Italy: The hour of deregulation has come
26 January 2012
Il Fatto Quotidiano
Austerity is to be followed by deregulation. Mario Monti has launched “Phase two” of his anti-crisis programme: a vast plan to open protected sectors of the economy, like taxis and road transport, to competition. An Italian economist welcomes the change, but warns that it is not without risks.
In the wake of austerity measures, on 20 January, Mario Monti’s government launched a vast plan for deregulation which aims to generate new jobs and open protected sectors of the economy to competition. However, the professions concerned, led by taxi drivers and truckers, have responded with mass protests.
Make way for deregulation. Business opening hours have already been extended [since 1 January shops can stay open 24 hours a day]. Administrative obstacles that blocked entry into a wide range of highly regulated sectors have been removed: pharmacies, taxis, newsagents, self-employed professions etc. In short, a wave of competition is about to break over the Italian peninsula.
To understand the scope of these measures, you have to bear in mind the dichotomy that has emerged over the years between the protected sectors of the Italian economy and those that are exposed to international competition, in particular competition from developing countries.
More competition implies advantages for customers
Sectors open to competition, that is to say almost all of the manufacturing sector and certain segments of the tertiary sector (market services) have seen major upheavals over the last 20 years: enormous price pressure, increased competition on foreign and domestic markets, the ongoing need to innovate etc.
In contrast, large segments of the Italian economy have not had to contend with Chinese or Brazilian competition: for the most part non-market services sectors. The resulting disparity between these two sectors has now become a problem. Let’s not forget the thousands of workers who lost their jobs in manufacturing companies that were not sufficiently competitive, and the hundreds of entrepreneurs who committed suicide. At the same time, we should also note that the self-employed have benefited from increases income that have largely outpaced wage increases in sectors open to competition.
Is it fair that certain sectors be subject to relentless competition from Chinese and Indian companies while others can set high prices that are protected by licensing laws? Is it fair that engineering graduates work for net salaries of 1,600 euros per month while their peers who studied to be solicitors can earn between 5,000 and 7,000 euros? Is it fair that taxi drivers earn between 3,500 and 5,000 euros per month, while steel workers take home only 1,150 euros?
As it stands, the deregulation plan aims to lower fees and prices and to reduce incomes generated by ownership of licenses. More competition necessarily implies advantages for customers; lower prices, more innovation, and improved services. In short, the goal of deregulation is to defend the rights of consumers. And that is fair and reasonable.
Deregulation to promote entry of young people
However, its impact does not stop there. for example, the deregulation of opening hours clearly favours major retailers over small businesses. The deregulation of taxi licenses will trigger a sector-wide change that is obvious to travelers to New York, who quickly notice that almost all of the taxi drivers are first generation immigrants, and very often Africans who have only recently arrived in the United States. In American cities, companies monopolise licenses and cars, while drivers are relegated to the ranks of the underpaid. Are we certain that we want to see such a radical social transformation in Italy?
Deregulation also aims to promote the entry of young people in certain sectors: young architects, pharmacy graduates, young taxi drivers etc. Removing obstacles that bar entry to regulated sectors will increase the number of opportunities available to job seekers. But two questions have yet to be settled: how will we manage the transition from a non-market system (the current Italian economy) to an open one? Are we certain that we want to see the social change that will be engendered by the transition to a total market system? Will the progressive closure of small businesses not change the face of our towns?
Instead of demonising taxi drivers and small business owners, we should take their fears into account. These are not black and white issues but complex problems that require structured solutions of the kind that the “politics of spectacle,” which has prevailed in this country for the past 20 years, has been unable to provide.
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