Translator: Michele Gianella Reviewer: Nicoletta Pedrana
I am an economist, an economic historian who deals with well-being.
And as such, I thought of starting this conversation
from GDP, gross domestic product.
Because the GDP of Italians has been a cause of concern for some time now:
if we look at it, it stopped growing;
it stayed at zero, it declined
and now it shows no sign of recovery.
And I’ll give to this analysis some historical perspective,
because I will take advantage of the vast amount of data
that has been developed by economic historians
over the past two to three decades to tell you part of the story,
and to give you the benefit of climbing the mountain
to look at the contours of the forest
rather than simply remaining inside the forest.
I ask myself is: is all this attention,
this concern we have for GDP, justified?
The answer is yes, the short answer; but I'm here to say "yes, but".
There is also a but, which I believe deserves some attention.
So, I’ll start by saying
we take economic growth for granted.
But actually, economic growth is historically a very new fact:
I will try to show you some figures,
but in short economic growth is a modern creature.
For millions of years, man was unable to improve his living conditions.
Not permanently, not significantly.
Then something happened:
even my children know it, in middle school, in high school by now.
There was what the 2015 Angus Deaton, Nobel Prize Winner in Economics,
called "The Great Escape", writing this beautiful book.
"Great escape" from what? From abject poverty, from premature death.
And it is a great escape
that began, as we all know, with the Industrial Revolution,
in England, at the end of the nineteenth century.
And then, slowly, all the countries tried to imitate this model.
I’ll show you, on this slide, the great escape of the Italians,
These are recently estimated data,
in which we have time on the horizontal axis -
I start the graph a long way back, I could have gone even further back -
to arrive roughly at 17 March 1861,
when the Kingdom of Italy was proclaimed.
On the vertical axis I put GDP, the Gross Domestic Product.
And what I find out is, there have been a couple of World Wars.
We are here.
We don't have the new president's GDP yet, because it's not December yet,
so we have to wait a while.
What you see from here is what I was saying earlier on:
normality was stagnation,
and then there was a leap, an incredibly huge leap forward.
And when we look at it and ìmeasure it in the meter of history,
it happened very quickly,
because this line could have brought it back to Caesar's time,
and it wouldn't have changed much.
So we have, on a slide our history,
a very fast progress nobody would have bet a penny on.
Very fast, very fast, but very very short-lived.
And then, as you see, there is a worrying, let's say, hint of decrease.
The same escape occurred in other dimensions of well-being:
this is life expectancy at birth,
we once again have time on the horizontal axis.
And we have this extraordinary ability of the Italians
who have become one of the world's most longevous people,
second only to Japan.
So another nice page of history.
But, there is a but.
This is the only thing that appears in the books we have.
There is nothing else so far, in Italian historiography,
the consideration that follows is missing: economic growth is not a neutral process,
it does not benefit everyone, not always, not to the same extent.
And so I wonder: what do we know?
Well, this is a graph that shows
that, if I look again at the case of Italy,
Italy has, over the course of 150 years, apart from inflation and the like,
succeeded in increasing twelvefold its per capita income.
If I look at northern Italy and look at southern Italy,
I get different numbers:
in the center-north there has been much more growth than in the south.
This is an example of a great escape
in which some have gone faster than others.
I can ask economic historians more,
and ask what happened in the different regions:
I come from Modena - it is no coincidence that there is this slide:
Emilia Romagna is the region that has grown fastest.
You understand, in short, that it is a selective escape:
not everyone, not always, not to the same extent.
Much better can be done, but it is difficult.
If, as a well-being analyst,
I want to understand who benefits from growth,
I should get to enter people's homes,
travel back in time, access everyone's income or expenditure;
and then try to reconstruct the trends.
This problem is difficult because
the Italian National Statistics Institute (ISTAT),
which was born in 1926,
has been collecting information since 1968 about household incomes only.
So how can we reconstruct and understand our history
over a period for which no income figures are available?
The solution is collecting household budgets
and that's what I did for 20 years.
Like many other countries, Italians kept household accounts.
In 20 years I have collected over 20,000 of them,
and I’ll show you what emerged.
This is a story that we have to superimpose
on the one I have shown you about increases in GDP.
This is the story of the distribution of income inequality.
I always have time on the horizontal axis;
but on the vertical axis I have a Gini index.
It is an index that is very high when there is a lot of inequality,
and it decreases when there is a lot of equality.
We find a beautiful story:
the Italians managed to escape from abject poverty,
and they succeeded by combining this great growth
with the ability to share, to distribute,
because in the long run inequality decreased;
but as you see something broke, something went wrong
around the beginning of the ‘90s.
This is a summary indicator that gives us a page to be very proud of:
we see this type of growth for very few countries in the world today.
In this we are pioneers,
and we have written a beautiful page of history.
We can do even more: I’ll show you this graph,
it's technical but it's worth looking at because it taught me so much.
The graph works like this:
this time I’m considering the period of the first 50 years, liberal Italy,
and I wonder:
let's take all the people who lived in that century,
and on the horizontal axis I put the population
ordering it from the poor to the rich.
So I have: the poor;
the middle class in the middle;
and then the rich on the right.
