Today something rather unexpected - even spooky - happened. Normally my diary entry is lucky to get more than 18 page views in a 24 hour period. During holidays or periods when people are at home and flicking through the web, the diary page can get up to 26 page views in 24 hours. But more than this I don’t think that it has ever got.
As I write this at 21.07 on Wednesday evening the number of page views is up to 73. Now, in the internet scheme of things this is less than less than nothing. But we are a small Agriturismo in a little corner of Italy and I write my diary partly to keep the web-site alive, partly to make sense of Italy for myself, partly as a conversation with guests who come regularly and partly to record ideas that the Italians we live amongst share with me. Some people who live locally give me information for my diary even though they, themselves, have never read it. The diary entry on young people leaving Italy was an example of this with a friend handing me the Gazzetino newspaper (which I don’t read) which ran the article on young people leaving the Veneto region. Some people here who know or follow the diary will say to me ’Why don’t you write about X in your diary’ and I condense or paraphrase their views and write them up on our website. Generally this is because Italy is a country with a tame and conformist press - there is always a line of the moment - free thinkers really suffer under this and in some way I am seen as a line to the world outside, a more rational world. It’s a psychological release.
So I was surprised to be up-braided on my diary entry of yesterday by two Italians who I don’t know and who have never stayed at La Faula! It seems incredible that anyone not connected to La Faula in some way would follow the website.
Yesterday I wrote than Italy, being a country with very many family-owned businesses and a a punitive and confiscatory tax regime was likely to have encouraged tax evasion to the extent that money saved by evading would be directly available to business owners either to reinvest in their business or to spend or save or hide-away as they wished. It is a no-brainer as far as I can see.
However, this view was attacked on three grounds. One was that there is ample evidence of politicians and public servants, and their friends and relatives, and many other hangers-on such as consultants unethically but legally gorging themselves from the public purse, enriching themselves, and so evasion had to be seen in this context. The other position was that tax monies went to support a hostile and value-destroying public administration that damaged the ability of firms to produce and compete. Finally, the point was made that illegal misuse of public monies, through corruption or organised crime, could do nothing but instigate evasion.
Now, every law-breaker has a good reason or excuse to justify their own transgressions. And if one took these arguments as justification to evade then no one at all should pay their taxes in Italy, or at the very minimum each taxpayer should decide how much to pay on the basis of the value they receive from the State. This is obviously untenable.
And we must remember that Italians are cut from the same cloth. Is it really true that Italians evade because of the objective iniquities in the administration of public monies or are they all just the same so just as politicians and civil servants abuse the trust placed in them so would your average tax-payer; that is, without the terror of the Guardia di Finanza and Equitalia Italians just wouldn’t bother to pay their taxes?
But what really happens if the iniquities in how public monies are managed by those in positions of trust are monumental in proportion. What happens in a society such as this? What really happens?
One of the laudable initiatives of the Monti government has been to require senior civil servants to disclose their earnings. I was, frankly, shocked to find that the earnings of top earners in the public administration have hitherto been considered secret. Notwithstanding this requirement only partial disclosure has been made. One of the people resisting full disclosure is the head of the Inland Revenue Service. And not only, it has become clear that top civil servants may, and do, hold more than one job in the public sector and they are sometimes earning more than one salary. There are Ministers in the Monti government who are earning more than one salary. To give you an idea of what a top civil servant can earn for one post I will tell you that the head of the Police disclosed that he is paid €621.253,75 per year. And this is just the head of one of the Italian police forces: there is also the Carabinieri and the Guardia di Finanza not to mention the Municipal Police and the Provincial Police.
Now, what about how these people treat themselves. In Italy there are 65,000 official cars with drivers for public servants. And, Monti has just announced that in 100 days he has saved €23.5 million of expenses in the Prime Minister’s office by reducing official state flights by 92%. Do these figures shock you? They certainly shocked many Italians from whom this abuse had been kept secret, and many remembered that next year the politicians who wallowed in these extravagances, and the extravagances by civil servants, paid for by others will return to the helm!
What about corruption. Private corruption is not a crime in Italy so we are talking about corruption by public bodies. The President of the Italian Court of Accounts estimated that in 2011 corruption amounted to €60 billion (yes, sixty billion Euros) and that Italy, by itself, accounted for one-half of corruption in the European Union. Now, these are estimates but he did say that in 2011 guilty verdicts were reached in trials for corruption amounting to €75 million. By itself, this is a shocking figure and one can reasonably infer that undiscovered corruption is greater.
