Nemo propheta in patria: no man is a prophet in his own land. And Alan Friedman, in this sense, would have the advantage of not being Italian. However, even if he is an American journalist and essayist who has lived in Italy for a very long time, it was hard for him as well, at the beginning of May, to predict how one of the most complicated political crises of our republican history would end. During a Lunch & Learn Talk with the students of SDA Bocconi’s MBA - Master in Business Administration program, he had foreseen a quick return to the polls as the most likely – but not welcome – outcome of the post-election impasse. But someone can still find something "prophetic" in his comments. It is an atypical government alliance, born after a long labor and only thanks to the "forceps" of the euro-reassurance: Premises that allow us to imagine an uphill road for the new executive branch, which will be monitored closely by the European Union and the financial markets.
But Friedman did not restrict himself to the political contingency. Taking questions from Francesco Daveri, MBA Director, the journalist talked freely about Italy today and its political and economic ruling class. And, true to his style, he didn’t hold back.
The useful European “chains”
The conversation started right from the relationship with Europe, an issue at the center of the Italian political crisis. Friedman has no doubts: we can’t do without it. “Mario Draghi’s quantitative easing has increased the liquidity available on the market by 2-3 trillion euro over the past two years. This keeps interest rates low and every year Italy has to pay “only” 65 billion euro in interests on its debt of 2.3 trillion euro. If, however, the economic recovery in northern European countries pushes the Euribor from -0.37% to +1, the increase in interest rates will amount to 10-20 billion euro, and the threat of speculation on the financial markets will become real again. Without a responsible government, the country could face a real storm. Italy is probably protected as long as the QE injects the market and the bank with liquidity. But Draghi’s term is over in October 2019.”
But it’s exactly within the context of the monetary union that our debt risks to pull us under. “Japan has an even higher debt,” he continued, “but it’s the third economy in the world and it has its own central bank that mints money and can decide its own economic policy.”
So, should we get out of the euro? Friedman is clearly against the idea: “It’s an impossible solution due to the effects it would have on the cost of money, inflation, the debt under attack, the Italian bonds plummeting (and the banks are still full of them), the deficit skyrocketing. The single currency cannot be taken away, it would be an economic nightmare. It’s true, Italy is “stuck” with the euro. The single currency is going much better for Germany, I agree. This is why not having a common fiscal policy is a problem for the weaker economies. I truly do not believe that Europe, as some would say, has gone too overboard compared to its original mission; on the contrary, I think there should be armed forces, a coast guard, and a coordinated foreign policy. Instead, Europe today is a dysfunctional family. The only non-populist leader left in the more important countries is Merkel: she’s pragmatic and she’s a stronghold to defend democratic values, albeit a weakened one now. What I mean is: it’s not that Europe has no problems, but there are no better alternatives than the Union. The alternative for the continent is to be economically squashed between the USA and China.”
From Europe to the democracies that constitute it. Or rather, all the western economies and the common crisis elements. “From the 80s to today I’ve had the opportunity to meet thirty or forty prime ministers and presidents from around the world. I’ve always observed that during the electoral campaign they propose radical changes, but once they come into power they are always constrained by the system and the supranational interests to implement more cautious and pragmatic policies. The only exception so far is Trump…”.
“In Italy business is better than politics”
The political situation is cumbersome and seems to obscure the horizon, it is not easy to look beyond. But it’s worth doing it to look at our country from a wider perspective, less conditioned by the current emotions. Alan Friedman, both a passionate and distant man in equal parts, is the right person for this “wide shot”: what does he think of the Italian management class and the future of the country?
“I love Italy but my experience over the past few decades tells me that the best people in this country don’t do politics anymore, but business. Or maybe politicians aren’t really incompetents, they simply give the people what the people want. After all, for centuries Italians have cared more for the interest of the individual – think of Machiavelli’s particulare – rather than the common good. Politically it’s a country that formed 150 years ago through the “imperialism” of the rich northern ruling class who conquered the south, almost as if it were a colony.” In other words, we lack the drive to team up for the common good. “Italians give into the recurring temptation of making a successful man their leader: it’s called “running to the aid of the winner”. It’s a cultural matter: are Italians victims or complicit in determining their collective destiny?”
Reforms, a love-hate relationship
“Reforms”, another mantra in Italian politics for the past 30 years. Like any mantra worthy of its name, so far its function has been more to “sedate” the malcontent or to envision another possible reality rather than really change the status quo. Friedman is trenchant on this as well: “Implementing reforms based on the recommendations of international economists, which means lowering the cost of working and the fiscal pressure on companies, making the job market more flexible, improving productivity by tying salaries to profits, reducing the number of public servants by 15-20% while retaining the same number of services by recouping efficiency, investing on meritocracy for real: all of this is much more unpopular than it seems. Italians don’t want to give up their privileges and one of the most generous European welfare systems: average retirement age is today still absolutely the lowest, 63 and a half years, and pensions are higher than the European average.” With a final note that says a lot about the different political culture he came from: “Because of these opinions I’m considered too laissez-faire, even though I consider myself rather left-wing, a democrat in USA terms.”
In terms of (attempts to) reform, according to Friedman the Jobs Act was a good start, but we have to do more. “We still have to re-train the Employment centers and their 10k employees, implementing more concrete policies for job placement. We have to extend tax incentives for female, youth and over-55 employment. All of this requires an active government that follows this line.” A nod to Renzi’s effort, then, who “did more than anyone else over the past 30 years, but for that reason he became extremely unpopular and he committed political suicide by saying he would quit if the constitutional referendum in 2016 failed.”
A call to action for the new generations
In other words, a lesson in political realism for the audience of young managers. And since the picture is not too encouraging, Friedman dedicates his last thought to them. Which is almost a call to action. “You, who are studying to build up your career and your future, you shouldn’t take anything for granted. Soon, the world as we know it and its history and all we know about democracy, politics, and economic rationality could all be thrown upside-down by a handful of demented demagogues. It’s up to you to avoid it.”
SDA Bocconi School of Management