Wednesday, January 30, 2008
A new Kid on the block
His name is Fu-Long, the first panda born in Captivity in Europe (after 25 years). You can meet him at Vienna Zoo.
Fighting the slowdown in the US
Once again the FED has cut the interest rate by 50 basis points. This was not unexpected after the gloomy figure about GDP growth in 2007. So the FED is just doing what every macroeconomist would suggest to do when a slowdown is hitting the economy. But, the US government is preparing another plan to stimulate the economy, which contemplates the US of fiscal policy.
The so-called fiscal stimulus has not been well acclaimed by many respected economists, as PL has shown in the last post. The reason is that Fiscal Policy is not considered today the best instrument for short-term stabilization. There are two problems associated with fiscal policy as a macroeconomic tool: first, it is hard to conceive (because of the many distortions that it can provoke); second, it takes time to assess its impact.
Coming to the US package, among the main arguments the critics have advanced, I endorse the words of our Master of Thought Paul Krugman, who claims the package is ill conceived because it is targeted to the people who needed it less. In short, these are the people who probably do not suffer for a temporary lack of liquidity (not the people highly indebted, not the poorest).
When and if the policy will start to appear as ineffective, the US government will be probably forced to propose another plan, but it will take some time to realize this, which may be probably be too much, given the magnitude of the problems the US economy is facing. The risks are two. One is that, when expectations start to come at play, a slowdown may turn into a recession; if no sign of recovery appears, the FED will have to keep on sustaining the economy by a further tax cut, but here comes the second problem: monetary policy ceases to be effective when the interest rate reaches very low rate. Mr Bernanke will never try to reach the neighborhood of zero for any reason, but his room for manouvre is shrinking after today's cut. So if the fiscal package is not effective, the problems for Mr. Bernanke will become bigger. There is of course another path to follow. What the Us government can and should do, is probably listen to Mr Summers' suggestion to strengthen the financial sector. After the recent mess, this is something that needs to be done. The road to reform is a painful one, but it probably avoids the problem associated with the expectations channels: it signals the intention to fight a recession at every cost, plus providing long term beneficial effects.
The so-called fiscal stimulus has not been well acclaimed by many respected economists, as PL has shown in the last post. The reason is that Fiscal Policy is not considered today the best instrument for short-term stabilization. There are two problems associated with fiscal policy as a macroeconomic tool: first, it is hard to conceive (because of the many distortions that it can provoke); second, it takes time to assess its impact.
Coming to the US package, among the main arguments the critics have advanced, I endorse the words of our Master of Thought Paul Krugman, who claims the package is ill conceived because it is targeted to the people who needed it less. In short, these are the people who probably do not suffer for a temporary lack of liquidity (not the people highly indebted, not the poorest).
When and if the policy will start to appear as ineffective, the US government will be probably forced to propose another plan, but it will take some time to realize this, which may be probably be too much, given the magnitude of the problems the US economy is facing. The risks are two. One is that, when expectations start to come at play, a slowdown may turn into a recession; if no sign of recovery appears, the FED will have to keep on sustaining the economy by a further tax cut, but here comes the second problem: monetary policy ceases to be effective when the interest rate reaches very low rate. Mr Bernanke will never try to reach the neighborhood of zero for any reason, but his room for manouvre is shrinking after today's cut. So if the fiscal package is not effective, the problems for Mr. Bernanke will become bigger. There is of course another path to follow. What the Us government can and should do, is probably listen to Mr Summers' suggestion to strengthen the financial sector. After the recent mess, this is something that needs to be done. The road to reform is a painful one, but it probably avoids the problem associated with the expectations channels: it signals the intention to fight a recession at every cost, plus providing long term beneficial effects.
Sunday, January 27, 2008
Recession schmrecession
Steven Landsburg is an economics professor at the University of Rochester (that's upstate New York). He just wrote a column in the Washington Post on why the fiscal stimulus package proposed by Bush is stupid. I had read his book "The armchair economist" and thought that he was a bit annoying about the environment and religion. But wow this article is clear and easy to understand and convincing. As he explains, "to stimulate spending, tax cuts have to make people feel richer -- but the richer people feel, the slower they'll be to rejoin the workforce. The more effective the tax cuts, the longer they threaten to prolong the expected recession".