What about links between politicians and organised crime? The Italian Anti-Mafia Police have sounded the alarm at the infiltration by Organised Crime groups into Lombardia and their links with politicians. Not to mention the ongoing investigations into negotiations between the mafia and the Berlusconi Government mediated by the Politician Marcello Dell’Utri. Not to mention either the fact that the last Italian Minister of Agriculture was actually at the time of his appointment committed to trial for being linked to the mafia. This is just a snippet of the never-ending stories of arrests, corruption and political linking to organised crime that are our daily bread in Italy.
So I think that it is a fair to say that irrespective of whether or not Italians would willingly pay their taxes uncoerced the point is moot as the Italian State has not proved itself worthy of taking and spending the wealth produced by private enterprise. This is a fundamental problem as the wealth produced by physical or intellectual exertion by one group of people is not to be squandered and appropriated by another. To do so is to reduce the producers of wealth to a type of servitude.
It is obvious that very many in Italy, not only politicians and civil servants, free-ride on the backs of the private sector. The numbers of free-riders seem almost limitless: pensioners who through design will extract more than they ever paid-in, civil servants who will earn more, much more, than they value that they bring to society can ever justify just to give two examples.
And this is an intractable problem: no politician in Italy is ever going to admit that the State, being effectively a plunder system, lacks the moral authority to levy and collect taxes even though it has the undeniable force to do so. In fact, the State does just the opposite. To obscure its immorality it mounts an ongoing campaign of vilification of tax evasion and those who practice it. The Italian State pretends that if people pay their taxes then taxes will be reduced for everyone. But it forgets that the people are also Italians and they know how their money gets spent: they know that the more money there is the more there will be to spread around and that the numbers of free-riders and rent-seekers in Italy grows in proportion to the wealth available. Craxi and Berlusconi taught them that!
For those of you that dip into this diary, I apologise for writing again on the Italian economy. It seems obsessive, especially now that Monti is at the helm and Italy has gone from being part of the problem to being part of the solution (his words). It seems that I just can’t let the thing go. The bond markets are calm, Italy is re-financing its public debt, again without problems. I’m obviously a gnarled know-it-all but ignorant farmer who can’t stop gnawing away at the same old bone!
It’s just that it is so clear now what is happening to the economy - what is being done to the economy - that the outcome, for the first time can be foreseen with little doubt. Now, telling the future should be left to clairvoyants, but equally we live and go-on because we can calculate the future effects of our actions. And the future effects of what the Monti Government is currently doing can already be ascertained without resort to cleromancy or divination!
Let’s start at the beginning. For many reasons, Italy following the second world war carried-on industrialising rapidly and developed a very powerful and successful export sector. By the time that it was three-quarters of the way through the 20th Century, Italy had a noteworthy and well-developed industrial and manufacturing sector. However, by the early 1990’s Italian industry was becoming uncompetitive, productivity was stagnant (or falling) and for many firms this meant an inexorable, if not instant, fall in profits. There was a consequent fall-off in business investment. The Italian economy stagnated, effectively, until the current date.
Italy has many large and internationally known firms. But the vast majority of Italian firms, including those subcontracting and supplying the famous brand-names, are small family owned and managed firms. The owners of these firms - and their families - live out of the firm, often in an informal way. In the boom times these small firms provided their owners with a great living, many got rich. Being family controlled and managed, tax evasion was a real temptation - gains through evasion would accrue directly to the owners and could then be reinvested, spent or salted away to Switzerland. This is especially true in a country like Italy where tax rates are high and capital allowances and deductions miserly.
Now, in a normal country unbearable tax rates would, of themselves, create a pressure to bring them down. However, in Italy, with a non-representative and fractured proportional democracy such pressure could not coalesce so businesses and their owners simply used evasion to reduce taxes to - subjectively - acceptable levels. On the other hand, Italy ran a populist political system and as employees - whether of the public or private sector - were historically the most numerous element of the voting public they were rewarded with lavish pensions, long holidays, lavish ’gold-watch’ retirement lump sum payments, 13-14 months salary for 12 months work, guaranteed jobs-for-life and the like.
As it impacted on private sector workers, the effect of this legislative largess was to increase significantly the cost burden on companies and inexorably to lead to a decline in productivity. As the same impacted on public sector employees it led to increases in public expenditure, increases in State intrusiveness into private business affairs and an overall reduction in productivity as numerous public employees performed no effectively useful function.
