B amucci, Alessand o
A icle
In sea ch o a g ow h model o I aly: he ailed a emp o
an expo -led eco e y s a egy?
Eu opean Jou nal o Economics and Economic Policies: In e en ion (EJEEP)
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Sugges ed Ci a ion: B amucci, Alessand o (2024) : In sea ch o a g ow h model o I aly: he ailed
a emp o an expo -led eco e y s a egy?, Eu opean Jou nal o Economics and Economic Policies:
In e en ion (EJEEP), ISSN 2052-7772, Edwa d Elga Publishing, Chel enham, Vol. 21, Iss. 1, pp.
113-132,
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In sea ch o a g ow h model o I aly: he ailed
a emp o an expo -led eco e y s a egy?
Alessand o B amucci
Ins i u e o In e na ional Poli ical Economy, Be lin School o Economics and Law (HWR Be lin), Ge many
[email p o ec ed]
We analyse I aly’s g ow h pa e n om 2001 o 2019 using he demand and g ow h egime
ca ego ies p oposed in he pos -Keynesian adi ion and ecen ly adop ed in he compa a i e poli ical
economy (CPE) li e a u e. We a gue ha a e he Global Financial and Economic C isis (GFEC),
I aly ollowed an expo -led eco e y s a egy. In his espec , Ge many’s g ow h model eme ged as he
success ul model o ollow. In he dominan iew, Ge many’s economic success since he mid-2000s
was a ibu ed o a se ies o pain ul bu necessa y economic e o ms. The success o Ge many’s
expo -led me can ilis egime became pa icula ly a ac i e o I aly gi en he simila expo -
o ien ed manu ac u ing indus y. Howe e , I aly has ollowed he ‘w ong’Ge man model based
on wage comp ession and es ic i e budge policies while he ‘ ue’Ge man model is based on
non-p ice compe i i eness ac o s.
Keywo ds: demand and g ow h egimes, expo -led g ow h, compe i i eness, in e nal de alua ion,
Ge many, I aly
JEL codes: E10, E69, F14
1 INTRODUCTION
When ying o analyse he s agna ion ha has cha ac e ised he I alian economy o e he pas
h ee decades, wo mainlines o in e p e a ion eme ge. The i s se o a gumen s, which a eo
o hodox inspi a ion, ocus on he p oblems o he I alian economy om he agg ega e supply
side. The discussion ocuses on labou ma ke ins i u ions and he deg ee o cen alisa ion o
he collec i e ba gaining sys em, on he ole o compe i ion in he domes ic ma ke o goods
and se ices, and on he unc ioning and quali y o public ins i u ions.
1
The second g oup o
a gumen s, o he e odox inspi a ion, look ins ead a he ole (and lack) o agg ega e demand
and how his has shaped he g ow h pe o mance o he coun y.
2
This app oach is e lec ed, no su p isingly, in he compa a i e poli ical economy (CPE)
li e a u e. In he CPE li e a u e he dominan pa adigm un il ecen ly has ollowed he
so-called Va ie ies o Capi alism (VoC) app oach. Based on he ins i u ional and supply-
side cha ac e is ics o ad anced capi alis economies, he VoC app oach p oposed he well-
known dis inc ion be ween libe al ma ke economies (LMEs) and coo dina ed ma ke
Resea ch A icle
This is an open access wo k
1. He e he usual call o s uc u al e o ms p e ails, ha is, mo e lexibili y in he labou ma ke ,
mo e compe i ion in he ma ke o goods and se ices and he decen alisa ion o wage ba gaining
(see, o example, Eu opean Commission 2019).
2. In suppo o his iew, see S o m (2019) and Cesa a o/Zezza (2018).
Recei ed 15 Decembe 2022, accep ed 30 May 2023
Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1, 2024, pp. 113–132
Fi s published online: Janua y 2024; doi: 10.4337/ejeep.2023.0119
Jou nal compila ion © 2024 Edwa d Elga Publishing L d
© 2024 The Au ho
economies (CMEs) (Hall/Soskice 2001). In hei well- ecei ed a icle, Bacca o/Pon usson
(2016) sugges ed o mo e away om he ca ego ies o he VoC adi ion, illus a ing a
new app oach o CPE ha places a he cen e o he analysis he co e elemen s o pos -Key-
nesian/Kaleckian economic hinking, namely agg ega e demand and income dis ibu ion.
