Friday, April 27, 2007

Italian Productivity

This is an excerpt from the economist Charles Wheelan, Ph.D.:

To get your mind around the concept of productivity, imagine a small, insular farming village in which all of the good land is being farmed and every household grows or makes whatever it uses -- from food to the house itself. Further suppose that a stranger walks into town looking for work.

If you subscribe to the "lump of labor" theory, then this guy is out of luck. The only way he could go to work would be by farming part of someone else's land. If he eats more, someone else must eat less.

But that's not how the world works. Suppose the guy who walks into town has figured out how to build a more effective plow. He can sell his plows to farmers, who will pay for them with a share of their more bountiful harvests. Not only will our stranger have a job, but the farmers will be growing and eating more -- even after paying for their new plows.

We can do it again: A second stranger walks into town and offers to set up a school -- or make clothes, or build houses, or design irrigation ditches, or do anything that frees up the farmers to spend more time cultivating their crops. Again, crop yields go up. And again, we've created another job.

Productivity is an important aspect of growth. Population growth and other factors are not as important as productivity, which is usually a better estimate for economic growth.

Currently, Italy is making reforms to its public sector in an attempt to curtail some of its reputation for poor public service and increase productivity. There was an agreement between Luigi Nicolais, the minister in charge of public reform, with the trade union federations – CGIL (Confederazione Italiana Generale del Lavoro), CISL (Confederazione Italiana Sindacati Lavoratori) and UIL (Unione Italiana del Lavoro) – which represented state employees at negotiations.

The public sector has had a long history of red tape and slow progress. Stories of checking out a book at an Italian university taking upwards of a month were common place. Currently, it takes an average of 35 days to setup a private company in Italy, while it takes 7 days in the UK.

The agreement will affect 3.5 million employees. It will include reforms such as goal based incentives where managers are assessed by reaching these targets. Also, career advancement will no longer be a function of years in service. Additionally, unused funds can be reinvested and used at a later date, which should curtail unnecessary spending. Unused labor will be transferred to other departments that need it.

Critics point out that managers still have no power to transfer workers who refuse to move to another area where they would be more useful. Furthermore, they argue that because the reorganisation of public departments and offices must agree with the trade unions this effectively gives the unions a veto over management decisions.

These are just small reforms of many that would be necessary to improve Italy's economic troubles. Some scholars suggest the increased labor supply has caused the Italian stagflation. This fact points to more interest to the Italian immigration issue. If there is no education supplied to these new workers, it can cut the productivity of everyone.

Not just the lesser public servants should see reform. The Italian Members of European Parlaimant (MEP) could use a pay cut:

So as Wheelen tells us about increasing productivity, an investment in education, innovation, specialization, and sensible tax and regulatory policies are what are necessary to maximizing productivity. The public sector reform is just one small part of one of these elements.

Thursday, April 26, 2007

Croatian/Italian Relations

As Croatia is making moves to joining the EU, Italy has called for the Croatians to reimburse lands and to apologize for the "ethnic cleansing" of Italians in the Istria region following WWII as Italian President Giorgio Napolitano describes.

In 1943-45, up to 10,000 were tortured or killed by Yugoslav communists who occupied the Istrian peninsula, now part of Croatia and Slovenia.

The demands have been building recently. The "exiles", or esuli, and "optants", or optanti, of the region now in living in Italy have not been able to take legal action in Croatia. A post-war contract between SFR Yugoslavia and Italy prevented the restitution of their property since a deal was made that seized this property as it was treated as war reparation. With its new EU leverage, Italy will hope to repair these "damages".

A map of the borders following WWI and WWII.


West Balkan nations to cooperate on organised crime and migration

According to the UNODC (UN Office of Drugs and Crime), the
heroin route through Croatia and Slovenia into Italy and beyond has grown in
importance again. Ivica Kirin, interior minister for Croatia, the closest of
all the Balkan nations to EU accession, said that by working more closely to
stop cross-border crime, nations would not only be defending themselves but
the EU too.

Nearby Croatia seems to also have trouble controlling its 5835 km (3626 miles) of coastline and will be difficult to protect. This will be another issue that Italy will have to contend with with the approaching EU membership that would make international border crossing easier.

Additionally, Italy is now grappling with immigration legislation. If Croatia has difficulty controlling its coastline now, other issues such as immigration will be a factor and may mean a bigger in flux of migrants to Italy assuming Croatia reaches EU status.

In a more recent report of Croatian massacre, the Hague is indicting a number of Croatians for their attack and expulsion of ethnic Serbs from Croatia. Croatia's former and deceased President Franjo Tuđman has been reported saying on video, "blows that will make the Serbs all but disappear, in other words, those we don’t reach immediately, must capitulate in the next few days."

With newer and fresh reports of war crimes, the Italians efforts to win over land for the esuli for an event over 50 years ago will probably be easy considering the other transgressions that may give Croatia difficulty in its bid for EU membership.

Tuesday, April 24, 2007

New Ecomafia Crackdown

Italy appears to have drafted new legislation that will impose harsher penalties for illegal dumping and trafficking of wastes. I reviewed a few EU and non-EU member states and the new legislation appears to be at the upper limit compared to other maximum penalties. The Italian bill would hand up to 10-years in prison and 250,000 euro fines.

This appears to be afront of new EU legislation that has imposed minimum penalties for illegal dumping and other ecological crimes. Interestingly, since these developments, the EU is now imposing possible sanctions on the US and China for giving subsidies to industry to dispose of hazardous and other wastes. This appears to be part of the on-going struggle for the EU to hold onto its exports as they continue to falter for the EU with the ever falling dollar.

Is this law driven by the actual attempt to crack down on the mafia or is it a means for the EU to demonstrate that there are measures to curbing illegal dumping within the EU for its on-going trade war? Perhaps both as the indirect costs of illegal dumping are astronomical and any favoring with the EU would help when the Italian debt has been downgraded to A+.

There is some skepticism of mafia crackdowns in Italy. As the "questione meridionale" (Question of the Meridian or Middle Region) hasn't been answered since WWII, there will always be a stark difference in wealth of the north to the poor south. As the politicians invest in the south as a voting reservoir, there is no crack down on the status quo of the mafia. Still unresolved, this invites groups such as the Lega Nord (the Northern League) which answers with the option to cleanly cut away from the south. The mafia has its roots in being counter-establishment and the organization continues its trends as the south is still not integrated accordingly by the government.

This legislation does target the 2nd highest revenue source to drug trafficking for the mafia, however, it still doesn't target infrastructural changes and unemployment that would keep crime from being the easier option. There is still a long way to go for Italy, but this does make a low risk crime with small punishments a more serious punishment.