But the State began to cost, really cost and so, at the time that businesses were starting to struggle with their cost base, the Italian State started seriously hunting-out money. And this was well before Monti. And to assist the Italian State it has an internal revenue service with enforcement and investigative functions plus a complete Military alongside the normal Military - this Military is called the Guardia di Finanza and comprises land, air and maritime forces. The Guardia di Finanza is commonly translated into English as the Finance Police. But they are much more than a Police and much more than a para-military force. They are, in fact, a real military and one of their major functions is tracking down tax cheats.
So it happened that Italian firms found themselves squeezed between rising costs and an unrealistic tax burden. And at the very time that this was happening foreign competition - especially in Eastern Europe and Asia - broke like a wave over numerous sectors in which Italy had, up-until-then been a world leader (think textiles, chairs and furniture, pumps etc).
Italy has a medieval (figuratively speaking) bankruptcy code. Bankruptcy does not erase debts and those debts run with the estate on death. So most family owned Italian businesses don’t have bankruptcy as an option. They tend to keep on until they really do reach the end of the rope and they fail. And very large numbers of Italian businesses have failed in recent years. If the owners are lucky and can pay off all their creditors, employees, tax authorities and others who have a claim on the business they can close. As all things Italian, it is a bureaucratic morass but it is possible. And very many firms are closing. The advantage of the Italian pension system has been that it was a final-salary scheme with income guaranteed for life. Many business owners have retired and gifted their share to other partners or staff in recognition that their share of the firm has no value because the firm has no value. And finally, many firms are zombie firms - seemingly alive but actually dead. Italian firms of a certain size can negotiate with the State to have the State pay 80% of an employee’s salary for that employee to stay at home. The idea is that when things pick-up the employee will return to his or her previous job. But if things don’t pick-up then there is the possibility of having the State pay for longer. But, this must have an end and many firms are reaching it.
So the private sector economy is dire, and for this reason Italy has stagnated for the last 20 years.
So now Monti has arrived and the offer that he is making to Italian businesses is this: They will pay all their taxes and in return he will modernise the tax code, make it easier to fire long-term employees - actually I’m not sure if there is anything else. On the other hand, the public sector, actually he will do nothing. He won’t make public sector employees sack-able, as they aren’t sack-able he won’t cut them. He will make them speedier in their bureaucratic applications by digitisation. That’s about it really.
So Monti is betting on extracting more wealth from the productive sector. A sector already on the rocks. It’s a 0-sum game - lose-lose. To the extent that the tax authorities succeed in extracting wealth from the productive sector so will they weaken it and increase the rate of its decline. This will inevitably lead to a decline in tax-takings so the authorities will try harder which, of course, will make things worse.
Italy is committing suicide and all the while the world is saying what a great thing it is that Monti had turned things around.
Now, I’m personally not convinced that by now evasion of taxes by Italian businesses is in the stratospheric proportions that the current propaganda campaign piloted by the Government, the State and chunks of the - especially left-leaning media - would have us believe. And, the Government doesn’t know more than I because tax evasion is by definition is unknown.
But what is known is that the Italian productive sector has been for a long time, and is in, decline.
So the story, I think we can be confident will proceed then finish like this:
Phase 1: Campaign to frighten tax evaders into paying their taxes
- good results announced
Phase 2: Production down, employment down, workers on stay-at-home on pay schemes up, exports down
Phase 3: Business failures and closures up and up
Phase 4: Tax takes diminish - increased anti-evasion steps announced
Phase 5: Economy doesn’t return to growth within envisioned time, when it does growth is insufficient to fund pay down the public debt (which in the meantime has been increasing)
Phase 6: Debt markets return focus to Italy as it is realised that its economic performance will not allow it to pay its public debt
Phase 7: Italy will leave the Euro
A quote attributed to Winston Churchill rather sums-up the position of the Monti Government:
"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon."
Monti is intending to milk it for all he is worth!
La storia/ Lasciano il lavoro e partono per
l’Australia: «Una nuova prospettiva di vita»
Il Gazzettino 22 February 2012
The Story/ They leave their work and leave for Australia "A new prospect for life"
In three years 50,000 young Italians have landed in Australia.
Like this the best of youth leaves Italy and the Veneto Region, that which can no longer stand the incrustations of the ’Beautiful Country’ [Italy] and the excessive sly scoundrels that free-ride on the backs of the others. It’s a shocking exodus that carries away the fresh blood of the country: not only and exclusively "the young", but above all those that are prepared to put themselves in play, to risk and to roll up their sleeves. If from a small provincial town like Montebelluna have left for overseas more than twenty young people aged between 18 and 30 years, (confirmed by the local Utpull Travel Agency) it means that word-of-mouth is a river full to overflowing and that there is an entire generation with suitcase in hand."