3
The au ho s sugges he concep o ‘g ow h models’, whe e he wo opposing bu , a he
same ime, complemen a y models a e he so-called expo -led g ow h model and he con-
sump ion-led g ow h model. In he o me , g ow h is d i en by ne expo s and hus by
o eign demand whe eas, in he la e , g ow h is d i en by household consump ion and
hus by domes ic demand. The all in household income wi nessed since he la e 1970s
in ad anced capi alis economies implied ha consump ion was inc easingly sus ained by
deb a he han income so ha he consump ion-led g ow h model can be labelled he
deb -led g ow h model. The wo models a e complemen a y since he cu en accoun de -
ici s o he deb -led g ow h model allow he expo -led g ow h model o un ade su pluses.
Pos -Keynesian schola s ha e also in es iga ed he eme gence o di e en g ow h egimes
and he shi o he egimes a e he Global Financial and Economic C isis (GFEC) o
2007–2009.
4
The egimes a e he deb -led p i a e demand boom egime, he domes ic
demand-led egime, and he expo -led egime bo h in i s me can ilis and weak cons ella ion
(Dodig e al. 2016; Dünhaup /Hein 2019; Hein 2019; Hein/Ma schin 2021). Academics
o pos -Keynesian inspi a ion ha e hus welcomed he new app oach o CPE by Bacca o and
Pon usson, highligh ing some sho comings wi h ega d o he dis inc ion be ween he wage-
led and he p o i -led egime ( ha is, how agg ega e demand eac s o a change in income
dis ibu ion), and he sou ce o agg ega e demand, ha is, o example, deb -led g ow h o
expo -led g ow h (Hein/Ma schin 2021; S ockhamme 2022). As highligh ed in Amable
(2023), he no ion o g ow h models can be also aced back o he wo k o he F ench
Régula ion heo y and in pa icula o he con ibu ion o he F ench economis s Robe
Boye and Michel F eyssene appea ed in he 1990s/2000.
Acco ding o he VoC app oach, he I alian model is seen as ambiguous, showing incohe -
ence and lack o complemen a i ies among ins i u ions and is hus elega ed o he case o a
‘mixed ma ke economy’(Molina/Rhodes 2007). As a gued by Della Sala (2004), in he
pos -wa pe iod I aly ied o mimic elemen s o a CME and in mo e ecen imes,
unde he impe us o he Eu opean in eg a ion p ocess, he coun y ied o adop elemen s
o an LME wi hou becoming ei he one. The VoC app oach p edic s ha coun ies ha
bes i one o hese wo undamen al ypes o capi alism will egis e be e economic
ou comes while coun ies somewhe e in be ween he wo –and his is he case o I aly –
will no pe o m as well.
In he g ow h models pe spec i e, Bacca o/Pon usson (2016) a gue ha I aly has ailed o
ind a subs i u e o he Fo dis ‘wage d i e ’o g ow h and ha ‘pe sis en s agna ion is
always an op ion’.
5
In Hein e al. (2021), I aly’s g ow h egime shi s om a domes ic
demand-led egime in he pe iod 2000–2008 oanexpo -led egimein hepe iod
2009–2016. Kohle /S ockhamme (2022) sugges ha he classi ica ion o g ow h models
acco ding o he dicho omy expo -led/consump ion-led may ha e los i s explana o y
powe o he pe iod a e he GFEC. The au ho s show how in he sample o 30 high-
income OECD coun ies used in Hein e al. (2021), 24 coun ies (including I aly) ou
o 30 can be classi ied as expo -led in he pos -c isis expe ience. The au ho s ques ion
3. In de ence o he VoC app oach, see Hope/Soskice (2016).
4. In his li e a u e he e m ‘g ow h egime’is p e e ed o ‘g ow h model’, bu he wo concep s
a e simila . We use he wo e ms as synonyms.
5. This conside a ion is, howe e , based on he heo e ical sho coming in he pape o which we
e e ed ea lie .