He is a die-hard right-wing but sometime he's right. He's even joined by "The Coalition against Fiscal Stimulus". But what about the Fed that is cutting interest rates like crazy as James Cramer proposes to save the economy? Aren't we gonna experience inflation and a recession simultaneously? I never believed in the power of a Central Bank anyway, now I have doubts about fiscal policy too...sorry Keynes. Anyhow, why is everybody panicking right now? What is not going well? What do you think, macroeconomists?
He is a die-hard right-wing but sometime he's right. He's even joined by "The Coalition against Fiscal Stimulus". But what about the Fed that is cutting interest rates like crazy as James Cramer proposes to save the economy? Aren't we gonna experience inflation and a recession simultaneously? I never believed in the power of a Central Bank anyway, now I have doubts about fiscal policy too...sorry Keynes. Anyhow, why is everybody panicking right now? What is not going well? What do you think, macroeconomists?
Thursday, January 24, 2008
The party in Davos and the new chief economist
Apparently, economists are no big fan of the World Economic Forum meeting in Davos, which they say is more about wealthy people showing off than anything else. Some former employees (that I met in Geneva) also feel the same as Rodrik: the WEF is more about Schwab (the founder) than anything else. But words of wisdom are from Krugman who said that when in Davos he ends up "skipping a couple of big dinner affairs and sneaking off to feast on the modern Swiss national dish — which is, of course, (as everybody knows), spaghetti carbonara".
In more important news, Justin Lin is the new World Bank Chief Economist. I'm sure he's a cool guy first because he defected from the army (always a smart move) by swimming from Taiwan to China (Mainland). Here a link towards his publications.
Wednesday, January 16, 2008
Gender and employment in the EU
Eurostat, the statistical Office of the European Commission, has recently published some facts and figures about the business sector in the EU. Some key facts are interesting:
It seems that, even if women participate less in the labour force, at least they are engaged in safer jobs. Anyway, after all, women do not seem to participate enough to the labour force yet, so how do we induce them to work more?
It was recently in the news a story about the impossibility for some Norwegian firms to meet the obligation of having 40% quota of women in the board. This legislation, very unusual, is one extreme type of legislation for women empowering. There are of course other more interesting solutions (gender based taxation) as recently discussed by Alesina et al. in this Vox column. Also working on a better implementation of the atypical, part-time contracts, seems a good way through, as the data suggests. More women participation in the labor force is not only beneficial for equity reasons, but also for productivity and GDP growth.
As I am student of economics, I often hear my mates complaining about a lack of women in the profession. Is it all about economics? Or is it that women dislike being researchers? From my personal experience, this does not seem true. I have met many women in my career. But, you may say, this may be just a biased sample, since the institute where I am studying is gender concerned.
So here are the figures, for the broad R&D sector. In 2006, there was a 45% share of women. What happens if we look across countries? Here I reproduce a graph, taken from Eurostat, which shows the number of women engaged in R&D as a % of the total in 2003.
Only Sweden, the Baltic Stated and Portugal exceeded the 40% ceiling in 2003. So there is still a big room for improvement. Anyway, this graph confirms the impression that I once got from my dudes when they were considering applying for PDs: both of them picked Stockholm as their first choice. Was it only the Academic reputation of the University that motivated their choice?
- In the overall business sector, more men than women are employed (64% vs 36%); this seems no news, but one has to bear in mind that in this sample, at least a dozen of sectors out of 19 are traditionally men's jobs (transport and construction, for example);
- By looking across sectors, the proportion of women is greater in the textiles industry (69%), retail trade (62%), restaurants & hotels (56%) and financial services (52%);
- Retail Trade and Restaurants & Hotels are respectively the first and the second sector in terms of highest share of part-time workers (29% and 28% respectively).
It seems that, even if women participate less in the labour force, at least they are engaged in safer jobs. Anyway, after all, women do not seem to participate enough to the labour force yet, so how do we induce them to work more?
