Italy from Recession to a new Socioeconomic Identity

Paolo Borioni

The historical sources of the Italian crisis[1]
The Italian economic crisis has global as well as domestic roots. As Italy depends on industrial exports, the country has been deeply affected by the global crisis, and even more so by the depressive results of the EU’s austerity measures.[2]  Mario Monti’s technocratic government has also added to depressive austerity: the Italian internal market shows a negative growth, below -2% in 2013, adding to Italy’s need for exports.

Italy was one the fastest growing industrialised European countries between 1950 and 1990, performing better than Germany.[3]  This was partly due to its newcomer identity characterised by low wages which helped competitiveness at the beginning of this period. The economic landscape was further marked by the presence of a few major enterprises (including Fiat, Pirelli, Olivetti) and big state-owned enterprises (Ansaldo-Breda, Fincantieri, Eni, Enel, etc.). Large companies provided long-term investment and innovation, facilitating the emergence of plenty of successful Small and Medium-Sized Enterprises (SMEs)[4]  in the so-called “third Italy”. The success of SMEs was founded on their embeddedness in a dynamic economy dominated by large firms, whose investment in research and technology also benefited SMEs.

Tax for Equity (T4E) - Getting Wages back on Track

Frank Hoffer[1]

During the last few decades productivity gains have not been shared fairly in most societies. The resulting growth in inequality has been one of the root causes of the crisis. Austerity and further aggressive wage cuts are currently aggravating the problem. As wage developments are continuously trailing long-term productivity growth, governments need to act in leading economies back to a more balanced growth path. Profits generated by monopolising productivity gains and depriving workers of wage rises in line with productivity should become subject to special taxation. Such a Tax for Equity (T4E) would ensure fair competition and close the opportunity for profit maximisation through wage repression.

Sharing productivity growth
To ensure inclusive and sustainable growth, productivity gains have to be shared between capital and labour. For this to happen, real wage growth needs at least to match the long term productivity growth in a society. As central banks aim at a certain level of inflation, nominal wage growth needs therefore to equal national productivity growth plus the targeted inflation rate of the central bank. Following such a balanced wage norm the increased productive capacity will be absorbed by the higher aggregate demand resulting from the simultaneous increase of wages and profits. Wage growth below productivity leads to either deflation as witnessed in Japan or aggressive export surplus strategies as in Germany; or - if prices are sticky - a decline in real wages, aggregate demand, production and employment. As markets have failed to deliver such balanced wage developments there is a need for policy intervention to stop the macro-economically undesirable wage repression. Wage restraint was achieved in many countries through a weakening of the collective bargaining system, an unprecedented rise in precarious employment and the creation of large unprotected low pay sectors.

The State as the Employer of last Resort

Cédric Durand

Dany Lang

The great recession the rich economies entered in 2007 has turned into social devastation in Europe. In France, there is every reason to despair the new rulers holding the reins since June 2012; indeed, the abandonment of workers’ collectives to their fate after half-hearted threats of nationalisation is only the tip of the iceberg. Policies implemented by François Hollande’s government include budgetary austerity on a scale unprecedented since World War II (60 billion euros’ worth of cuts planned over five years), the institutionalising of the European “golden rule” which limits structural deficits to 0.5% of GDP, a “competitiveness” plan which offers firms €20bn in tax credits (€7bn of which are to be funded by a VAT increase) without any counterpart, and the transposition into law of an agreement reached between employers’ organisations and minority trade unions aimed at increasing dramatically external number flexibility on the “labour market”. This profoundly neoliberal orientation is based on choices that need to be analysed.

Wages for Equitable Growth

Patrick Belser

Average wages around the world
The global financial crisis had significant negative repercussions for labour markets in many parts of the world. The most significant impact has been on employment figures. But the ILO Global Wage Report 2012/13, entitled “Wages and Equitable Growth”, shows that the weakening of the global recovery in the two years after 2010 was also reflected in average wages. Among the group of developed economies, real average wages (i.e. wages adjusted for inflation) fell by -0.5% in 2011, after having fallen a first time in 2008. Preliminary estimates based on quarterly data for 30 countries indicate that average wage growth in that group of countries was around zero in 2012. 

This contrasts with emerging and developing regions, where the growth of both GDP and real wages generally remained positive. Looking at the world as a whole the report found that real average wages grew by 2.1% in 2010 and slowed to 1.2% in 2011. But remove China from the equation and things look only half as impressive, even in the developing world. Note also that it is too early for even preliminary global estimates for 2012 as only few developing and emerging economies produce quarterly wage data, and as annual wage data is often published more than 6 months after the end of the year. 

Source: ILO Global Wage Report 2012/13

Constructing an Anti-Neoliberal Analysis to Arrive at Truly Alternative Alternatives

Salimah Valiani

The instance of nursing labour market restructuring

For the past few decades, the world economy has been shifting through radical restructuring and reorganisation. Within this context, the "anti-globalisation”, “anti-WTO”, “anti-neoliberal,” and other such movements are an important field within which to identify the thinking behind the action. For Antonio Gramsci (1971), questions of theory and practice are raised particularly when the “movement of historical transformation is at its most rapid”. The point of such questioning, as Gramsci says, is to make the “practical forces unleashed” more efficient and expansive and the “theoretical programmes” more realistically justified. Taking inspiration from this, the aim of this column is to provide methodological direction in analysing and responding to changes of the neoliberal era using the instance of the global restructuring of nursing labour markets.