On the vertical axis,
I measure how much income grew during these 50 years.
The red line tells me: look, on average,
but the average Italian does not exist, we are here for this -
on average it grew a little less than one percent.
Those were the years when Italy had not taken yet
the trajectory of the Industrial Revolution.
What does the graph tell us?
It tells us exactly who won and who lost.
Those above the line grew more than the average.
It means that, in one way or another,
they managed to benefit more from economic growth than others.
From this graph we learn
that that period wasn't the best of times to be very poor,
here on the left, or very rich
they were all below the red line.
Here the middle class was born,
and in particular the upper middle class, the slightly higher part.
Time runs: we can repeat this graph
and I did so with all these household budgets.
I have a curve for liberal Italy,
I have another curve for Fascist Italy,
I have another curve for the difficult years
that followed the oil shock until the 1992 crisis;
and then I have the present days.
Now, I afflict my students with details, why and how.
Here I only have four minutes left, so what can I say?
Let's learn something very important: growth is multi-faceted;
history never repeats itself in any way;
winners and losers depend on historical periods;
it is a bad idea to be poor in the period we are living in:
you see that here, the poorer you are,
the farther away you are from average growth,
and, moreover, we are on negative ground.
Bad idea, a middle class that defends itself, the super rich -
the nature and quality of growth are very different.
Therefore, growth itself is very important;
but of course it is not enough to draw conclusions and make sense,
form a judgment of the benefit distribution.
Hence a first consideration that tells us that economic growth is a necessary thing,
but in no way, for no reason sufficient to guarantee the well-being of all,
provided we share this value, of course.
This is the last graph, and it's beautiful.
As usual, I put time on the horizontal axis,
then I did a complex thing.
I asked myself: if I take the first decade into consideration,
1861-1870, what country in the world grew the fastest during those ten years?
And then I asked myself, and what country fared the worst?
And the answer is: Chine fared the worst,
and the one doing the best was New Zealand.
I did this for all the decades, so I found -
we don't care at all to know who is the best -
I found the line of the best and the line of the worst
over the last 150 years.
This draws a cone, which is the great divergence,
it is this great process of unequal growth of the world,
and then I put in our Italy, which is the red line here,
discovering a terrible thing:
Italy is the worst country in the world,
during the decade 2000-2010,
as per capita income growth rates.
This gives me a second message: growth is very important,
because here we are saying
that we are doing not only badly, but particularly badly;
and we are learning that growth can seriously come to a halt,
and perhaps lead to a crisis - I used a different word here, no?
Excuse me, where is it?
I used the word decline, which is a much more serious thing:
the Venice of the fourteenth century.
They are cultures that disappear
and come back, maybe, but after a few centuries.
I start to conclude.
Should we be afraid of this decline? Yes.
But - this is Angus Deaton, with whom I opened -
Angus Deaton says: let’s keep reasonably calm.
"Science really works": technology and science will save us,
guarantee that in one way in the other we will overcome this too.
We will have a new Giolitti, we will have a new Einaudi,
we will have - I don't know, but technology will save us.
Is it possible that the Italians, who are faring so badly,
should not understand this?
Of course not, we do understand it.
Yet we are in the position I showed you a little while ago.
So I only have two slides, for the two minutes I have left.
The first is this.
Science and technology are not neutral phenomena:
they imply and involve many tensions within a society.
There are sectors that disappear, there are sectors that explode.
A society must want this change, it must know how to manage this tension.
If inequalities increase too much, the social fabric begins to tear apart,
people go to the ballot boxes,
and some mechanisms
may prevent the adoption of technology,
even if it is out there.
A society may fail to do this.
"Social capability" is an expression used by a scholar named Abramowitz,
he wrote beautiful books.
And now I’ll combine all the pieces -
leaving you embittered, I'm afraid,
because there is no happy ending.
So when it has to work - here it is.
So, the portrait of our country seen in its entire post-unified history
is the one of a country that has stopped growing
an unprecedentedly long period.
The country has been struggling for 25 years,
and we are seeing indicators such as inequality of growth
and rapidly increasing poverty.
When this happens there are consequences
that have nothing to do with the economy, but with society.
We begin to develop values
such as intolerance, closure, the search for income, the fear
that leads to closure, rather than competition.
These values are those that inhibit social capability.
That prevent a company, the ruling class,
from saying, "We must manage change".
It is the only salvation to continue to grow
and transmit well-being to our children and to the generations that come.
No social capability, no science, no technology.
We will not be able to adopt, to accommodate
the changes required by scientific innovation.
And if there is no social capability, there cannot be the main driver
that kept so far the world out of poverty,
which is technology.
My conclusion is: growth, all right.
I suggest the ruling class, to which we all belong,
should introduce three other words, three other indicators to monitor:
inequality;
people are somewhat allergic to this thing, be this good or bad,
but poverty:
the Italians don't care much about poverty.
And looking ahead, the three words with which I leave you,
words I believe in -
and that is what I try to explain to the students,
and to my beloved children -
the three words are: culture;
growth naturally, but it must be an inclusive growth
because these inequalities will not allow us
to continue the march towards progress.
Thanks.
(Applause)