It was recently in the news a story about the impossibility for some Norwegian firms to meet the obligation of having 40% quota of women in the board. This legislation, very unusual, is one extreme type of legislation for women empowering. There are of course other more interesting solutions (gender based taxation) as recently discussed by Alesina et al. in this Vox column. Also working on a better implementation of the atypical, part-time contracts, seems a good way through, as the data suggests. More women participation in the labor force is not only beneficial for equity reasons, but also for productivity and GDP growth.
As I am student of economics, I often hear my mates complaining about a lack of women in the profession. Is it all about economics? Or is it that women dislike being researchers? From my personal experience, this does not seem true. I have met many women in my career. But, you may say, this may be just a biased sample, since the institute where I am studying is gender concerned.
So here are the figures, for the broad R&D sector. In 2006, there was a 45% share of women. What happens if we look across countries? Here I reproduce a graph, taken from Eurostat, which shows the number of women engaged in R&D as a % of the total in 2003.
Only Sweden, the Baltic Stated and Portugal exceeded the 40% ceiling in 2003. So there is still a big room for improvement. Anyway, this graph confirms the impression that I once got from my dudes when they were considering applying for PDs: both of them picked Stockholm as their first choice. Was it only the Academic reputation of the University that motivated their choice?
Friday, January 11, 2008
Skiing in Armenia
Skiing in Armenia was an incredible experience. We felt like the mountain was ours as there was very few people and the surrounding lunar landscapes were breathtaking. We were quite amused first at the pricing system.
To go up the chairlift, you need to buy a ticket that is good for one ride. First I thought this was a good idea since those who skied more paid more. But reaching the second chairlift higher on the mountain we realized we needed to buy another ticket, which is a different one, even though it's the same price.
In the windy cold you have to take off your gloves, find change, ski ten meters to the ticket booth while the guy that sells them accompany you from the chairlift to the booth, back and forth! "Raise your hand if you think this is a good system!"
Ok you can buy more than one ticket, but they're different for each chairlift! You would have to plan your skiing a lot then! All in all, even though you end up paying less than when buying a day pass at other places, the transaction costs are way too high. I keep on wondering why they don't sell day passes, they would earn more like that...is this the heritage of communism? I have no idea...
Blogs and Books
A lot of economists write on blogs to share their ideas and express their opinion on many current issues. The most famous are probabbly Mankiw (very conservative but very intelligent and insightful), Rodrik (good selection of topics but, according to me, he never has anything interesting or insightful to say) and Krugman (he writes more about US politics now).
Others that I like are Vox, Freakonomics and The Economist's Free Exchange. Right now they're mentionning how economics books are a complete disaster in France and Germany. It is actually from this Foreign Policy article by Stefan Theil:
“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,” asserts the three-volume Histoire du XXe siècle, a set of texts memorized by countless French high school students as they prepare for entrance exams to Sciences Po and other prestigious French universities. The past 20 years have “doubled wealth, doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise,” the text continues. Because the 21st century begins with “an awareness of the limits to growth and the risks posed to humanity [by economic growth],” any future prosperity “depends on the regulation of capitalism on a planetary scale.” Capitalism itself is described at various points in the text as “brutal,” “savage,” “neoliberal,” and “American.” This agitprop was published in 2005, not in 1972. "
Others that I like are Vox, Freakonomics and The Economist's Free Exchange. Right now they're mentionning how economics books are a complete disaster in France and Germany. It is actually from this Foreign Policy article by Stefan Theil:
“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,” asserts the three-volume Histoire du XXe siècle, a set of texts memorized by countless French high school students as they prepare for entrance exams to Sciences Po and other prestigious French universities. The past 20 years have “doubled wealth, doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise,” the text continues. Because the 21st century begins with “an awareness of the limits to growth and the risks posed to humanity [by economic growth],” any future prosperity “depends on the regulation of capitalism on a planetary scale.” Capitalism itself is described at various points in the text as “brutal,” “savage,” “neoliberal,” and “American.” This agitprop was published in 2005, not in 1972. "
This is so scary. How can they invent this pop social science based on false facts and no scientific rigor at all. It's not even teaching economics, it's like just facts about the economy. This is crap, big time.