114 Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
he alidi y o his in e p e a ion, highligh ing how in mos cases he g ow h con ibu ion
made by ne expo s is p ima ily due o he all in impo s a he han by he g ow h o
expo s. Hein/Ma schin (2021) keep he egime dis inc ions also o he pos -c isis pe iod,
a guing how i is he mac oeconomic policy egime – ha is, he combina ion o iscal,
mone a y and wage policies as well as open economy condi ions – ha in luences he coun-
y’s g ow h egime and i s change. In he case o I aly, a highly es ic i e mac oeconomic
policy egime a e he global c isis has o ced he coun y o shi om a s agna ing domes-
ic demand egime o a s agna ing expo -led egime (Hein/Ma schin 2021).
Agains his backg ound, we a emp o explain he coun y’s pos -c isis egime wi h he
( ailed) a emp o adop an expo -led eco e y s a egy. This does no mean ha he s agna-
ion o he I alian economy begins wi h he GFEC o 2007–2009. The s agna ion o heI alian
economy has been ongoing o almos h ee decades. In his con ibu ion, howe e , we ocus
on pe iod om 2001 o 2019 o y o explain he pa adigm shi in he I alian g ow h model
a e he global c isis in he con ex o he Eu opean Economic and Mone a y Union (EMU)
and he ela i e economic policy cons ain s. We a gue how, a e he c isis, Ge many’sexpo -
d i en g ow h model eme ged as he success ul model o ollow o I aly and o he eu ozone as
a whole. In he dominan iew, Ge many’s economic success since he mid-2000s was a ib-
u ed o a se ies o pain ul bu necessa y economic e o ms ha we e able o kicks a g ow h
and employmen . The success o Ge many’s me can ilis expo -led g ow h model has been
especially a ac i e o I aly, gi en he simila ly expo -o ien ed manu ac u ing indus y and
he s ong simila i y in he a ay o expo ed p oduc s. Howe e , bo owing e minology
om S o m/Naas epad (2015), we a gue ha I aly has applied he ‘w ong’Ge man model
( he model po ayed in he mains eam in e p e a ion) based on wage comp ession and
es ic i e budge policies. In con as o his simpli ied mains eam cha ac e isa ion o he
Ge man model, Ge many’sexpo success,o he‘ ue’Ge man model, is based on non-
p ice ac o s, such as he echnological imp o emen o he expo ed p oduc s and he eo -
ganisa ion o ou le ma ke s (Simonazzi e al. 2013; S o m/Nas eepad 2015). No leas , e en
i I aly had been able o emula e he success o Ge many’s me can ilis expo -led g ow h
model, expo -led g ow h su e s om in insic con adic ions as i depends on he capabili y
and willingness o he expo e ’s ading pa ne s o un pe manen cu en accoun de ici s.
Once he de ici coun y is no longe able o inance i s cu en accoun de ici s, i will be
o ced o consolida e, a ec ing also he su plus coun ies.
Ou pape is o ganized as ollows. In Sec ion 2, we iden i y he demand and g ow h
egime o I aly, looking a he GDP g ow h con ibu ions and he sec o al inancial balances.
We show how he expo -led g ow h model is he only iable op ion o a coun y whe e
bo h he p i a e and he public sec o s aim a unning budge su pluses. In Sec ion 3, we
show how Ge many eme ged as he success ul model o ollow. In he dominan in e p e a-
ion, he eco e y o he Ge man economy since he second hal o he 2000s has been
a ibu ed o he success o de la iona y policies based on he combina ion o aus e i y
and lexibilisa ion. In Sec ion 4, we a gue how I aly ollowed he ‘w ong’Ge man model
based on wage comp ession and p ice compe i i eness while he success o Ge man expo s
can be a ibu ed o non-p ice compe i i eness ac o s. He e, ou compa a i e analysis will
ocus on wo aspec s: he eo ganisa ion o expo ma ke s and he imp o emen in echno-
logical compe i i eness o expo s. In Sec ion 5, we d aw he conclusions.