"Here blows a bad wind, you feel the crisis upon you. I’m going away because I want to have the possibility of a life, I want to earn decently and put aside something to have a family, to have a horizon that is not simply a plodding forward day-by-day."
"I’m not going to Australia to stay there 6 months or a year. If I can make it there I’ll stay there for the whole of my life."
And the determination that you read in his eyes reveals that behind this phrase is truly a nausea for a country, our country, that can’t offer prospects and even less dreams. "Yes, I am also going to stay there - says Filippo - I think that it is a great possibility. We have nothing to lose. It can’t go bad."
The excerpts above are from an article that appeared in the Gazzettino, a paper of the Veneto - Friuli Regions. Emigration of young people overseas from Italy has reached immense proportions.
I guess that these young people will get a warm welcome in Australia. I wonder what the Chinese make of their welcome in Friuli. What follows are excerpts from Il Messaggero a newspaper covering Friuli dated 19 February 2012.
Manzano, the Guardia di Finanza [Finance Police] seizes Chinese Wholesale Shopping-Centre
Alleged lack of certification for the anti-fire systems of the centre. Evicted 30 families: "We had asked the owner of the building to put things in compliance with the law"
Yesterday morning around twenty Finance Police, commanded by Captain Dario Greci (with the assistance of two police patrol cars and two squad cars of the Carabinieri para-military police and a fire-engine) seized and put under seal the wholesale shopping centre and sent home around 30 Chinese families victims of a closure for which it seems they bear no responsibility. The seizure of the Shopping Centre was not the result of counterfeit goods or irregularities by the salespeople but rather the lack of a certificate relating to the antifire systems and other systems and the absence of which does not allow the workers to work in safety.
For the Chinese workers it was, however, an authentic cold shower: crowded in silence at the entrance to the carpark, they waited for hours until the Finance Policemen, who had arrived at 7.00 a.m., took them one at a time into their shops to retrieve at least perishable goods or those goods already sold and needing to be urgently shipped.
One must now ask where they will live and work the 30 families rendered from yesterday until today without their shop and without bearing any responsibility for what happened.
Yes. One may well ask!
In December, the European Central Bank created €489bn which it lent to Eurozone Banks on the basis of poor collateral. Italy’s banks were the biggest users of this facility. This operation triggered a significant improvement in Italian the government bond market. So it does seem that Italian banks did as President Sarkozy of France predicted:
“Italian banks will be able to borrow [from the ECB] at 1 per cent, while the Italian state is borrowing at 6-7 per cent. It doesn’t take a finance specialist to see that the Italian state will be able to ask Italian banks to finance part of the government debt at a much lower rate.”
In effect the European Central Bank has created money for which there is no immediate underlying value. It has a nominal value, of course, but it raises the real question as to the value of money and what it actually is.
In normal times a massive increase in the money supply would be a recipe for inflation. However, these are not normal times and when so much value has been destroyed by Italy which, after borrowing so much, finds itself with insufficient productive capacity to pay down its public debt and just enough productive capacity to pay the the interest on that debt, massive liquidity is required to encourage, maybe even bribe, the banks to continue funding that debt as doubts begin to seep in regarding the creditworthiness of the nation.
But the value is not there. It really isn’t there. Taking the money from the European Central Bank, the Italian banks can be bribed or coerced into reinvesting in Italian public debt but this is just buying time. The European Central Bank is gambling that in the time bought, and through the interventions of the Monti government, the productive capacity of Italy through growth will increase and allow it to concretely commence paying down its public debt. Thus, that which it can’t do today it will be able to do tomorrow and market confidence thus returned the crisis will be over.
As an aside, if this is the scenario and it is achieved it is hard to believe that we wouldn’t see serious inflation or the creation of other asset-price bubbles.
If, however, Italy cannot achieve the growth in its economy necessary to allow it to pay-down its public debt, and the market knows and begins to believe this to be the case, the result will be disastrous because Italy will be bust and the banks, to the extent that they hold worthless Italian public debt, will see their assets and capital destroyed. In fact, the strategy of the ECB which is unable to fund the Italian public debt directly is to do it via the banks but this is to spread the country risk to the banks as a matter of deliberate policy. It’s frankly madness.