And while I'm at it, I had the misforture of studying in the French system before entering University, and I hated what I thought was economics. Being completly disoriented I ended up doing a Bachelor in Business after a disastrous year in engineering and then I discovered how interesting and insightful economics really was. Especially with some classes such as the history of economic thought with this book.
Tuesday, January 8, 2008
Armenia...and Georgia
Travelling to Armenia has made me realize one should travel a lot to understand poverty. While I had lived and seen many countries in Africa, Latin America and Asia, I had never been to an ex-Soviet Union country. I have to admit I was surprised by its poverty and how different it was from the kind of poverty I had seen before. According to my new experience, things that poor countries have in common include: a lot of abandoned and falling apart buildings, dogs all over the place, scary military people everywhere, complicated border crossings, littering in the street as if they didn't care about their city and crazy driving as cars don't stop for pedestrians, they accelerate and beep them. Also some little things like the fact that in my father's flat elevator, to get to the 5th floor we have to press on 2. These seem so simple problems and not “that bad” but they are ubiquitous.
Still, it doesn't look like a chaotic place at all but there seems to be very little economic activity. Huge abandoned factory buildings and industrials infrastructures are everywhere and many houses reminded me of African shanty towns. Still, most people seemed quite well-off.
A trip to Georgia left me puzzled once again about my conception of poverty. Tbilisi is a amazing place with a magical architecture and where guys yell at girls and slap them in front of everybody. However, the country side is grey and its people didn't look any better off than in Madagascar, I thought. So I checked my favorite and best indicator in the world, GDP per capita, measured with purchasing power parity exchange rates.
Armenia fares a bit better, at 5700$, which is like half that of Botswana , Mexico or Russia, while Georgia is at 3900$. This is a bit poorer than Cuba, still 4 times more than Madagascar. While some may argue that this doesn't take into account income inequalities, it gives a good approximation of the way of life of most of its inhabitants. If it's this low in these 2 South Caucasus countries, probably most people are struggling, except for the omnipresent “oligarchs”.
Finally, as my border crossing episode makes clear, corruption explains most of this poverty. It also makes me realize once again how we are well in the West as we feel the law is on our side. Being trying to understand development for the past few years, I'm mystified by what happened in the West. How could democracy emerge? How could people stop fearing governments and take control. Corrupt and poor countries appear so trapped...and living with corruption is super annoying.
Anyway this is all vague but as I read John McMillan's book on markets I understood that while markets were the best thing for growth and emancipation there is a fundamental top-down requirement: the rule of law. Good democratic institutions allow mutual trust and social capital investment which allows markets to thrive. It's no doubt that much growth empirics is about that nowadays. This is inexistent in all poor countries.
All in all I recommend all of you to visit these two amazing countries. Just for Armenian pizza it is worth it.
Pictures from my trip can be seen here and here.
Still, it doesn't look like a chaotic place at all but there seems to be very little economic activity. Huge abandoned factory buildings and industrials infrastructures are everywhere and many houses reminded me of African shanty towns. Still, most people seemed quite well-off.
A trip to Georgia left me puzzled once again about my conception of poverty. Tbilisi is a amazing place with a magical architecture and where guys yell at girls and slap them in front of everybody. However, the country side is grey and its people didn't look any better off than in Madagascar, I thought. So I checked my favorite and best indicator in the world, GDP per capita, measured with purchasing power parity exchange rates.
Armenia fares a bit better, at 5700$, which is like half that of Botswana , Mexico or Russia, while Georgia is at 3900$. This is a bit poorer than Cuba, still 4 times more than Madagascar. While some may argue that this doesn't take into account income inequalities, it gives a good approximation of the way of life of most of its inhabitants. If it's this low in these 2 South Caucasus countries, probably most people are struggling, except for the omnipresent “oligarchs”.
Finally, as my border crossing episode makes clear, corruption explains most of this poverty. It also makes me realize once again how we are well in the West as we feel the law is on our side. Being trying to understand development for the past few years, I'm mystified by what happened in the West. How could democracy emerge? How could people stop fearing governments and take control. Corrupt and poor countries appear so trapped...and living with corruption is super annoying.