2 WHICH GROWTH MODEL AFTER THE GFEC?
Fo ou assessmen o I aly’s g ow h model, we look a GDP g ow h con ibu ions and
sec o al inancial balances. Following Hein/Ma schin (2021), we dis inguish be ween
In sea ch o a g ow h model o I aly 115
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
wo pe iods so o cap u e he changing mac oeconomic and mac oeconomic policy con-
di ions. The i s pe iod anges om 2001 o 2009 and i includes he GFEC, while he
second pe iod anges om 2010 o 2019 and includes he eu ozone c isis and he ollow-
ing pe iod o aus e i y policies. Table 1 shows he con ibu ions o eal GDP g ow h o
he componen s o agg ega e demand (p i a e consump ion, g oss ( ixed) capi al o ma-
ion, go e nmen demand, and ne expo s) oge he wi h he sec o al inancial balances
o he main mac oeconomic sec o s, he household sec o , he co po a e sec o ( o ming
oge he he p i a e sec o ), he go e nmen sec o s and he o eign sec o . In he pe iod
2001–2009, he main sou ce o g ow h is ep esen ed by public and p i a e consump ion
demand, wi h 0.22 and 0.23 pe cen age poin s, espec i ely (a e age alues o e he pe -
iod as o he es o Table 1). P i a e in es men did no con ibu e o agg ega e demand,
and he con ibu ion o g oss ixed capi al o ma ion is ze o while ade balance con ibu ed
nega i ely o eal GDP g ow h. G ow h con ibu ions sum up o eal GDP g ow h, which
in he pe iod 2001–2009 was equal o 0.18 pe cen . Looking a he sec o al inancial
balances, we can see ha he balance o he household sec o was posi i e (p i a e demand
was no de ici - inanced). E en i he co po a e sec o egis e ed a small de ici (equal o
0.23 pe cen o GDP), he p i a e sec o aken oge he was s ill in su plus. Th oughou
he 2001–2009 pe iod, he go e nmen sec o an a de ici o 3.28 pe cen and he o eign
sec o eco ded a su plus o 1.11 pe cen , which is equi alen o a de ici in I aly’scu en
accoun . The sec o al inancial balances sum up o ze o, as he su plus in one sec o mus , by
de ini ion, be equal o he collec i e de ici s o he o he sec o s. I aly’sg ow h egimein he
pe iod 2001–2009 can be iden i ied as domes ic-led.
In he second pe iod (2010–2019), he sou ce o p i a e demand disappea s, wi h g oss
ixed capi al o ma ion and public demand con ibu ing nega i ely o GDP g ow h
(−0.14 and −0.10 pe cen age poin s, espec i ely). The con ibu ion o p i a e consump-
ion is minimal (0.06 pe cen age poin s), and he only signi ican con ibu ion o GDP
g ow h in he pos -GFEC pe iod comes om ne expo s and hus o eign demand
(0.37 pe cen age poin s). In his pe iod eal GDP g ow h was equal o 0.27 pe cen .
The s ance o he sec o al balances con i ms he slowdown in p i a e consump ion and
in es men . The household and business sec o s a e bo h in su plus, and he balance o
116 Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
Table 1 Con ibu ions o eal GDP g ow h (pe cen age poin s) and sec o al inancial balances
(pe cen o GDP), a e age alues, I aly
2001–2009 2010–2019
GDP g ow h & g ow h con ibu ions
Real GDP g ow h (pe cen ) 0.18 0.27
P i a e consump ion 0.23 0.06
G oss capi al o ma ion −0.09 −0.06
–G oss ixed capi al o ma ion 0.00 −0.14
Go e nmen demand 0.22 −0.10
Ne expo s −0.19 0.37
Sec o al inancial balances
Household sec o 2.46 1.27
Co po a e sec o −0.23 2.45
Go e nmen sec o −3.28 −2.77
Fo eign sec o 1.11 −0.89
Sou ce: AMECO (2022). Own calcula ions.
he p i a e sec o as a whole is e en la ge han in he p e ious pe iod (3.42 pe cen ). A
he same ime, he de ici o he go e nmen sec o dec eases o 2.77 pe cen .