It is clear to me that Italy will never have the growth in its productive capacity necessary to pay back its public debt. It’s an old, tired, conservative, badly-governed, badly run, often corrupt country with appallingly cynical politicians, a destructive bureaucracy, a massive old and poorly educated population, shocking demographics with youth-flight from the country and youth inactivity for a massive number of those who remain. A clear mind can but make one see that the debt was created precisely to guarantee a standard of living to a people who were unwilling or unable to productively obtain that standard of living by themselves. The public debt is in the assets of the old Italians (including in their foreign bank accounts!).
And Monti knows this and he knows well that when the statistics show, quarter after quarter, that Italy isn’t up to the task the markets will realise that the whole of that debt is not going to be repaid. And then the interest rates will go up and then the whole house of cards will tumble down. So he, of course, wants Eurobonds guaranteed by Germany. He wants Germany, through its productive capacity, to guarantee the obligations which Italy has incurred but which it is unable to meet. This is cynical and exploitative but it does conform to an Italian pattern of seeking foreign assistance to extricate itself from its own misadventures (German funding during WWII, Marshall funds, U.S. and Soviet funding during the Cold War).
It would be better if Italy abandoned its magical thinking, faced-up to the very real challenge of creating a country, and all that goes with it, fit to give all its citizens, of all generations a fair shot and a decent quality of life. Maybe Italy won’t even be able do this.
But the starting point would be the realisation that Italy will need to enter into negotiations with its creditors to reduce its debt-burden. Now, of course, that the Italian banks have bought more debt, and that a large part of that debt has found its way back to the European Central Bank, the task will be significantly more difficult. But the day of reckoning has actually already arrived. Denying this, and buying time hoping that something will turn-up is just piling risk upon risk.
Someone who read my last diary entry asked me if I really believe that the changes currently being made by Mario Monti’s Government will be insufficient to resolve the long-standing moribund state of Italy’s economy.
The answer is yes and for the reasons that were set-out in a letter sent to the Greek Government by Greek labour unions and business leaders opposing wage cuts. They wrote that Greece’s lag in competitiveness stemmed from structural problems, not wage levels: “Competitiveness on a [Greek] national level is affected more by factors like bureaucracy — which is fed by complex regulation, state intervention, the tax system, corruption and antibusiness mentality rather than wage costs,”
They could be writing about Italy. The fundamental problem is that Italian policy makers and bureaucrats don’t believe that the private sector can be trusted to pay its taxes and respect environmental, product safety and the numerous other laws that impact on the productive economic activity of a nation.
At the inauguration of the Italian 2012 judicial year the President of the Court of Auditors warned that "corruption, malfeasance and illegality are still very strong, much stronger than they appear. These phenomena, he said, "are present in the country to a significant degree and the size of which, presumably, are far superior to those that are, often painfully, brought to light.
He went on to say that just in the evasion of VAT alone Italy is top amongst European countries.
If we put aside, for a moment, the question of whether and to what extent Italian business people can be trusted to obey the laws, one thing we can be clear about is that in the eyes of Italian officialdom they can’t. That is, Italian officialdom views private economic activity as highly likely to be, as a minimum, evasory of tax, labour and work-safety laws and most probably as commonly harbouring worse i.e. corruption and crime.
Putting aside the question as to whether the Italian parliament has an effective system for drafting and considering laws, and also putting aside the fact that most laws are hurriedly prepared being the result of horse-trading between the political parties, one thing that we can be clear about is that those laws drafted will be aimed at restricting evasion and worse. So they will be controlling, prescriptive and impose heavy obligations on business that limit businesses freedom of action.
Putting aside the philosophical question as to whether, in a free-market democracy, the role of the State should be to encourage and support private economic activity, one thing that we can be clear about is that in Italy the State primarily sees its role as controlling all private economic initiative that occurs within its territory, each element of which can be hiding evasion, non-compliance, corruption and illegality. Obviously this isn’t so easy in the case of Organised Crime and neither is it so easy in the case of companies like Fiat that can create a real and plausible threat to leave Italy.
Putting aside the question as to whether bad laws, oppressively applied and rigidly enforced by people sharing the very same history and values as the subjugants of those laws and their application can lead to corruption to relieve the burden, one thing that we can be clear about is that such an environment is hardly conducive to healthy economic development and is more likely to lead to economic morbidity.
And that brings us back to the central conundrum in Italy. If the people - in their guise as entrepreneurs - cannot be trusted; and if that same people - in their guise as politicians - cannot be trusted - and if that very same people - in their guise as administrators, controllers and bureaucrats - cannot be trusted, the tiger eats its own tail and the country has no future.
