Remembering Luigi Einaudi and the Italian Economic Miracle
On this day in 1961 Luigi Einaudi (1874-1961) passed away. Einaudi was a household name for generations of Italians: a name associated with economics and, particularly, with free market ideas. He played a role comparable with that of Ludwig Erhard in Germany: he significantly contributed to the policies which brought about what is still remembered as the Italian economic miracle.
This “economic boom” was fostered by relatively light-touch regulation and light taxation pursued in 1948-1963. Monetary stability was then a priority of the Italian Central Bank and the country decided to open up to trade and joined the European common market, thereby finding a wider consumer base for its products. In 1948-1963, the country grew on average at 6,5%.
After the war and the end of fascism, Einaudi was the doyen and most prestigious of Italy’s economists. He was a committed free trader and a champion of liberismo (free market liberalism), though in his massive body of work that spanned over 70 years, many nuances can actually be found. His fields included both economics and journalism: Einaudi himself was actually pleased to self-define as a journalist and commented over economic events since he was a very young man. He was an “empirical” economist, and he constantly tested his views and opinions in a fruitful dialogue with the political and economic reality of the moment – with which journalism helped. He began to write Italian correspondence for The Economist when he was in his twenties and was a columnist, first for La Stampa in Turin and then for Corriere della sera in Milan, until he was forced to leave his position by the fascist regime.
In the 1930s, he had opposed the Keynesian measures adopted by the government as well as Keynes’ “new economics”, expounding the classical liberal doctrine. His major articles are now available in English in this Palgrave three-volume set.
After the fall of fascism, Einaudi served as Governor of the Central Bank and Treasury Minister. The free market economists were not many, but they still left a mark in the public policies of those years. Einaudi was very active in public debate (a great writer, but apparently not a great speaker). These economists were paradoxically helped by the fact that, after the war, Italy’s public administration was in such disarray that it was clearly impossible to entrust it with an ever growing list of tasks and this opened the way for somewhat “heterodox” individuals.
In 1948, Einaudi was elected President of the Italian Republic (a largely ceremonial post). At the time of his election, he was 74.
While he was Head of State, he continued to write, but published his works only after he left office.
Here’s what Einaudi, then President, wrote in 1950 in response to Giorgio La Pira (1904-1977), the Christian progressive mayor of Florence who blamed unemployment on the lack of proper government measures. After having patiently explained to La Pira the many barriers to greater employment and economic growth which the very state he was head of kept in force, Einaudi notes:
If unemployment only reached two million persons, this is due to the fact that in Italy, luckily, laws are not always enforced, that everybody disobeys as far as possible foolish and anti-social laws. Despite our innate noncompliance, however, something remains, enough to bring about unemployment and to drive many decent fellows to exacerbate it under the pretense of doing away with it.
This was published after Einaudi left office. But I wonder if ever a head of state has been similarly frank!
Einaudi’s last article was prepared for a meeting of the Mont Pelerin Society, of which he was a member, and later published by Bruno Leoni in Il Politico, the journal of the Political Science Department of the University of Pavia which he founded and edited. Leoni translated Einaudi’s piece into English.
You can find it here. It is an interesting reflection, by and large autobiographical, on the role of economists when they enter in contact with politics. Here’s an interesting bit:
I will not contend that the economist is not a slice of a man, but the whole of it with his nature, passions, inheritance of previous generations and vested interests. This remark would not be pertinent; nobody wants the astronomer or the physicist or the chemist to forget that he is also a man with children, a wife and parents, who lives in a society and is able to live in that society as a full citizen and not only as an astronomer, a physicist or a chemist. I say instead that separating the means from the ends is unreal and must be definitely avoided. The study of the means which should concern only the economist is not separable from the study of the ends. Means, when they are suitable, re-act on the ends. Means implying freedom are incom- patible with non-liberal ends.
The article ends with a quotation from Francesco Ferrara that I am sure David Henderson will particularly appreciate.