FLORENCE— Bernardo Caprotti was a 45-year-old entrepreneur when he agreed to buy a suburban plot of land for a new supermarket.
Building permits recently came through. He’s now 88.
So begins an enlightening story in today’s Wall Street Journal on Italy’s sclerotic economy. The story continues:
Italy has emerged as a Technicolor example of the [EU’s] problems. Its growth has been stuttering for 20 years. Since 2008, its economy has shrunk by 9%, and this year it is struggling to expand by even 1%.
It is tempting to think that a simple solution is new leadership, that Italy just needs to elect more market-oriented politicians to sweep away the layers of red-tape and barriers to entrepreneurship that have ensnared the country’s entrepreneurs.
But the problem is much more intractable because established businesses benefit from the status quo:
The roots of the problem, say many Italians, lie in how vested interests in the private and public sectors gum up the economy, preventing change that replaces old practices with new, more efficient ones, and repeatedly frustrating political attempts to shake up the country.
It adds up to “deep-seated cultural obstacles to growth,” says Tito Boeri, a professor at Milan’s Bocconi University who is one of Italy’s top economists.
Years ago, Milton Friedman put his finger on the problem:
A few months ago, I attended a conference on the intersection between politics and capitalism (what we’ve called government-granted privilege). The eminent economic historian Robert Higgs was there and he said something that has stuck with me (I’m paraphrasing, but he just approved the quote):
I believe crony capitalism—the alliance between business and government—is the biggest problem of our age. And the reason is that it is robust. As alternatives to free-market capitalism, communism and old-fashioned fascism are thankfully dead. And genuine socialism has no real constituency in America. But crony capitalism, unfortunately, has a very active, organized, well-funded, and vocal constituency. It is the greatest threat to our prosperity and our freedom.