By William K. Black
(Cross posted at Benzinga.com)
I began writing this article while returning from presenting at a conference on Modern Monetary Theory (MMT) in Reggio di Calabria, Italy arranged by Francesco Toscano and supported by the Regione Calabria and the Provincia di Reggio Calabria. MMT has sparked considerable interest in Italy because it puts the lie to the constant claim that there is no alternative (TINA) to austerity and deepening recessions in the Eurozone.
At the conference, a Calabrian professor, Francesco Aiello, urged the position that macroeconomic policies designed to take Italy out of recession should not be adopted unless they could be demonstrated to increase worker productivity. His position was that austerity – in the form of substantial cuts to public spending – should be the default position in Italy. He argued that Italian government spending generally harmed productivity.
I responded that forcing Italy back into a gratuitous recession and causing millions of Italians to be unemployed was a self-destructive policy that caused immense waste and great suffering – and would greatly harm productivity. MMT policies, particularly the jobs guarantee programs my colleagues have developed would add greatly to Italian productivity in multiple areas. In this article I emphasize one of those areas, an area that illustrates how insane Italy’s austerity policies have become.
Austerity has driven unemployment among young Italian adults to over 35%. The result is that Italian university graduates are emigrating. This loss of Italy’s greatest source of future productivity gains is particularly crippling because Italy has far fewer university graduates than most developed nations.
How bad is Italy’s loss of productivity? Consider the loss to Italian productivity of losing one Calabrian couple. Vincenzo and Santa (née Freno) Saraceno were illiterate peasants who emigrated from Reggio di Calabria to the State of New York in 1896. Santa had somewhere between 12 and 16 pregnancies once she and her husband came to the U.S. Their children were traditional Italian-Americans. The girls married Italian-Americans, often at age 16, withdrew from school, and began to have children. The Saraceno girls were literate, but a high school degree was never an option. They raised their young families during the Great Depression.
One of the Saraceno girls married a man with the family name Marino and had a boy they named Raphaële (Ralph in English). Ralph was the first university graduate in the extended family and was admitted to Harvard Law School. Ralph went on to become the Majority Leader of the New York Senate. He was a Republican who worked cooperatively with the Democratic Governor – Mario Cuomo.
Another Saraceno daughter married an Italian American named Johnny. Johnny was not a well-educated man. He was awarded the bronze star as a tank commander in World War II. His Sherman tank took out over 15 German pillboxes to help breach the German border fortifications. The Sherman had a large silhouette, poorly sloped and inadequate armor, and a gasoline engine that led to catastrophic fires when the armor was penetrated. The Germans had the best anti-tank guns and the best man portable anti-armor weapons in the world and they were adept at placing their pillboxes to secure overlapping fields of fire that would shred attacking infantry and aid attacks on the particularly thin armor on the Sherman’s flanks.
The Saraceno’s youngest daughter had her name changed by Irish nuns (who insisted that she have a more “American” name) to Jane. She married a carpenter named Joseph Carbone (whose family came from Abruzzo) several years after he came back from being a navigator on a bomber in the European theater. He helped guide bombing raids in which as much as 20% of the attacking force of bombers was destroyed. (Like Johnny, Joseph rarely talked about his service.) The Carbones had two children. June was the first of the Carbones to get a university degree. She was one of the first classes of women to be admitted to Princeton and then received her law degree from Yale. She holds the Smith Chair at UMKC and is invited all over the world as the featured speaker at far more prestigious law schools. We married over 33 years ago.
Other descendants of Vincenzo and Santa Saraceno have graduated from Harvard Law School, are dentists, nurses, bankers, biomedical engineers, and dozens of other trades. Divorces are rare among the descendants. The old joke about the three critical matters for Italians – family, family, and family – remains true.
One illiterate peasant couple left Italy and created a massive gain in productivity and an extraordinary extended family here in America. Calabria’s seemingly trivial loss in 1896 has produced exceptional gains to America.
Pasquale Catanoso, another professor from Calabria, responded critically to my recounting of the Saraceno’s story by stating that anyone can give an example of a single family and that Italy had no equivalent to Princeton and Yale. Both of those statements actually constitute agreement with the points I was making. Everyone in America can give dozens of examples of families like the Saracenos. The story of my wife’s extended family is simultaneously a story of an exceptional growth in the productivity and opportunities of a family and an utterly conventional example of what made America great. From an American perspective, the Saracenos are simply a typical family. We are a nation of immigrant families whose descendants made extraordinary progress even when the family arrived in America as illiterate peasants.
Italy is no longer causing illiterate peasants to emigrate. The massive unemployment of young adults caused by austerity is increasingly driving Italy’s best hopes to flee their home nation. Austerity constitutes a vicious assault on Italy’s children, young adults, and productivity. Austerity is an insane policy, but defending austerity on the basis of purported concerns about government spending harming Italian productivity exceeds insanity. When Italians simultaneously defend the austerity program that is causing hundreds of thousands of young Italians to flee their homeland and claim that they are devoted to protecting their children we know that we have transcended insanity and achieved despicable hypocrisy.
I’ll assume for the purpose of discussion that Professor Catanoso is correct that Italy does not have equivalents to Princeton and Yale. Italian scholars often make extremely harsh criticisms of Italian universities and their faculties. The central criticism is that decisions are made on the basis of connections rather than merit. If this is true, the question is why Italy does not create its own world-class universities, particularly in the South. Italy can create a superb group of universities. It can found new universities run on the basis of merit by professors from the Italian diaspora. The universities would not have the endowments of Princeton and Yale, but they would (if the Italian critics of their universities are correct) quickly be Italy’s leading universities and would encourage Italy’s best and brightest not to leave. The real answer, of course, is to end involuntary unemployment in Italy through applying MMT’s recommended policies while creating these new, superb universities so that graduates will be able to find productive work in Italy.
Italians have to choose. They can continue to waste the talents of millions of Italians, particularly their young, through Great Depression levels of unemployment. Italians can continue to make a mockery of their claim to being obsessed with the welfare of their children by driving their children from Italy through austerity. America’s message to Italy is simple – make our day – send us your Saracenos. Alternatively, Italy could decide to end its recession, employ its people, and create a group of world class universities. Not all choices are tough.
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.
Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.
Follow him on Twitter: @williamkblack