Last week I had the pleasure of seeing Alessandro D'Alatri's recent film La Febbre. As the reviewer says, this is a 'normal' (everyday) film, not a great one, even if there are one or two memorable moments, like the scenes by the river, which were (and I imagine this is not entirely unintentional) rather reminiscent of some to be found in the unforgettable L'Albero Degli Zoccoli from that giant of Italian cinema Ermanno Olmi.
La febbre è il classico film italiano, che vuol raccontare una storia normale, di tutti i giorni, e che per farlo non trascende dai canoni della buona creanza del plot, e da quel pizzico di amara critica sociale che lo rende molto politically correct. D'Alatri infatti sceglie una storia senza picchi emozionali o visivi, con risvolti e situazioni tipiche per un certo tipo di cinema, affrontando il tutto con una messa in scena scanzonata e senza pretese.
On the aesthetic level the film is perhaps far from satisfactory, since D'Alatri seems at times unable to make up his mind whether he is Rosselini or Almodóvar but this is not my principle concern here. The film narrates the 'little story' of Mario Bettini:
La storia dell'impiegato Mario Bettini, geometra comunale come si definisce nel film, passa così tra luci e ombre attraverso gli amici, il sogno di aprire un locale, il posto fisso, la mamma e il fantasma del padre e il grande amore di una vita.
Well, almost an everyday story in an Italian context I would say, but what interests me here is the situation of Mario as a young person who wants to succeed, and all the trials and problems which are thrown in his path by a system which doesn't understand him, and which seems happier to see him fail than to see him succeed. THIS is one of the big problems facing Italy today. And it is reflected in the large numbers of young qualified people who leave Italy every year.
There is one very memorable moment in the film, the one where Mario gets to meet the Italian president. The scene takes place in Mario's bar, which he finally manages to get the permit to open thanks to the fact that the local mayor needs his help in the context of the president's visit. Mario offers the president a drink, una birra is the reply, una birra Italiana, è bella la birra Italiana. So Mario serves the drink, and then tells the president there is something else he would like to give him, and out of his pocket he whips his Italian passport: "here, this is for you, I don't need it or want it" (or words to that effect).
Now here, although to the point in terms of sentiments, D'Alatri hasn't quite got it right. There are currently an estimated 3.5 million Italians living and working outside Italy (to go by the AIRE database), but one thing they do seem to keep is their Italian pasport, since it is this document which enables them to move.
The point I would like to draw attention to here is the substantial loss of future human capital which Italy is undergoing at the present time. Back in 2002 the website Lavoce published an article on this topic. As they say throughout the 1990s there were a growing number of Italian graduates leaving Italy:
La fuga dei laureati italiani all'estero è un fenomeno di cui spesso si discute senza l'appoggio di dati significativi. Analizzando i flussi di laureati italiani che vanno all'estero il fenomeno appare drammatico e in crescita. Mentre all'inizio degli anni '90 meno dell'1% dei nuovi laureati emigrava all'estero, alla fine degli anni '90 circa il 4% dei nuovi laureati lascia l'italia.
During recent years this situation has surely only accelerated. They also publish comparative data for migration of graduates into and out of a number of other EU countries. Unfortunately this data is now somewhat old and it would be really interesting to see something from, say, 2005. My feeling is that the position has only deteriorated. Paola in an e-mail suggests the following:
It is difficult to differentiate between people who are first, second and third generation Italian. However, in terms of first generation Italians leaving the country: I found that since 1990 every year 4% of people who hold a bachelor's degree move out of the country to find job elsewhere; to this number you need to add some people who went to work elsewhere after high school, and MANY young people who did not register to AIRE (Association of Italians residing elsewhere) -therefore the government has no idea they are working somewhere else ... Could we estimate an average of 6% of the average yearly birth for people between the ave of 20 and 45 years old are leaving the country?
Now this situation is important, and especially in the context that Italy's population has not been replacing itself since the early 1990s (ISTAT, latest data, PDF link). There is only continuing population increase in Italy these days due to inward migration. But, as the Lavoce article stresses the balance in human capital terms is hugely negative here. That is to say, this inward migration is extremely important in labour force terms but can only serve to make the path of the Italian economy sustainable if the young educated Italians stay and enter the labour force in more productive, higher value activities. It is here that the big problem exists (and this is not only a problem for Italy, since as I explain in this post here, the phenomenon is similar for Germany. And of course, Italy and Germany are the two European societies with the highest median ages, something whose economic importance I try to explain here).
So the position is a very worrying one. Anyone with anything to add on this, either anecdotally or in terms of more data and links, please feel free to go ahead in comments.
Italy At A Glance - January 2008
Welcome to the Italian Economy Watch Blog. Below you will find the normal chronological blog posts. But first we would like to present some charts which provide background data which we hope will help the first time reader better assess and get to grips with the argument being presented on the blog. In what follows you can find charts for Italian male life expectancy, median age, quarterly GDP growth, inflation, household demand, retail sales, and import and exports growth. Basically this data provides a summary of the argument which we are presenting on this blog, which is that in order to understand Italy's long term and ongoing economic malaise you need to understand something about Italian demography, and it's macroeconomic consequences. Please click on thumbnails for better viewing.
With such weak internal consumption growth Italy badly needs to run a trade surplus to obtain the economic growth necessary to make public finances sustainable. In this Italy is similar to Germany and Japan, and different from domestic consumer driven economies like the UK, France and Ireland. Long term fertility and life expectancy really do matter, since they condition labour force growth
and consumption patterns, and with these productivity and the growth of internal credit and consumer demand. Above left you can find Italy's ferility rate, and above right the evolution of the 25 to 49 age group, which has just passed it historic peak. On either side here you can see charts for recent quarterly GDPand long run annual GDP.
