Lost in Deflation
Why Italy’s Woes Are a Warning to the Whole Eurozone
Bibliographic Data
| ID | 12155228 |
|---|---|
| Authors | Servaas Storm (Delft University of Technology, corresponding author) |
| Year | 2019 |
| Volume | 48 |
| Issue | 3 |
| Pages | 195-237 |
| Publication date | 2019-07-03 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | International Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0891-1916 • E-ISSN: 1558-0970 |
| Publisher | Taylor & Francis (PUBLISHER • GB) |
| DOI | 10.1080/08911916.2019.1655943 |
| OpenAlex | W2989775964 |
| Language | EN |
| Citations received | 9 |
| References cited | 26 |
Using macroeconomic data for 1960–2018, this article analyzes the origins of the crisis of the “post-Maastricht Treaty order of Italian capitalism.” After 1992, Italy did more than most other Eurozone members to satisfy EMU conditions in terms of self-imposed fiscal consolidation, structural reform, and real wage restraint—and the country was undeniably successful in bringing down inflation, moderating wages, running primary fiscal surpluses, reducing unemployment, and raising the profit share. But its adherence to the EMU rulebook asphyxiated Italy’s domestic demand and exports—and resulted not just in economic stagnation and a generalized productivity slowdown but in relative and absolute decline in many major dimensions of economic activity. Italy’s chronic shortage of demand has clear sources: (1) perpetual fiscal austerity; (2) permanent real wage restraint; and (3) a lack of technological competitiveness, which in combination with an overvalued euro weakens the ability of Italian firms to maintain their global market shares in the face of increasing competition of low-wage countries. These three causes lower capacity utilization; reduce firm profitability; and hurt investment, innovation, and diversification. The EMU rulebook thus locks the Italian economy into economic decline and impoverishment. The analysis points to the need to end austerity and devise public investment and industrial policies to improve Italy’s “technological competitiveness” and stop the structural divergence between the Italian economy and that of France/Germany. The issue is not just to revive demand in the short run (which is easy) but to create a self-reinforcing process of investment-led and innovation-driven process of long-run growth (which is difficult)
Aggregate demand · Austerity · Business · Deflation · Diversification (marketing strategy · Economic policy · Economics · Macroeconomics · Market economy · Monetary economics · Monetary policy · Unemployment · Wage · Economic Growth and Productivity · Italy: Economic History and Contemporary Issues · Regional Development and Policy
The Risk of a Second Wave of Post-Crisis Frailty in the World Economy
Trading Away Development
Mind the output gap
Adolescence in the Italian Labour Market
International fiscal rules and domestic support for austerity
The mass politics of public debt, immigration, and austerity
A Rejoinder
The international political economy of Berlusconism
Politics by other means
| Citations per year | 1.5 |
|---|---|
| Citation span | 2020 - 2026 (7) |
| Highly cited | No |