It reminds me of a story I loved as a kid: an boy goes into the jungle and encounters four hungry tigers, and surrenders his colourful new clothes, shoes, and umbrella so they will not eat him. The tigers are vain and each thinks he is better dressed than the others. They chase each other around a tree until they are reduced to a pool of melted butter. The boy then recovers his clothes and his mother makes pancakes which they eat with the delicious butter. I don’t think Italy will have an ending even as half as productive!
Many of you will recognise Rina from the Photo of the Day. Rina was our cook for a good number of years. She is a great cook and I know that many of you will have fond memories of dinners prepared by her that you enjoyed at La Faula. Rina was at the opening of a news-agents that her son and his girlfriend have just opened in the centre of Povoletto.
You might think that the birth of this new business is an expression of the new vitality that Italy is experiencing under the liberalizing Monti government. You might have read that Italy is undergoing a period of austerity. Strange as it is to recount, Italy is not undergoing a period of austerity and while the government is certainly liberalizing more than probably any government in the entire history of Italy it is liberalizing Italian-style; that is, cynically.
Where Monti is refreshing is in the language that he uses. He challenges the false-beliefs and magical thinking conformistically forced down upon and into Italian consciousness. Many Italians were shocked when he pointed out that for very many people entering the workforce today, the same-job-for-life is not a plausible possibility. But this is nothing to do with the government. He was just stating a fact, but a fact to which many Italians remained wilfully ignorant. He has rightly pointed out that Italy is in need of great change - not because it is being forced upon the country by Europe or the markets but because Italy must change if it wishes to have a future as a vibrant and healthy society with an economy capable of sustaining a quality life for the vast majority of citizens.
But Monti has also said that there is no longer any need to worry about Italy because it is now on the right track, he has said that he intends fundamentally to change Italian society in the remaining year of his one-and-a-half-year government and he has said that the changes that he is making are to give young people a chance. Italy is certainly on the right track compared to past governments so this is half-true but Italy remains a train-wreck happening. Italian society can certainly not be changed, let alone fundamentally changed in one year by an un-elected government so this is untrue. Some of the changes that the Monti government has made could certainly be seen as necessary but not sufficient conditions to assisting entrepreneurial vigour in young people. But the changes have fundamentally been made to guarantee the status and quality of life of the two great favoured Italian casts - pensioners and workers in the public sector.
If Italy had struck serious difficulty raising money to fund its borrowing, young people would have pretty much found themselves in the same desperate situation that they are in now. Businesses are currently also in a desperate situation. Starved of profits to reinvest and privy of bank funding; crushed by poorly designed and un-pityingly applied legislation, subject to an unyielding and confiscatory taxation regime they are failing and closing. As things are now, for the private sector they could be little worse. But life goes on as before for the pensioners and public workers. This has been guaranteed.
One only has to look at Greece to see that when a government really has run out of money and options cuts must be made to pensions and public workers. Like Greece, Italy has a coterie of pensioners well-paid by unfunded State occupational pensions based on 80% of their final salary (not to mention the incredibly generous unfunded ’gold-watch retirement bonus’ and at-retirement promotion to a higher-paid grade!) and a bloated, inefficient and hostile public workforce, unsackable, that probably more than anything else has destroyed Italy like termites methodically destroying the productive fabric of the society. Yes, the corrupt and dysfunctional politicians may be like the wind that brings the house down but it was the numerous corrosive individual insects that brought it to destruction.
Monti has made three calculations, unfortunately that are plain wrong and my guess is that he - like Berlusconi before him - will still be in power when the house comes down around him.
Monti has calculated first that there is a large pot of wealth called ’evaded taxes’ that he will be able to get his hands upon without damaging the productive capacity of the country and which will be sufficient to sate a significant part of Italy’s on-going funding needs. My guess is first that the pot is much smaller than believed and that, to the extent that those resources can captured and transferred from the individual companies to the Italian State, they will drive companies out of business and restrict re-investment in productive activity. Taking money that would otherwise be put to productive use and giving it to hoarding pensioners or public workers to carry-on their work of suffocating the productive sector is value destroying. The Soviet Union was value destroying. Its end will also be Italy’s.