Arguably these are all the data points you need to understand my lengthy post on The Euro Area and Italy's De-Facto Dependence On Exports, as well as why it is that the danger Italy may once more fall into recession presents us with the difficulty of what the credit ratings agencies will say about the resulting impact on the government debt situation.
2008 Forecasts: The OECD in December revised their 2007 Italian forecast down to 1.8%, and the 2008 one down to 1.3%. Confindustria also revised their forecast down in December, arguing that growth would slow to 1 percent in 2008 from an 1.8 percent this year, citing factors like the rising cost of food and oil and the rise of the euro against the dollar. Such numbers are clearly not encouraging, but arguably downside risk for 2008 is greater even than either the OECD or the Confindustria forecasts reflect Morgan Stanley's Vladimir Pillona is somewhat more sanguine. While presenting the MS central forceast for Italian economic growth to slow to 1.0%Y in 2008, from 1.8%Y in 2007, he goes on to note that "even annual GDP growth of 0.5%Y next year has a significant possibility of occurring, as shown by our model’s forecast error bands".
I personally will be very surprised if we still see calendar year 2008 anything like as high as 1.8%, but more to the point even 1.3% may be rather on the high side if we get a significant deterioration in the external environment, especially in Eastern Europe on which Italy is fairly dependent, and where the Italian banking sector has significant exposure. So that puts me much nearer to Pillona's "basement bargain" number of 0.5% than to any of the others. One of the reasons for my pessimism relates to my assessment of Italy's current trend growth rate, and to the level of fiscal and monetary tightening which may be operating on the economy even as it slows. During 2007 the Italian govenment has been running a fiscal deficit of comfortably below the 3% of GDP required by the EU commission. But since this fortunate situation was in part acheieved by the use of one off measures, and in part by the strong tax inflow from the above trend growth, the government will need to maintain a comparatively tight fiscal stance to keep things on course, and any attempt to further loosen may run into real problems with the EU commission and the credit rating agencies. And as I keep arguing, it is very hard to see an accomodative monetary posture from the ECB in the near future. The IMF in their October World Economic Outlook came in with a similar figure of 1.3% for 2008, the Economist Intelligence Unit is forecasting 1.7% in 2007 and 1.4 in 2008, and the latter 2008 figure was also endorsed by the EU commission in its November forecast.
As I indicate, my own view is well to the downside of all this. The only apparent bright spot on the horizon is employment, but I am dubious that in the context of Italy's ageing workforce this will work through as some are hoping, as I expain at some considerable length in this post here. My opinion is that Italy will enter recession at some point during 2008, and that we may well have 2 consecutive quarters of negative growth. The continuing high euro will maintain pressure on Italian exports, and high oil and food prices will maintain pressure on the inflation front, at least in the firts half of 2008. At the same time, and despite rumours that Romano Prodi's government is compemplating a large tax cutting package, I anticipate that the fiscal environment will remain tight. Italy's large (106% GDP) accumulated debt, and the vigilance from the gentlmen at Standard and Poor's and the other credit rating agencies more or less guarantee that.
As most of the forecasts suggest, we have been seeing growth which is somewhat above trend during the upswing in the last couple of years, so it would not be surprising if we now saw some below trend growth. Trend growth (over a 5 year average) in Italy may even have fallen into the 0.5 to 1% range, so if I have to put a number I would say 0.7% with a definite "downside risk" tag attached. The nearest forecast to this that I have seen is the 1% one from the Morgan Stanley GEF team. The implications of such sustained low growth are, I think, important, since if Italy cannot find the way to raise trend growth up towards the 2% mark there is simply no way the government debt can be stabilised and sustained. And with each passing year we have one year less to crunch time.
4 comments:
Edward, I think this April 2, 2005 Time’s special report on Italy—focused on "The Fading Future Of Italy's Young"—could be very interesting for you … If you haven’t seen it already.
Ciao
Roberto
(windrosehotel)
Hi Roberto. Thanks for this. I have posted a direct link on the blog. As you will have seen, I really liked the photo.
Hello Edward,
The chartes that you used in your post publiched on January 26, 2007 are very informative and help to visualize all the trends and the challenges that Italy is staring to face. I noticed - correct me if I am wrong - that there were no charts related to the evolution of the participation rate in terms of sex composition and immigration. I am not sure if our official statistics has been reporting these information by quarter in the last few years, but it could useful to add this information and see whether there could be any potential delay in the economic downward trend.
Thanks for doing such a great job,
Paola
Hi Paola,
Thanks for the complements.
"I noticed - correct me if I am wrong - that there were no charts related to the evolution of the participation rate in terms of sex composition and immigration."
No. You are right. I don't analyse these components. ISTAT do publish - and I do have on my hard disk - data on these. On 20 Sept 2007 I did some charts for the migrant component. You can find this post here, but I haven't yet looked at participation by gender. The problem is simply time, especially with all that is happening at the moment. I will try in the near future, but if not I will concentrate on gender when the next quartery labour force data comes out. Basically, I am very suspicious of the notion that raising participation rates among poorly educated women over 55 with little work experience is going to generate a lot of extra economic worth, although it evidently is going to be very necessary. Incidentally ISTAT also give data by educational qualification and age.
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