Anyway this is all vague but as I read John McMillan's book on markets I understood that while markets were the best thing for growth and emancipation there is a fundamental top-down requirement: the rule of law. Good democratic institutions allow mutual trust and social capital investment which allows markets to thrive. It's no doubt that much growth empirics is about that nowadays. This is inexistent in all poor countries.
All in all I recommend all of you to visit these two amazing countries. Just for Armenian pizza it is worth it.
Pictures from my trip can be seen here and here.
Monday, January 7, 2008
Entering Georgia
Crossing the border into a poor country is always a worrying matter, especially by car at a small border, where officials have unlimited discretion.
We were on a family trip from Yerevan to Tbilisi in my dad’s new Highlander. The weather was nice, the egg sandwiches delicious, lake Sevan and its surrounding mountains shining, dogs wandering around with joy; everything was perfect.
Getting out of Armenia went slowly but smoothly. Still, it was enough to make us realize what kind of problems we can get at borders. ‘Georgia here we come’.
We in the car were smiling but border officials were not. The passengers (me, my mother and my sister) get out of the car and cross into by foot, all goes well, once again. The driver (my father) stays in the car to get controlled separately. It doesn’t sound right but anyway, you got to do what they told you…So we’re waiting in Georgia while my father seems to be struggling. He waves at us, we have to go back.
No, there won’t be any Tbilisi, this is the end. This was like Czech Republic all over again, when on our way to visit Prague we had to change plans once at the border because we didn’t have ‘visum’. We all felt sad, angry and desperate, having been so close to visit such an exotic place.
The explanation was that we could enter the country but the car couldn’t. ‘Bullshit’ we thought. This was like the perfect crap officials could invent to get a little something for the week-end. Indeed, they had prepared the bribe extraction ingeniously: getting us excited and psychologically already into Georgia up to the point of no return, where even the most honorable father would have paid a bribe.
But my father had built his life on being principled. We were going back to Armenia. In spite of everything, there was still a glimmer of hope deep inside all of us. Since this was just total crap, maybe we could get the decision reversed. Our hearts started beating again when my father convinced the Armenian agent to argue for us at the Georgian border. We were saved.
Armenians and Georgians border agents, both wearing camouflage jackets, seem to get along well as they kiss when they salute each other. But our hope melts away once again when the Armenian explains that it is indeed true that we can’t enter Georgia with a car with a temporary ‘car passport’. Maybe they were just doing their job after all.
While my father is arranging our re-entry into Armenia and my sister despairing outside, I try to get my mom into going to Georgia anyway, by taxi or bus or whatever. While it was not really possible for me to understand what was going on in her head as the words that came out of her mouth could be counted on one hand, I could see that she still wanted to go. We just needed a ride. ‘Mom’ I shouted, ‘should we try to get a ride? Come on, answer! What are you thinking for Christ sake?’ ‘Just relax’ she replies, ‘here’s an American diplomat. There it is, our ride’.
Delighted, I was about to go tell my dad to ask them for a ride. But there he was at my window, already telling us we had to hurry up to take our things and get in their car. The ride had been arranged, they had been chosen.
Entering Georgia took about five minutes. The officials didn’t even look at us, even though my father was waving and smiling, full of life.
How we survived on the road to Tbilisi, however, is another story.
We were on a family trip from Yerevan to Tbilisi in my dad’s new Highlander. The weather was nice, the egg sandwiches delicious, lake Sevan and its surrounding mountains shining, dogs wandering around with joy; everything was perfect.
Getting out of Armenia went slowly but smoothly. Still, it was enough to make us realize what kind of problems we can get at borders. ‘Georgia here we come’.
We in the car were smiling but border officials were not. The passengers (me, my mother and my sister) get out of the car and cross into by foot, all goes well, once again. The driver (my father) stays in the car to get controlled separately. It doesn’t sound right but anyway, you got to do what they told you…So we’re waiting in Georgia while my father seems to be struggling. He waves at us, we have to go back.
No, there won’t be any Tbilisi, this is the end. This was like Czech Republic all over again, when on our way to visit Prague we had to change plans once at the border because we didn’t have ‘visum’. We all felt sad, angry and desperate, having been so close to visit such an exotic place.
