I spent two weeks in the resort area of Aprilia Marittima, Legnano and around Pordenone in summer 2010 visiting friends and family. You could not recognize the area for Italy. Dark skin is rarely visible. Street peddlers are all but gone. All you see as far as the eye can see, is a sea of white Caucasians with blond hair and blue eyes. I may be exaggerating a bit, but it was eerie.

Uncannily, in relation to the rest of Italy, the North East would be the equivalent of Germany at European level. The North West of Italy is heavy industry country with state ties and state subsidized. The North East of Italy is the independent family owned industrial area with a degree of administrative autonomy; very hard working, surprisingly creative and reliable folk. Few know for example that “Jacuzzi” is a family name… and yes, they created the baths and sold the brand to Whirlpool if memory serves.

So, Bossi has to a great extent already achieved his separation. Can he go on to get full political separation? I don’t know but I doubt it.

@ Guido, thanks, a potential tinderbox anyway.

I haven’t lived in Italy for now 35 years and only follow passingly the political and economic evolution there.

That said, left right animosity is nothing new. Left right animosity is the hallmark of grade school and almost a right of passage. During the “anni di piombo” of the second half of the 70s (the last time I lived there), we had to pay particular attention to the type of clothing we wore to school or the stickers we placed on our mopeds in order to be identified with one side of the political spectrum or the other and according to the part of Rome we were visiting or just going through.

I don’t know if things are still that extreme today but what I can say is that Italian politics is terribly fractious and petulant. When visiting Italy today if one relied purely on tv and newspapers to keep up with world events, one would feel horribly isolated. The 1pm national news cast consists of approximately 20min of petty school yard childish bickering packaged in live political interviews (the type of bickering that goes: “he said something so I will do something and show him who’s boss”). Then you have about 5min of international news. Then you have about 30min of sport of which the first 20min are national soccer news and here too you get live interviews of soccer executives bickering petulantly. The remaining 5 minutes concern culture as in food and drink, theater or cinema. And that’s your news diet when you are in Italy.

Can it possibly get any worse in a declining economy? I suppose so. But I hate to speculate what it would look like.

Just wondering about your thoughts on how the situation in Italy might transpire in regards to the Northern league etc. i have an old friend who lives in Rome who is worried that if things deteriorate further there might be a push from the prosperous North to seperate from the poorer south. He is saying that Berlusconi is kept in power by these people who are very right wing. He is a keen follower of Italian football & was telling me how Italian football fans, ( Ultras ) are often divided by region & also right/left loyalties. He reminded me of a game he attended a few years ago when after a rumour was spread that a fan was killed by the police, both Lazio & Roma fans rioted resulting in 187 police being hospitalised. He is worried that these right/left divisions could come to the surface as the political & economic situation worsens.

In an environment of electoral politics (and particularly in representative democracy rather than in direct democracy), the state cannot possibly invest economically. Electoral politics will see to it that interest groups are formed and that some groups go on to acquire greater weight in the electoral process.

We agree on the desirability of debt free money… but… even in this context, the quantity of money must somehow be restrained by some parameter lest we fall in the same trap of DBFM… that is, that the entities that operate closest to the point of injection of the currency (which for all practical purposes cannot reach all economic actors simultaneously) benefit disproportionally from all subsequent users…. thus, once again, leading to the mathematical concentration of profits.

Maybe we’re at cross purposes here?

You say:

“…companies…cannot invest….mostly due to waning demand…”

Entirely agree, but that ‘s not what you appeared to say previously? You appeared to be suggesting that it is (supply side) capital formation that’s the driving force, not demand? Hence my comment re neo liberal narrative.

With regard to your comments about credit & financialisation of the economy – entirely agree. This is what Michael Hudson, particularly, writes about.

Do you understand that MMT would reduce considerably the ‘debt proportion of money base (from its 100% now!) over time?