The second calculation that Monti is making is that the changes that he is making will be enough to stimulate growth. This is plain wrong. The restrictions and inefficiencies that Monti is addressing are real enough and in the long term changing them is a necessary condition to stimulating economic growth. But it is not a sufficient condition and the liberalizing must be a real freeing of the ’animal spirits’ of the productive sector. Those animal spirits were running wild in the after-war years when ordinary Italians found that by the application of intelligence and hard-work (and often cunning) they had more than a fair chance of becoming well-off and a shot at being rich. But a Roman Catholic country (which Italy is) cannot countenance for long wild Bacchanalian spirits, the will must be bent to the authority of the State and besides Italy is an old and tired country run for old and conservative people. The free young leave.
The third calculation that Monti is making is his greatest mistake. When Italy was run by Prodi the Italian group-think was that Prodi was a good man, with an uncorrupt government (at least compared to that of Berlusconi before) and he was a good pair of hands to have on the economy. Whereas Prodi’s government was wholly morally corrupt based as it was on the buying of the allegiance of smaller parties with rewards of positions and posts and many in it were legally corrupt and were forced to resign. Prodi governed during the two-years in which Italy experienced its greatest growth in a generation due to the liquidity boom of 2006-2008. He spent it. When the Berlusconi-Tremonit axis returned (Tremonti being the Finance Minister) the group-think was that Italy was doing fine, probably better than other countries and was an admired example in the world community of nations. Well, we know how that finished. We should remember that Prodi and Berlusconi were feted in world capitals. Berlusconi was a faithful ally of President George Bush and addressed both House of Congress.
Now we must submit to the group-think about Monti. That he is liberalizing Italy in a ’German’ way, that he is motivated by the future of Italy, especially that of its young people and that he is inflicting a generation change on the country. In fact, he is making those changes that he thinks he can to maintain the status quo. As the Prince says in that great novel Il Gattopardo "everything must change so that everything can stay the same" Monti, an aristocrat in the current system (for this reason he was chosen by the President Napolitano to perform this role) is giving nothing to the young and he is taking away from the productive sector.
So Monti is calculating that the truth of what he is doing will remained cloaked from those who count objectively if Italy is to have any good future. The fact that those Italians, conservatively glued to their television thought-boxes and reading reliably (partially) State-funded nationalistic newspapers, be they of the ’left’ or the ’right’, will reliably regurgitate whatever the line of thought is of the moment will not compensate for the fact that those upon whom the whole edifice depends - entrepreneurs who risk their capital and the workers who give their mental and physical labour and the young who have the energy that an enervated country lacks - will see the lie. And they will know that Monti, despite most probably being a good man, is just another Italian leader unable to level with his society and tell the truth. The private sector and the young will smell out Monti’s partiality to the status quo.
Seeing the lie, their resources confiscated to the State and its two great casts, the old and the public sector, the Italian productive sector and the young will drain away. All that will be left will be the carcass of the great party that was had by a whole generation on many generations-worth of public debt!
[The next diary entry will be on how, by funding the Italian banks to load-up on Italian public debt, the European Central Bank, under the Italian Mario Draghi, has ensured that the banks are effectively bust. When it becomes obvious that the Italian economy will never be able to sustain repayment of its public debt, the extent that the banks are still holding that debt will be the extent of their exposure]
Our website has been still-in-the-water for around four weeks. It still showed but it was not possible for me to add photos or diary entries. For the last couple of weeks the webcam images were stilled. It is nice to have it back again and live!
The problem began when the webhost notified me that I was reaching the limit of the 5GB disk space available under our hosting plan. Two years ago when we had reached 3GB of web content I was able to increase the maximum to 5GB, at that time the limit of what was available from this particular company, and I hoped that by the time that we reached this maximum the web-hosting world would have moved on and significantly more space would have been available. However, it was not to be. Upon receiving the automated message informing me that our website was out of room I contacted the company and asked them if they could increase the disk space available. They refused and offered me instead a virtual server package costing around 12 times more than the hosting. I wrote back saying that, actually, all I needed was more hard disk space and it would be good if they could provide it as otherwise I would be forced to transfer the hosting. The reply was curt: I could not expect them to tailor hosting packages to individuals! Now I should mention here that, always being afraid to lose our domain, faula.com, by forgetting to pay the annual renewals, I had prepaid the hosting until mid-2014.
Then followed a time of searching out other webhosting companies. The main question was whether to stick with an Italian company or go to one of the many international webhosters whose offers are significantly better than most of those from Italy. Now there is no reason at all when you are thinking of webhosting to stick with a local company. I come from New Zealand and have lived in the United States and United Kingdom so I certainly have no inate reluctance to use a non-Italian webhosting service. But......well.......you know......yes, in the end irrationally and without any basis in fact I decided that it would somehow be more secure to go with an Italian web hosting service.
