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
Austerity is a problem, but Italy is in a crisis because Italian’s have been happy to let politics meddle in all business. the whole system is corrupt, and as long things were fine, nobody complained. When you have so must interference of politics in the business system, money is spent badly, people choose not to become productive, because everyone knows that in Italy , before the crisis, to get a good job you don’t have to be good – you have to know the right people. Now this system is collapsing, and so Monti is doing useless austerity, but believe me, Italians are no accepting the idea of putting reforms to make the system more competitive. Young people are leaving not for austerity , but because we have the worst labour rules among the Western world. The older generation doesn’t not want to give up privileges, so companies cannot hire anymore, and they cannot fire bad workers, because this is forbidden by law. The bad thing about austerity is not that it is driving away young people, but they have put austerity on the lower middle class, without touching the privileges of the political and elite class.
I am an italian graduate and i have to disagree on everything IDA is stating here. Professor Black hit the nail on the head about the Austerity situation in Italy. Citing corruption of the system as an excuse to promote killer austerity measures is like saying – for example – that we have to resort to shooting criminals in the streets ourselves, because judges are corrupt and don’t apply the laws correctly. The fact that we have a big problem with connections, politics, corruption, and the realization that moost of the time – in our country- you can only find a job employing these means, stands as a testament to the truth that MMT is the probably the only solution to revert this terrible situation. In austerity, a job is considered a privilege, something that the State won’t guarantee for you; so if something becomes a privilege, only the most fortunate can enjoy that, and of course that’s what corruption feeds upon. With MMT, if the State stands as a guarantee for minimum salary and decent living standards, you can’t barter votes for employment, you don’t need to ask your “connections” to help your poor boy get a decent job to allow him to have a family and peace of mind; MMT just does away with these vultures that use jobs as a mean to control the masses, it does away with politicians that think that you are not entitled to your basic rights but you have to *earn* them.
And it’s just tragic to see that people are so brainwashed in Italy that they still fear the coming of something that’s already come to them: unemployment, lack of hope and future. Because in a modern society, that’s based on jobs, if you leave people unemployed, you’re basically saying that no one cares about them. And the State is not exactly something you can “opt out” of so easily, considering you have to find at least a decent amount of accessible resources for yourself to enjoy a standard of living that we consider “acceptable”.
P.S. to professor Black: these guys are just the result of 15 years of tv-induced brainwashing with their obsessing mantra of “unproductivity” “bad spending” “state intrusion in private affairs”, that led the italian masses to the idea that public spending is always bad. Those are the harsh, bitter fruits of the european austerity propaganda. I hope my people, who’s been so proud and ingenious during history, will rise up and look at these lies for what they really are, in the end.
Can You Ask To Have THIS Italian Sent BACK To Italy (Before He Settles Here)?
[Michele Italy Says: December 10th, 2012 at 2:15 pm
I apologize in advance for my bad English. Today I saw a video where an Italian professor of economics (Alberto Bisin), with chair in New York, said that the markets had confidence in U.S. debt repayment, because the United States still had room to raise taxes. I wonder, how is it possible that this man could teach at a university in New York? The video is in italian. but Warren, Paolo Barnard can translate it better than me! I’d like to have your own opinion on it. Thank you and I apologize for the off-topic.
Here’s the video: http://www.youtube.com/watch?feature=player_embedded&v=zzYIVp7aLhc
You know Bill, the battle of statistics may have turned against us. 🙁
You know, Roger, you’re absolutely right, but it should be clear by now that only those professors with Austerity in mind (even if they don’t really believe in it) are granted voice and privilege in international universities. US universities included. Those guys are on the other side of the barricade: it’s them that brainwash people with this mantra of “Bad Deficit”, “Repay deficit”, “We are living off the sacrifices of our descendants” and similar amenities. It’s a shame that this has become the rhyme and reason of many economy journalists, opinionists, anchormen and in general of any kind person that has an interface with the general public. To speak against Austerity, to present facts and not myths in economy, to explain MMT to ordinary people, has become in itself a revolutionary act.
It’s a long way up for us that want to spread the word and help ordinary people see economic problems under a different light, i’m afraid.