Whilst not endorsed (or otherwise commented on) so far by core MMT proponents (I’ve been trying to get them to comment), I found this quite extensive modelling study produced by a Japanese Prof for their economy which shows the effect government spending, debt free, over time: (interesting results imho)

http://www.monetary.org/yamaguchipaper.pdf

I’m not sure why you say “…government cannot consistently invest profitably…” ? Surely there are many long standing examples of reasonably well operated state enterprises? For example, we have the ESB (electricity supply board) here in Ireland which has done a reasonably good (& profitable) job over decades. Interestingly, irisheconomy.ie linked & discussed a paper looking at the EU wide experience of ‘competition’ driven privatisation over the last 2 decades. It was quite clear in its conclusion that the supposed objective of increasing competition & lowering consumer prices has not been met, nor will it be in the foreseeable future. It regarded the outcomes of state owned vs private as roughly even. A reasonable interpretation would be that supposed state ‘inefficiency’ & somewhat higher wages levels were cancelled out by higher private executive remuneration
& company profits. I know which I would rather have if the outcome for consumers is roughly even. In the face of impending climate change & energy resource constraints, it is obvious that the state owned sector would be/are far more capable of delivering strategies to address these issues. Far easier to introduce policies for the wider public good than when a private company, whose only interest is (typically short term) profit.

I don’t think anyone in the UK would regard railway privatisation as a success, most certainly not for consumers or a in respect of progressing a sustainable transport policy. For the Tories who introduced it (& New Labour who continued with it) it’s definitely a ‘taboo’ subject.

Are you saying that there is no place for state owned enterprise?

I’m not dogmatic about this (or anything else), but it seems to me there’s an overwhelming case for some enterprises to be in public hands. If you consider the marginal cost (if any) of supposed state run ‘inefficiency’ versus the social and other state costs of greater private sector employment volatility during economic downturns, then ‘privatisation’ dogma looks even more pointless & destructive in an MMT & ‘functional finance’ world. I don’t think it’s rocket science to identify ‘natural’ monopolies where the (near universally mythical) ‘free’ markets simply don’t work work to ordinary citizens benefit. Personally, I would favour a presumption that private enterprise must prove its benefits for certain sectors, with a buyback right to the state if they fail to deliver following a ‘privatisation’ experiment.

Anyhow, I don’t see why you connect your conclusion “…monetary stimulation of demand in times of recession cannot be a viable solution…”?

But leaving that aside, the key proposal in MMT for demand stimulation in a recession is primarily a +fiscal+ operation. And the monetary aspect of financing it does not create ‘debt’, so I’m not sure what the reason for your objection is?

Nor does MMT suggest this policy is about creating ongoing state enterprises, if that’s what you thought?

Their Job Guarantee, paying at or near minimum wage (to prevent ‘crowding out’) is intended to maintain incomes for the otherwise unemployed & apply greater (temporary) counter cyclical demand stimulus. With careful scheme design there can be socially useful outcomes too which would otherwise be impossible to finance (vis viability, inflation) during times of near full private sector employment. Win-win for the public purpose.

Hi Mike,

On the two links I gave it was more to highlight the fact that their are very bright people with radically different perspectives who aren’t convinced about MMT. And I agree with you both critics are flawed, but I come at this as a layman and with a layman’s humility (at least I try) so I don’t consider myself to be in a position to outright discount them.

Of the two, flawed as it is (in particular I think Bill Mitchell as address the Robert Murphy critic) I lean more toward the acting man critic and I do think it worth the read.

On your point about the QTM, I agree. however, I read the blog to try and counter my own confirmation bias. I read Krugman for the same reason 😉

As an aside, a fascinating analysis of QTM can be found here http://www.cargocultist.com/?p=1586

Recently on the Moneyillusion blog someone posted a link to one of Steve Keen’s (excellent) behavioural economics lectures, a reasonably prominent Keynesian economists replied that he’d started watching it but spotted an error within the first five minutes so thought it wasn’t worth watching further. I give this as an example of what I think is one the main things wrong with this field, i.e., a basic inclination to confirmation bias.

Rightly or wrongly It’s this kind of thing that makes me wary of theoretically driven interventionist macro policy – I don’t consider economics to be a hard science.

I’ll also add I’m still trying to distill my own thinking on macro economic policy particularly in the context of “realpolitik”.

Fundamentally however I see this as a private sector debt crisis created by private sector banks and it’s there I think the problem should be addressed.

Now I’ve just this morning received my copy of the revised edition of Debunking Economics so I’m off to try an educate myself further!

Once government is the largest actor in the economy and capacity is excessive and interest rates are perilously low and the monetary authority is burdened with toxic assets… that’s when you can see that credit is not productive capital…