The Keynesianism That Southern Italy Needs

ugo maraniPick a panel of scholars, as large as you like, who are able to sensitively understand social issues and ask them their opinion on the pros and cons of a major public intervention in Southern Italy. You will get a distinct response from each person interviewed, regardless of their political ideology. Conservative scholars, perhaps, will second an increase of public expenditure and reformist scholars will be against the expansion of the state’s role but the exact beliefs will vary.

Contamination will not represent in itself a negative factor. Undoubtedly, most responses will be built on concepts like “welfarism”, “the vices and virtues of public hand”, “parasitism”, “market laws”, “Keynesianism” , “legality”, “the institutional deficit”. The reader must not be confused and think that all the multifaceted responses are due to the vanity and “solipsism” of academics: the truth is that, behind the question of the pros and cons of  increased public expenditure in southern Italy, there is a set of associated but indirect questions and answers.

Let’s try to make them transparent. Is public expenditure considered of equal value to private expenditure? Or is it a lower surrogate?

In other words: is the building of a state-financed regional railway less valuable than a privately-built port? Furthermore: are the local institutions, that planned and constructed the railway inherently money-wasting, too bureaucratic and inefficient?

If so, is it due to their historical weaknesses in capacity and operations? Or, perhaps, because no carrot-and-stick mechanism has ever been adopted? How do we assess how the timeline of the project and its implementation would have differed in private hands? Finally: is public expenditure an acceptable source of disposable income? Is such distribution of funds mere welfarism?

Those who believe that a private expenditure is more worthy than its state financed counterpart, that institutional deficits cannot be cancelled, that state intervention will result in poor performance, will naturally oppose any possibility of expansion in state investment in the disadvantaged regions.

In my opinion they are wrongly associating cause and effect. The “obvious” flaws in the current system are a result of a multitude of variables, many of which are concealed. This prejudice is the base of the rhetorical framework in policies that have lead the state to cease production in southern Italy and also to the birth of a ghost. A ghost that has taken the form of the northern Italian issue, the drop or halt in the growth of northern regions as a result of the excess of unproductive resources withdrawn in the south. This has been disclaimed by history, which reports the regions as compliments not alternatives.

Thus, could a public investment plan be possible in southern Italy featuring small government investments, infrastructure projects by selected incentives to SME, by income transfers to poor social groups? Yes, undoubtedly, if a couple of conditions were respected. If 3% of Italian public expenditure , some 800 bn yearly, were directed to southern Italy for a three-year period, and such an expenditure were divided among agents (public, private, and both) and among beneficiaries (old infrastructures, municipalities forgotten by public financial laws, the poor, voluntary organizations, unemployed, un-indexed pensioners). The objection might be: fund management is structurally inadequate in the southern regions administrations. Maybe. Their behaviour is questionable but it is no worse than the CEO of Finmeccanica or Trenitalia, the President of the Monte dei Paschi di Siena, or of global banks packing the municipalities accounts with swap derivatives.

Let’s suppose the real problem of southern Italy is its institutions. A mechanism of awarding resources should be taken into consideration, but not a hypocritical and formal system like the European one, where smartness seems to depend on the quantity of paper planning production. A real monitoring, where the state can judge transparency, efficiency, and timing in resources management. The real problem in southern Italy is that, after twenty years of conformism on endogenous development, on welfarism, on the “cathedrals in the desert”, it  is waking up from its narcolepsy.  The tragedy is that “at the patient’s bedside” a group of doctors and wise experts from the European Union,  with an  inadequate and operative attitude, are helping the sick, that is  the stagnating regions, to collapse. Obviously, in the name of law.

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