Basque Country you have right and left national parties (which are more of a franchise of the big one and are considered as foreigners) and right and left independentist ones.
So you have both independentist left (Bildu in Basque Country, ERJ in Catalunya) and independentist right (PNV-EAJ in Basque Country, CiU in Catalunya).
Right independentism support independence (obviously), but they take it easy. They behave in a very pragmatical/utilitarist way.
Left independentism is highly beligerant, specially in Basque Country. Basque country’s Bildu is the perfect image of SJW, the palestinian scarf is a very usual dress code in basque left independentists.
One thing: take care with the label “right” in some countries of modern Europe. Northern League in Italy or Front Nationale in France are labelled as right or far-right. However, if you check the ideology you’ll find that they share many elements with traditional left parties (specially policies aimed to protect workers and nuclear families). They indeed represent a kind of “democratic fascism”, let’s say, without the totalitarian element, but with the traditional mix of social conservantism and high interventionism of fascism.
Not every country is seeing the rise of this kind of parties. I would say France, North of Italy, Holland, Sweden, Finland, perhaps Germany, but not UK (english people are too libertarian) neither Spain, for some reason.
Tom Brown
Jun 30 2015 at 11:21am
Scott you write
“Indeed the only explanations I’ve ever read are conservative explanations, tied to cultural differences.”
So how do US conservatives explain the economic performance of Mississippi, Alabama and Puerto Rico? How do European conservatives explain it? Especially those from the “successful welfare states of Northern Europe” (as you put it).
I wonder if high concentrations of fervent religious beliefs have anything to do with it. The successful welfare states of Northern Europe are largely atheist aren’t they? Do you know of any such studies?
Maybe strong religious beliefs (and the associated mindset) were economically useful to instill in people in feudal and/or plantation/slave societies, but no longer are.
Scott Sumner
Jun 30 2015 at 12:37pm
Aiden, Good points, but those are still fundamentally cultural explanations for the problem. I’m curious as to whether the progressives have an explanation.
Farzana, Yes, but what causes those things to happen? Southern Spain has similar problems. What is the progressive explanation?
Juan, Yes, I am aware that the right in Europe tends to be statist.
Floccina
Jun 30 2015 at 4:03pm
I think that in this case you have at least consider the idea that maybe Southern Italians prefer to take more time off and enjoy their beautiful surroundings and earn less money. Maybe it is us who are crazy. We have our basic needs met and yet we still go to work everyday. Perhaps Barilla should have lowered the pay sufficiently and hired more people.
Kenny
Jul 2 2015 at 1:46pm
Interestingly, I just re-read this post by Mencius Moldbug where he includes this quote from “Naples: A Travellers’ Companion” written by the “British popular historian” Desmond Seward:
Aidan commented above:
The “local patronage system” in Southern Italy being the set of political institutions (or their ancestors) that the Northern Italians created during and after unification.
So maybe Southern Italy – and Mississippi, Alabama, and Puerto Rico too (as Tom Brown mentions above) – have been screwed by occupation of a hostile force.
[some overly-long urls have been shortened–Econlib Ed.]
Peter Schaeffer
Jul 3 2015 at 1:37pm
Scott Sumner deserves credit for writing about this. However, Tino Sanandaji wrote an excellent article on the subject several years ago. “The American Left’s Two Europes Problem” (https://www.aei.org/publication/the-american-lefts-two-europes-problem/)
“The American Left is far more interested in northern Europe than it is in southern Europe, despite the fact that southern Europe constitutes the majority of the population of the core 15 European Union members. Why?”
“A century or so ago, German sociologist Max Weber observed that Protestant countries in northern Europe tended to outperform the Catholic and Orthodox countries in the south of the continent. Weber believed that the northerners had a stronger work ethic, were thriftier, and possessed more of what is today called “social capital.” Though Weber attributed these differences to Protestantism itself, we should note that countries did not randomly convert to Protestantism. The roots for the cultural differences might very well go even deeper.”
“For all their fascination with Europe, southern Europe doesn’t loom large for the American Left. But France, Italy, Spain, Belgium, Portugal and Greece are more representative of European outcomes than Sweden, Denmark, and Finland, and have equally sized welfare states. Their failure should not be ignored in the American debate.”
