The idea – so popular on the left – that Italy comes from “30 years of austerity/liberalism wild” does it have any confirmation in the data?
Let’s take the Istat data, which starts from 1995, and see how it went up until the latest data published a few days ago, relating to 2023. Let’s look at current primary public spending: the “blood” that circulates in the public sector. That is, public spending without counting the investments (which are less likely to be “wasteful”) and not counting the interest on the debt (which is not controllable by the government).
From 1995 to today it has increased in real terms (= taking inflation into account) by 76.1%, i.e. more than 2.6% every year. Compared to real GDP growth averaging 0.7% per year. That means, current spending primary it increased at an average annual speed equal to almost 4 times the increase in real income.
Could it have been the fault of the interest on the debt? No, because as mentioned they are not included in primary current expenditure. Could it have been the fault of the salaries? The graph at the top right answers us. No, because in about 30 years they have increased – again in real terms – by 5.2% (0.17% per year). A figure compatible with the overall stagnation of wages in Italy.
But if they aren’t the investmentsinterests, and salaries, what created this explosion of public spending?!
The two graphs below answer this question. Which depict two variables that have doubled in real terms in almost 30 years, growing approximately 5 times more than real income.
The first depicts i consumption intermediates, i.e. purchases of goods and services by the public administration; the second depicts social spending. And this is where the most important public policy implications for the future lie: what determined the doubling (we repeat, in real terms!) of purchasing spending, despite attempts to centralize purchasing? And on the social spending: how was it possible to double social spending in real terms and at the same time double the number of people in poverty?
The possibility of recovering those 2/3 points of primary surplus which serve to reduce taxes and put debt on a gradually downward path.
In the meantime, save this post: and show it to all those who continue to tell you that in Italy we have had austerity and liberalism wild.
Luigi Marattin, 6 March 2024
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The article No, it’s not true: Italy is not a victim of “wild liberalism” comes from Nicola Porro.