8/21/2019

Italy’s Economic Rot Is Europe’s Problem, Too

"As I am spending the week in Italy, my thoughts have naturally turned to the topic of economic growth and its benefits. One striking fact about Italy is that, over the last 20 years, growth in per capita income has been close to zero. That’s not a recession, rather it’s become the normal state of affairs. And so the question arises: What is economic growth good for, anyway?

Unfortunately, a zero-growth environment cannot be stable forever. The reasons are many; structures ossify, firms and governments become less productive and dynamic, rules become more vulnerable to gaming and rent-seeking, and interest groups increase their ability to seize parts of the pie. If the pie doesn’t grow, eventually it becomes harder to sustain productive activity and a healthy politics."