Of course, the sad realities of vastly different outcomes in Europe has clear implications for U.S. immigration policy… Even if no one wants to talk about it.
Mikko Särelä
Jul 3 2015 at 2:15pm
Do you consider Robert Putnam’s thesis on this conservative? For me, as a nordic citizen it is at the heart of progressiveness (though perhaps not for Americans).
What’s the thesis? (For the full account I hope you read Putnam’s Making Democracy Work.)
Basically it seems to come down to the question of whether your society is mainly organized according to hierarchical relationships or egalitarian relationships between peers. Hierarchical societies lose and peer societies thrive.
The big question is how do you change a hierarchical society into a peer society. (Perhaps the Internet can help and perhaps not.)
ps. one of the telling signs for a hierarchical society is that the education gap between average people and elected representatives is larger.
Peter Schaeffer
Jul 3 2015 at 4:22pm
MS,
Putnam is a figure of the left. However, his research is deeply unpopular on the left and well-received on the right (part of the right). Indeed, Putnam was so appalled by his own work that he hid his results for several years. See “The downside of diversity – A Harvard political scientist finds that diversity hurts civic life. What happens when a liberal scholar unearths an inconvenient truth?” (http://www.boston.com/news/globe/ideas/articles/2007/08/05/the_downside_of_diversity/?page=full)
“IT HAS BECOME increasingly popular to speak of racial and ethnic diversity as a civic strength. From multicultural festivals to pronouncements from political leaders, the message is the same: our differences make us stronger.
But a massive new study, based on detailed interviews of nearly 30,000 people across America, has concluded just the opposite. Harvard political scientist Robert Putnam — famous for “Bowling Alone,” his 2000 book on declining civic engagement — has found that the greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings. The study, the largest ever on civic engagement in America, found that virtually all measures of civic health are lower in more diverse settings.
“The extent of the effect is shocking,” says Scott Page, a University of Michigan political scientist”
“Basically it seems to come down to the question of whether your society is mainly organized according to hierarchical relationships or egalitarian relationships between peers. Hierarchical societies lose and peer societies thrive.”
No. The data shows that “high trust” societies tend to succeed and “low trust” societies tend to fail. Putnam (to his intense dismay) found that diversity devastates trust.
Of course, Putnam didn’t really originate these ideas. They go back at least to Edward C. Banfield and “The Moral Basis of a Backward Society” or to Max Weber ” The Protestant Ethic and the Spirit of Capitalism”
estis mentulae
Jul 3 2015 at 6:11pm
[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]
Randall Parker
Jul 3 2015 at 7:38pm
Given these enduring differences between European peoples I do not see how the Euro zone can survive intact. The crisis in Greece is small potatoes compared to what is gradually going wrong in Italy and Spain. Come the next deep recession their sovereign debt loads will shoot up and they’ll get priced out of the bond markets. Then the Germans will have a cow or two.
As for the reasons for these enduring differences: We await advances in science to lay out the causes in detail.
Nicholas Marsh
Jul 4 2015 at 3:10am
One thing that divides northern and southern Europe is a history of dictatorship and civil war in the south.
Greece had a civil war from 1946-1949, followed by a coup and military junta from 1967 to 1974.
Spain had the civil war from 1936-39, and then a dictatorship until 1978.
We all know about the Italian dictatorship, but also don’t forget the civil war from 1943-45 (fascist -v- anti-fascist).
Portugal was run by a fascist dictatorship from 1974 (that was its self ended by a military coup that led to democracy).
If we are looking at trust and social cohesion being keys to economic growth then civil war or dictatorship (maintained by informants and secret police) would seem to be effective at undermining that trust and cohesion. If so then that lack of trust would appear to linger long after the war or dictatorship has ended.
In contrast Northern Europe had invasion and occupation of democracies (eg Norway, Netherlands, Denmark) with small numbers of ‘quislings’ which would tend to unite the population; or a long history of independent democratic government (eg Sweden, UK).
You’ll be wondering how to explain the success of Germany (dictatorship to 1945), Ireland (civil war 1922-23), France (partial dictatorship, and civil war, 1940-44), UK civil war in Northern Ireland (1969-1998), and Finland (civil war 1918).