The explanation was that we could enter the country but the car couldn’t. ‘Bullshit’ we thought. This was like the perfect crap officials could invent to get a little something for the week-end. Indeed, they had prepared the bribe extraction ingeniously: getting us excited and psychologically already into Georgia up to the point of no return, where even the most honorable father would have paid a bribe.
But my father had built his life on being principled. We were going back to Armenia. In spite of everything, there was still a glimmer of hope deep inside all of us. Since this was just total crap, maybe we could get the decision reversed. Our hearts started beating again when my father convinced the Armenian agent to argue for us at the Georgian border. We were saved.
Armenians and Georgians border agents, both wearing camouflage jackets, seem to get along well as they kiss when they salute each other. But our hope melts away once again when the Armenian explains that it is indeed true that we can’t enter Georgia with a car with a temporary ‘car passport’. Maybe they were just doing their job after all.
While my father is arranging our re-entry into Armenia and my sister despairing outside, I try to get my mom into going to Georgia anyway, by taxi or bus or whatever. While it was not really possible for me to understand what was going on in her head as the words that came out of her mouth could be counted on one hand, I could see that she still wanted to go. We just needed a ride. ‘Mom’ I shouted, ‘should we try to get a ride? Come on, answer! What are you thinking for Christ sake?’ ‘Just relax’ she replies, ‘here’s an American diplomat. There it is, our ride’.
Delighted, I was about to go tell my dad to ask them for a ride. But there he was at my window, already telling us we had to hurry up to take our things and get in their car. The ride had been arranged, they had been chosen.
Entering Georgia took about five minutes. The officials didn’t even look at us, even though my father was waving and smiling, full of life.
How we survived on the road to Tbilisi, however, is another story.
Sunday, January 6, 2008
Yet another crisis...
These days a lot of resonance is being given to the problem related to the garbage crisis in Naples. First of all, let me tell you that Naples is the second city I always recommend to visit in Italy when asked (the first one being Rome), so when I think of the negative image many foreigners are receiving , this makes me particularly angry. Where does the problem come from? How can such a beautiful city be devastated by such a plague?
From what I heard and read so far, the very likely explanations for the phenomenon are a mix of everything: bad politics, criminal interests, economic connivance....
Bad politics is a recurrent phenomenon behind many crisis. Why it is a problem afflicting Southern Italy and many other countries may be a forthcoming post. In the meanwhile, I cannot track precisely the origin of the garbage phenomenon but I can recall hearing about it for the first time more than 10 years ago. The solution always adopted to tackle the "emergency" has been either finding a new landfill, or sending the "excess" garbage to Germany or Romania. These solutions, temporary and partial, have been favorably regarded by politicians. This short-sightedness of course paved the way to new, subsequent crisis later, with always the same kind of problems annexed: garbage burnt on the streets-cum- dioxine emitted at intolerable level, plus citizens' protests. An increasing number of people living in the areas affected by the problem has started dying of cancer (dioxine was the cause), way more than the national average, but no reasonable answer came from the public authorities. Ex- post, it seems like they thought the situation would stabilize one day, by a miracle of St. Gennaro, Naples' patron saint...
You may wonder, how come such inaction? Here comes the second major problem, criminal interests. As it is very neatly described in the book Gomorrah, a worldwide bestseller, the organized crime has found it profitable to displace illegally the garbage. Any kind of waste, from urban to special toxic, is introduced overnight into illegal landfills (those without the necessary authorization) for a very reasonable price .
Of course everything is done secretely. The whole affair has emerged when some peasants started to observe their sheep dying. After investigation, it emerged that under their camps toxic material had been accumulated, so their lands were confiscated.
Today many politicians are arguing that the problem of Naples is an Italian problem because many entrepreneurs from the north have taken advantage of this system with benevolent ignorance. While the premises are right (this is indeed an Italian problem), the argument is wrong, because it confuses the cause with the effect. There is economic connivance from the North just because a very lousy political apparatus in the south has allowed the organized crime to set up such a flourishing business. In economics, profits drive entrepreneurs, but rule of law sets the boundaries for economic activity to be prosperous for society. There is nothing to blame here (certainly not Capitalism), except simply a very very incompetent generation of politicians.
