Italy’s ‘Mother of All Reforms’ Will Remain Childless

Prime Minister Giuseppe Conte’s ‘simplification’ effort is unlikely to kickstart economic growth.

July 9, 2020 • Commentary
This article appeared in Politico on July 8, 2020.

Milan — The first time I heard an Italian politician promise to slash red tape, I was 13. It was 1994 and, with great fanfare, Silvio Berlusconi had injected the Reagan‐​esque language of bureaucratic reform into Italian politics.

It was a theme the four‐​time prime minister and his successors would return to over and over again. As the economist Nicola Rossi recently noted, over the last 30 years, Italy has introduced 10 much‐​talked‐​about “simplification reforms” and “reforms of the public administration” in 1990, 1993, 1997, 1998, 1999, 2000, 2003, 2005, 2009, 2014.

And yet, none of these resulted in an actual, substantive deregulation effort.

It’s in this context that Prime Minister Giuseppe Conte’s “mother of all reforms” should be considered. Approved by the Cabinet in the early hours of Tuesday morning, it has been presented as a “revolution” that will “cut red tape” and “get the country moving again.”

If only.

Italy has long been considered a country where the rule of law is weak and an excessively complex regulatory framework discourages investors. The Heritage Foundation Index of Economic Freedom assigns Italy a score of 51.3 (out of 100) in judicial effectiveness. The World Bank’s Doing Business project periodically reminds Italy of its weakness in how people deal with construction permits (68.3/100) and in the complex procedures related to the payment of taxes (64/100).

There are those in Italy who cheerfully dismiss these rankings as contrivances of an evil neoliberal establishment. Talk with ordinary people, then.

Virtually any Italian who has a little property, let alone a small business, can expound on the many permits and authorizations he had to seek, even for the smallest improvement to his apartment or the simplest innovation in his production method.

Call it the 12 tasks of Mario Rossi (the name Italians give to the everyman).

One task might be to find permit “A-38” in a maze‐​like building, where the bureaucrats continuously send the citizen from office to office, seeking one document that will lead to another, and then another, along the trail of the document he actually needs. (Some readers might recognize this as the plot of an Asterix comic.)

And yet, that’s not the problem the Conte government has decided to tackle.

Instead of trying to make the lives of businesses easier, the government seems to have decided that it’s the lives of the bureaucrats that ought to be simplified.

The proposed “simplification plan” is 48 articles long and deals with a host of issues. It contains some improvements such as an attempt to introduce digital procedures to streamline approvals for new buildings.

But its essence pertains to public procurement and public tenders. In short, the government wants to make it easier to award contracts without a competitive bidding process. Competitive tenders will still be required for any investment higher than €5 million. Under that threshold, you could have a competition limited to five bidders (for sums of more than €150,000) or award contracts directly for smaller projects.

This is no way to relaunch the Italian economy — unless you believe that it’s public works, and public works only, that will spur growth.

Don’t expect real change from what is, after all, yet another long, convoluted law. For genuine deregulation, Italy will need clear, simple, certain legislation that makes life easier for business by making it clear and apparent who are their interlocutors in the public administration. Processes need to be streamlined. And the burden of proof for denying permits should be shifted off the shoulders of entrepreneurs and onto the state’s.

But reforms like that would take real political capital and courage, as well as a clear vision for the future of the country — none of which Conte’s government has shown any evidence of having.

“Simplifying” regulations is a euphemism for forcing some people or businesses to relinquish power. Specifically, it implies entrusting more power to individuals and businesses, and less to the government. This requires experience in drafting legislation, but it’s also a clear ideological choice — one that runs counter to the direction Conte is heading.

After all, this is the government that has seized on the coronavirus crisis as an opportunity to increase reliance on the state by Italian citizens, feeding ever‐​growing expectations of government support that will hopefully be financed by the European Union’s recovery fund.

Berlusconi’s Reagan‐​esque language ended up being nothing more than words. Given the Conte government’s track record, it would be foolish to expect anything different this time around.

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