I’ll suggest that a) the UK supports the point, Northern Ireland is propped up by subsidies from the rest of the UK; and b) the effects of dictatorship and civil war on trust and cohesion are not irreversible. A polity can regain trust and cohesion, but that process takes a lot of time and a great deal of conscious effort to bury the grievances of the past. West Germany at least went through such a process much more intensely than southern Europe.
Michael Stack
Jul 4 2015 at 4:59am
I’m from the US, but visiting Italy right now, and one thing that struck me regarding the differences between southern and northern Italy is the way people drive.
If you’re from the US, driving in northern Italy would seem pretty famiilar, but in southern Italy, it is a completely different story. People essentially ignore traffic laws altogether – they continue driving through red lights, which means each intersection is a slow-moving stretch of constantly merging traffic. People go the wrong way down one-way streets, create new lanes between existing lanes of traffic, etc. I found myself wondering if this reflected some cultural differences in northern and southern Italy.
Lauren
Jul 4 2015 at 6:19am
@Michael Stack. Kind of like Boston, eh?
Sorry to quip. I couldn’t resist. I think you are quite right that there are driving styles that characterize particular cities and regions. I grew up in the NYC area, and any time I’m back there, I fall immediately and naturally into the driving style there–which, for those who don’t drive there could seem terrifying but which is completely consistent and easy for those who know the ropes. (E.g., to switch lanes, pick the spot you want to move into, position your car slightly ahead of it and nearer to it in the lane you are in, signal and then immediately slide back into the spot. No signaling longer than 5 seconds before starting your lane change else people will treat you like the noob you are and never let you switch lanes. Lots of small cultural details like that.) The first time I drove in Boston it was an eye-opener. Like, everyone drove right through red lights, drove 30 miles an hour over the already-high speed limit on the Interstates and highways–all matching each other’s speeds, which was the first time I ever experienced the relative safety of that–and seemed to obey all kinds of imaginary customs I had no idea about. Now I’ve driven there enough times that I cotton to it; but if you asked me to put the customs into words, I could barely begin.
The first time I drove on the German Autobahn–maaan, did I ever get my comeuppance. Think: tailgated a mere two inches behind while driving 110 mph (you do the conversion to kph), with cars square-dance passing me on the right. What was I thinking to imagine that 110 mph could somehow have been enough to let me drive till I felt I had enough clearance as I was used to in the States in the left lane to pass someone even slower?! And driving in Frankfort–well, you don’t even want to hear my harrowing tales in a city where sidewalks are customarily used as additional lanes and where people know their cars to within a centimeter’s breadth–because, after all, if you are driving up on a sidewalk to get around traffic delays, you better be able to fit between the traffic in the street, the historic buildings, and the cars that are already parked on the sidewalk. Oh, right, and weave amongst the pedestrians. Frankfort driving makes driving in Rome look like a sweet piece of tiramisu.
And then there’s France and the rule of the right. Or the customs on top of the legalities of the roundabouts in England. Different customs–lights? horns? first there or by direction–for backing up or proceeding on one-lane roads in country areas. Come to think of it, I’m amazed I’m still alive after driving in so many unfamiliar places.
Great question, Michael. Sure, there are different driving styles, very pronounced and distinct. But what causes these cultural differences in driving styles? How can they persist when they are so vastly at odds and with stakes as large as major property damage or death? Do welfare states or differing GDP or tax matters that persist over time also give rise to different cultural styles in other day-to-day matters?
pseudoerasmus
Jul 4 2015 at 8:56am
The South was converging with the North during the post-war boom, but then began diverging again since the mid-1970s.
I assume this is because high rates of growth (due to global events) in the post-war period dampened the demand for redistribution and employment protection.
But when a much less competitive economy is in regulatory and fiscal union with a much more competitive economy, there’s bound to be divergence in unit labour costs. Wages & labour market rules are more or less set nationally, but vast productivity differences remain between north and south.
Southerners also exploit public employment opportunities more than northerners. And Southerners migrating to the north in droves have affected the age-dependency ratio in the South.
Colin
Jul 4 2015 at 10:57am
there is no meaningful unemployment support in Italy: you only get it for six months
That’s interesting. In Spain unemployment benefits last up up to two years, and I believe a minimum of four months.