Garbage is indeed a business. It could be a legal and rewarding one, if the share of recycling were increased. There is a little town near Salerno (in the same region of Naples, Campania), Mercato San Severino, where a special system of garbage collection has been adopted: the garbage is not collected from the streets, but door-to-door, and a pecuniary premium on the share of recycling reached by year is assigned per family, an amount which is deducted from the bills. This is a simple system which produced up to 65% of recycling. This is an example of how the system can be run efficiently if long run strategies are adopted. From what I am able to read in the newspapers, the solutions the government plans to adopt are not so encouraging, but given the state of emergency, one cannot really expect more to be done.
Of course the answer to this problem, given its magnitude and the stakes involved, may only come from the central authority. I conclude with one simple message. If somebody is wondering whether a federalist system would be better for Italy, as many argue today, I will give this example as supreme evidence of what could be the unintended consequences of decentralizing authority in systems where the periphery is lacking enough political accountability.
From what I heard and read so far, the very likely explanations for the phenomenon are a mix of everything: bad politics, criminal interests, economic connivance....
Bad politics is a recurrent phenomenon behind many crisis. Why it is a problem afflicting Southern Italy and many other countries may be a forthcoming post. In the meanwhile, I cannot track precisely the origin of the garbage phenomenon but I can recall hearing about it for the first time more than 10 years ago. The solution always adopted to tackle the "emergency" has been either finding a new landfill, or sending the "excess" garbage to Germany or Romania. These solutions, temporary and partial, have been favorably regarded by politicians. This short-sightedness of course paved the way to new, subsequent crisis later, with always the same kind of problems annexed: garbage burnt on the streets-cum- dioxine emitted at intolerable level, plus citizens' protests. An increasing number of people living in the areas affected by the problem has started dying of cancer (dioxine was the cause), way more than the national average, but no reasonable answer came from the public authorities. Ex- post, it seems like they thought the situation would stabilize one day, by a miracle of St. Gennaro, Naples' patron saint...
You may wonder, how come such inaction? Here comes the second major problem, criminal interests. As it is very neatly described in the book Gomorrah, a worldwide bestseller, the organized crime has found it profitable to displace illegally the garbage. Any kind of waste, from urban to special toxic, is introduced overnight into illegal landfills (those without the necessary authorization) for a very reasonable price .
Of course everything is done secretely. The whole affair has emerged when some peasants started to observe their sheep dying. After investigation, it emerged that under their camps toxic material had been accumulated, so their lands were confiscated.
Today many politicians are arguing that the problem of Naples is an Italian problem because many entrepreneurs from the north have taken advantage of this system with benevolent ignorance. While the premises are right (this is indeed an Italian problem), the argument is wrong, because it confuses the cause with the effect. There is economic connivance from the North just because a very lousy political apparatus in the south has allowed the organized crime to set up such a flourishing business. In economics, profits drive entrepreneurs, but rule of law sets the boundaries for economic activity to be prosperous for society. There is nothing to blame here (certainly not Capitalism), except simply a very very incompetent generation of politicians.
Garbage is indeed a business. It could be a legal and rewarding one, if the share of recycling were increased. There is a little town near Salerno (in the same region of Naples, Campania), Mercato San Severino, where a special system of garbage collection has been adopted: the garbage is not collected from the streets, but door-to-door, and a pecuniary premium on the share of recycling reached by year is assigned per family, an amount which is deducted from the bills. This is a simple system which produced up to 65% of recycling. This is an example of how the system can be run efficiently if long run strategies are adopted. From what I am able to read in the newspapers, the solutions the government plans to adopt are not so encouraging, but given the state of emergency, one cannot really expect more to be done.
Of course the answer to this problem, given its magnitude and the stakes involved, may only come from the central authority. I conclude with one simple message. If somebody is wondering whether a federalist system would be better for Italy, as many argue today, I will give this example as supreme evidence of what could be the unintended consequences of decentralizing authority in systems where the periphery is lacking enough political accountability.
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