America’s Economy Is Heading Down the Same Road as Italy’s
In 2015, I came to the United States from Italy to study at Indiana University as part of an exchange program. I remember one day I was particularly surprised to discover that the State of Indiana had a AAA credit rating. I then wondered how it was possible that people in nearby Illinois, where the rating was notch above junk at best, kept voting for policies that plunged the country into financial ruin, kept moving to Indiana in droves, and all while having an example of a sustainable economy just right of the border.
Being Italian, I thought I might know the answer. Illinois had entered the vicious cycle of clientelism, taxes, reckless public spending and anti-job unionization push, the same cycle that had wrecked the Italian State since at least the beginning of the seventies. It is a spiral that is difficult to break out of: bottomless public spending assures votes, while negative externalities are pushed to the future and to be dealt with by the next elected public official.
When I came back to the United States to work in 2019, I considered myself a sort of economic refugee. Italian youth unemployment was around 40% at the time (now it is even higher after the Covid lockdowns), and most of my friends were unemployed or severely underpaid. One of my few successful acquaintances managed to open a company in Italy but then gave up because of oppressive taxation (imagine paying an effective tax rate of 60%) and successfully moved out of the EU. The rest of my friends were either unemployed, still studying (at 27 years of age) or just stuck in an endless cycle of internships.
If you ask Italian youth about the reasons behind the dire economic situation of the country, the answer is often something along the lines of “neoliberalism” or “economic inequality” or “capitalism.”
Is a tax on work that forces employers to pay out twice what an employee takes home liberalism? Is a pension system that literally pays defined benefits pensions to individuals who retired at 40 years
Article from Mises Wire