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Thursday, August 2, 2012

A grand plan to save Italy from collapse



Sorry for this Italy-centered post, but I though that my consideration on the decline of the political debate here might be interesting also for non-Italian readers. (image source).



Yesterday, Mr. Angelino Alfano, leader of the "People of Freedom" (PdL) party, publicly presented a plan aimed at saving Italy from economic collapse. When he spoke, I was driving along the highway and by chance my radio was tuned on a channel that aired the presentation. I had nothing else to do, so I listened to the whole thing. And I was horrified.

Let me explain. This note is not supposed to be against a specific politician or against a specific party. Mr. Alfano is the successor of Mr. Berlusconi as leader of PdL and to him I recognize the ability of speaking in a series of vaguely intelligible sentences. That's already a notch above a good number of his colleagues. What horrified me is that what he said could have been said by any politician, left or right, conservative or liberal anywhere in the world. And that explains why we are in trouble.

So, what is that Mr. Alfano and his advisors concocted to save Italy from collapse? Well, as far as I understood, the State's properties (parks, buildings, land, hospitals, etc.) should be transformed into a sort of giant fund and investors would be allowed to buy shares. That would bring money into the empty state coffers and save Italy from financial collapse (*).

I can think of a zillion reasons why the scheme wouldn't work, but you can see by yourself that, basically, it is just a game of smoke and mirrors. The state properties would not be sold, but not retained either. They would "float" in a no-man's land and that would, somehow, generate a giant cash transfer that would miraculously save Italy from collapse.

But it was not the improbable nature of the plan that bothered me. Yesterday, as I was listening to Mr. Alfano speaking, I was expecting that there would be at least something more than a discussion on how to balance the books.  I mean, political parties used to be concerned about people's future. They weren't supposed to be concerned only with shifting money from one place to the other. But I was disappointed. "Restarting growth" was the only concern for the future expressed in the speech.

Now, think about that. How is it possible that the leader of the largest national party shows no interest in what exactly we should do to avoid falling again into the kind of troubles we are in? I mean, if we are collapsing, there has to be a reason why. Italy has been a reasonably prosperous for about half a century after the second world war, can't you even vaguely think that there has to be a reason if everything is falling apart today? Can't you conceive that the way out may not be fiddling with the account books, but to take into account that the world, out there, has changed? There are problems with resources, with energy, with pollution and with all sorts of global changes, climate change is just one. Can't you think that the old "solutions" (i.e. growth) may have become problems?

But no way. No mention of resources, of energy, pollution, all the rest. As I said, I am not singling out here Mr. Alfano as a bad politician. It is not his fault. Simply, the political debate has evolved in such a way that most people are living day-by-day, mainly trying to survive. The political debate has declined to a point in which there is no interest in the causes of the problems, no interest in long term solutions, no attention to anything except to the the hope that some politician will pull the rabbit out of the hat. A game of smoke and mirrors.


* To understand Mr. Alfano's plan, imagine you have to pay a mortgage on your home and you don't have enough money. You could sell your car but, instead, you think of a clever scheme. You declare that your car is a public asset and you ask your neighbors to to buy shares of it. In this way, you can still drive your car and pay your mortgage. There is just one small problem: now you have to pay dividends to your neighbors and and that may cost you more than the mortgage!



11 comments:

  1. Well, that’s not a very original plan for a whole country. You can look for information about East Germany’s Treuhand, or either see this documentary, from min. 22:30 onwards.

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  2. Hi Ugo, your witty account of a "new rescue plan" reminded me the Russian privatization big game. Unfortunately, as in Russia's case I see behind "a game of smoke and mirrors" somebody's very big pocket.

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  3. Jack Alpert, who designed seat belts in the US, talks about how we humans are constantly doing things ad hoc and have temporal blindness. He designed a game built on growth and solvable with simple mathematics and tried it on everyone from 5th graders to nobel laureates. He found only one person, I think a 9 year old who went on to design our internet protocols, he tried it on worked out how to solve the game before he started to play, while almost everyone else thought they could solve it in an ad hoc fashion. Nearly all humans, including our politicians, are stumbling around blindly in relation to the larger problems we face and only attack the most pressing issue. If only we would just look into the future or at least think about it a little before we did something. Ah, Cassandra.

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  4. Italy of the Roman Empire prospered as long as there were foreign lands to expand the Empire with the then-available technology. That was their method of growth.

    Who will be today's Alaric and Odovacar?

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  5. No more great leaders anywhere. I wish we had an Alaric!

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    1. Gesundheit! Seriously, why do you need a great leader? A number of good problem solvers would work better, while there's often either a fight for who gets to be leader or a leader pushing in the wrong direction.

      We see that it doesn't work in today's Europe. The German, French, Italian, Spanish, Finnish governments try to follow their own viewpoints for their country. As a result, they're always struggling with each other, and that often ends in deepening the crisis. Instead they should work together for Europe. A good first step is no longer demanding from others what they wouldn't be willing to do themselves in a similar situation.

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  6. Well Alfano solution makes some sense. The "problem" we have now is not that we have runt out of resources (not yet), but that we borrowed our future in the big Ponzi scheme called "debt". It worked until the future looked larger than the present, so borrowing a little of it was not a problem.

    Now we have the big problem of repaying it back, as the future looks smaller than the present. And no more resources are left for paying for "people future" (or for the big politician pockets). So their first problem is that. The second is restarting the growth, so the future could be larger than the present and the Ponzi scheme could restart.

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    1. It might even work: I found a way to explain it and I added it to the post. It is a ponzi scheme, anyway.

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    2. Please Ugo, trust your instinct. When you wrote: «I can think of a zillion reasons why the scheme wouldn't work» you assumed a very wise position.

      Don't be deceived by these ideological (liberist) bullshit that all Italian mass media are spreading constantly about public debt because it's NOT the immediate problem of the Eurozone.

      If you want a competent view of the crisis, supported by public data and well established economic theory, I would suggest the reading of the professor Alberto Bagnai's blog, an econometrist which has sustainability of public debt as one of his research interests:

      http://goofynomics.blogspot.it

      (sorry people, it's an Italian only blog). Debora Billi is already a commenter there.

      Unfortunately he apparently doesn't know much about resource depletion and climate change, but I hope that both you and Debora could raise his awareness of these issues. At your time you might learn something interesting about (international) economics from a macroeconomics perspective, which is what really matters with regard to resource depletion and climate change.

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    3. Well, thanks for the suggestion, I'll give a look to Bagnai's blog

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  7. I really do think industrial civilization will fall without anybody in the conventional media mentioning the twin taboos peak oil or limits to growth. In the UK, i've given up hope of watching a tv program examining and explaining to the masses what is really happening to the economy from a science perspective. Both topics appear to have been censored because you couldnt think of a more interesting and relevant topic for the bbc2 science series 'horizon'. but so far, no mention of either, in recent years anyway.

    The silence is absolutely deafening!

    I think some censorship does occur of certain subjects as there has been no mention either of the jesus myth hypothosis. It would come as a surprise, even to most atheists that there is actually ZERO evidence for a living jesus and his disciples. Zilch, didley squat, nada. Alot of people would be quite interested in that, because many ive mentioned it to hadnt heard of it. I'm no conspiracy nutter, but surely no mention of such interesting subjects suggests there must be some considerable censorship going on by who knows what powerful forces.

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