With the internet everything is local, but what really motivated me was the very real belief that there were sure to be problems with the transfer and the unfounded and probably unjustified assumption that having something Italian would make the resolution easier. While I was searching and deciding on the best webhosting company to transfer to I was unable to add content to the website as we were at the point of running on empty regarding disk space and so it seemed prudent to leave the website unaltered until the transfer had occurred.
Eventually I decided on a company and asked a friend of Luca’s nephew who is in his 4th year of computer science at Udine University to give me a hand. Having decided to transfer to an Italian webhosting company obviously it made sense to have an Italian assist me in the process! We made a full back-up of faula.com as at 31 January. This would be the version that would eventually go live in the new hosting. Everything that occurred on the site after this date would disappear at the point that the back-up version went live.
I registered with the new hosting company. Unlocked the domain from the old hosting, obtained the transfer code, followed links and compiled on-line forms until it seemed that all there was to do was to wait. The domain transfer authorisation was issued on 2 February and specified that the transfer would occur within 7 days. Having done everything that I had been required to do it seemed that the process would be wholly automatic. Well...
On Sunday 12 February I did a WHOIS search for faula.com and saw that the transfer had occurred but the reality was that the version on the web was still that of the old hosting. This was incomprehensible so on the Monday morning 13 February we opened an assistance request with the new hosting company. These requests are just simple messages that pass to-and-fro between the customer and the technical assistance person. The Italian that was helping me opened the request explaining the anomaly we had found that the website was still the version on the old hosting. The reply was polite and informed us that the transfer had occurred correctly as was shown by the WHOIS record which the tecnician had helpfully pasted-in. We wrote again, apologising that we had not been clear but pointing out that we had expected that the web-site should have transferred to the new hosting. The reply told us that the DNS was still pointing to the old hosting and gave us a link to a knowledge-base article. The knowledge-base article explicitly stated that the transfer of the domain is automatic but included a brief description of the A Record and CNAME configuration should the DNS have to be done manually. Now, the A Record and CNAME configuration determine how other computers can see your site and we certainly didn’t want to get into this so we wrote back to the technical assistance asking why if the process was automatic we had to undertake a manual configuration. The reply came back that the domain name transfer was automatic but we manually had to configure the pointing. I had a headache.
The process went on a few times. It was like a shell game. Our questions never elicited a clear answer but could elicit another reference to the knowledge base. Eventually we had run out of rope. We understood that we would manually have to configure the DNS and that if we got it wrong the site would go down (and even worse we would then be back into another round with the technical assistance!). The whole day had passed and we were feeling a bit ragged. With the help of Wikipedia I eventually managed to work out that the configuration should read (in English) [the] world wide web name is faula.com at A Record XXX.XX.X.XX.X
Having worked this out our first problem was that in the ’control panel’ where one configures the website there were three fields but the code we had seemed to demand only two. Eventually we made a punt and entered the DNS configuration and waited to see whether the site would go down or transfer.
I have to say at this point that when I realised what the script was saying: that on the world wide web the name was faula.com but its address could be found at X, I felt a tremendous satisfaction. It was like cracking some code and the answer was so simple. And then we saw that the other name servers of the web were applying the change and in hours the site was changing from the previous to the new (which was actually much older as it was the back-up that we had made on 31 January). It was a kind of magic.
And when I went into my e-mail I saw that I had received an automatic e-mail confirming the old MX, A Record and CNAME and the new. The e-mail was also automatically sent to a named technician in the hosting company. I wondered if this was the person we had been communicating with all day.
The following morning the young Italian computer science student dropped by and we reviewed the site to see what glitches had occurred following the transfer. There weren’t really any major problems, some new pathways had to be defined but it had gone pretty well. I said to the guy: "I was amazed at how unwilling the technical assistance person was to give you the answer. He (or she) just gave the minimum. The technician could have done it himself in a flash. I wonder why he made us go through all that?"
And his reply was: "It’s always like this. And this time we were really very lucky because the replies came promptly. When you have to wait, days can pass before problems get sorted".
I thought back to the shear unhelpfulness of the original Hosting that had not been prepared to allocate more disk space to the site.
"I’m leaving" the young Italian student said. "When I finish my degree I’m going to travel overseas to study on the Erasmus programme. And I’m going to stay there. I’m not going to stay in this country."
I couldn’t help but think that he was right.