RJMeyers
Jul 4 2015 at 4:17pm
My attempt at an explanation, which is taken from John Kenneth Galbraith’s book “The Nature of Mass Poverty,” is as follows:
Welfare states require extensive amounts of administrative expertise, education, and generally divert lots of resources into the public sector. But poor, less developed countries don’t have the resources to spare for this. They must instead economize on talent through markets to build up sufficient capital and expertise to later make a transition to welfare state organization. Doing this too early results in a public sector that sucks up far too much of total output, which strangles and preys on the private sector. Galbraith makes this argument re: communism and why it was generally such a failure in most undeveloped areas. He also notes that China is the exception that proves the rule, since it has a very strong and roughly continuous tradition of administrative power that gave it an advantage in adopting socialist institutions from such an low level of development (this does get toward “culture” as an explanation, but I would still place this under the heading of “institutions.”)
The poor Mediterranean regions went to welfare states too quickly, drawn in either as part of a larger union (e.g. Italy) or as part of trend following, since everyone else was doing it (e.g. Greece). They rushed into welfare state organization without proper preparation and are now best characterized as “failed welfare states,” even if they are not themselves failed states.
I believe a similar dynamic exists between Northern and Southern US as well.
walter p komarnicki
Jul 4 2015 at 11:31pm
re Michael Stack’s comment: you ought to try driving in the Philippines, where rules of the road are mere suggestions, and here in Cagayan de Oro City, Mindanao, the most dangerous time is 3am-6am when vehicles regularly run red lights, and speed. (I speak from experience, having been t-bones off my scooter by a drunken motorcyclist at 5.45am.)
Scott Sumner
Jul 5 2015 at 9:53am
Everyone, Thanks for the comments.
Mikko, I’m not surprised that Putnam’s thesis is not viewed as being conservative in Europe. That highlights a very important difference between American and European attitudes, which reflects our very different types of inequality. In America, that sort of cultural explanation is called “blaming the victim”, and is considered a disreputable right wing viewpoint.
Nick Bradley
Jul 6 2015 at 12:21pm
“I’d have more confidence in conservative ideas if they even had an explanation for the failed free market states of the Deep South, primarily Mississippi.”
Even with a massive depression, the Germany-to-Greece GDP per capita ratio is higher than New England’s to Mississippi’s.
So don’t throw stones. And if the US didn’t spend a trillion dollars pumping transfer payments into the South from 1933-1980, it’d be even worse.
Nick Bradley
Jul 6 2015 at 12:27pm
^ correction to above comment — I meant that the ratio of New England to MS is higher than Germany-to-Greece
E. Harding
Jul 9 2015 at 3:21pm
@pseudoerasmus
Something makes me suspect all the data in your italy3.jpg before 1951 is complete hokum. I’ll go look at whether this is actually so, as I’m wondering which countries they’re counting as North. If the data is legit, maybe they’re primarily looking at Scandanavia as “North”?
E. Harding
Jul 9 2015 at 3:25pm
^Oh, now I get it. North is North Italy, South is South Italy.
E. Harding
Jul 9 2015 at 3:32pm
So it is as Scott Sumner says. Back during the fossil fuel consumption boom, even the most institutionally dysfunctional regions could have rapid economic convergence with the less institutionally dysfunctional regions.
J
Jul 9 2015 at 5:07pm
A bit late, but besides the large differences in corruption between north and south there is also about a 10 point average IQ difference (look at PISA scores by region). I’d think these two things likely largely explain the differences. Better institutions and more intelligent people, the north is also as Peter Schaeffer notes the a high trust society in contrast to the south, which partially explains the better institutions.
Kyle
Jul 10 2015 at 11:40am
Nick, that sounded wrong, so I looked it up. That doesn’t look to be true.
New England: 49,519
MS: 28, 944
Germany: 47,627
Greece: 21,683
The states are from wikipedia, 2012. The countries are from world bank, 2014. Mass is about 4k higher than New England, so that’s still a closer ratio.
Adrian Ratnapala
Jul 13 2015 at 7:19pm
@juan
]
I don’t know if you were deliberately switching between “UK” and “english” there. But it is telling. Once upon a time, the land of Adam Smith might have been more liberal than England. But not anymore. The UK does have parties of the sort you are talking about, but in a confused way.
The UKIP is seen as right wing, but is not very significant. In Scotland, the SNP is supremely significant, but thinks of itself as left-wing. This limits the kinds of stupidities it is allowed to get involved in.
Comments are closed.