6
The ex e -
nal sec o is in de ici , which is equi alen o I aly’s cu en accoun su plus. I ollows ha
in he pe iod 2010–2019, I aly can be classi ied among he expo -led economies (Hein
e al. 2021; Hein/Ma schin 2021). Ne expo s, wi h he addi ional (albei minimal) con-
ibu ion o p i a e consump ion, appea o be he sole sou ce o g ow h in he pos -
GFEC pe iod.
Figu e 1a shows he e olu ion o ne expo s as sha e o GDP. S a ing in 2010, we
obse e a apid imp o emen in ne expo s ollowed by a sligh decline un il 2018
whenne expo ss oppeda ound2pe cen o hen ise again in 2019. I we analyse
impo s and expo s ends sepa a ely, we obse e how he imp o emen in he ade bal-
ance in he pe iod 2010–2019 has been d i en p ima ily by a educ ion in impo s
demand a he by a genuine inc ease in expo s. Figu e 1b shows expo s and impo s
as an index, whe e he base yea is 2007. A e 2009, I alian expo s en e s a g ow h
pa h ha con inues un il 2019 while impo declines bo h as a consequence o he global
c isis and o he eu ozone c isis and he esul ing d op in go e nmen and consume
spending. Impo s eco e ed only om 2014 and managed o su pass he p e-global c isis
alues only in 2017. In his ligh , he classi ica ion o I aly’s g ow h egime in he pos -
c isis expe ience as expo -led does no appea o be dic a ed by a genuine shi in he
g ow h pa adigm o he coun y om one d i en by domes ic demand o one d i en
by o eign demand (Kohle /S ockhamme 2022).
F om he a i hme ic o he sec o al inancial balances, we know ha i he public sec o
and he p i a e sec o would like o achie e simul aneous inancial su pluses, i is necessa y
ha he o eign sec o uns an o se ing cu en accoun de ici ( om he domes ic pe -
spec i e, a cu en accoun su plus). This means ha i he p i a e sec o accumula es sa -
ings and he public sec o is cons ained by a balanced budge ule, as in he Eu opean
con ex , an o se ing cu en accoun su plus is equi ed. In Figu e 2, we show he
6. Mo e speci ically, he p ima y su plus goes om an a e age alue o 1.62 pe cen in he pe iod
2001–2009 o an a e age alue o 1.47 pe cen in he pe iod 2010–2019. In e es paymen s on
deb in ela ion o GDP wen om an a e age alue o 4.89 pe cen in he i s pe iod o 4.23
pe cen in he second pe iod.
In sea ch o a g ow h model o I aly 117
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
115
(a) (b)
110
105
100
95
90
85
80
2
3
% o GDP
2007 = 100%
1
0
–1
2002
2004
2006
2008
2010
2012
2014
2016
2018
2002
2004
2006
2008
2010
2012
2014
2016
2018
Sou ce: AMECO (2022). Own elabo a ions.
Figu e 1 (a) Ne expo s o goods and se ices in pe cen o GDP and (b) expo s (black) and
impo s (g ey) a cons an 2015 p ices (2007 = 100 pe cen ), 2001–2019, I aly
118 Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
6
5
4
3
2
1
0
–1
–2
–3
–4
–5
–6
–7
–8
–9
–5
–6
–7
–8
–4
–3
–2
–1
0
1
2
3
4
5
6
7
–5
–4–3
–2
–1 0
1
2
3
45
67
8
9
10
11
12
–1
0
1
2
3P i a e
sec o
de ici
P i a e
sec o
de ici
(a) Ge many (b) I aly
2018
2017 2007
2008
2011
2010
2009
2006
2005
2004
2017
2001
2013
2014
2003
20022012 2015 2018
2019
2016
2016
2015
2014
2012
2013
2008
2006 2011
2009
2010
2005
2004
Cu en accoun (% o GDP) Cu en accoun (% o GDP)
2003 2002
2001
2019
2007
Go e nmen budge balance (% o GDP)
Go e nmen budge balance (% o GDP)
P i a e
sec o
su plus
P i a e
sec o
su plus
–2
–3
–4
–5
–6
–7
–8
–9
–10
Sou ce: AMECO (2022). Own elabo a ion.
Figu e 2 E olu ion o he sec o al inancial balances, 2001–2019
e olu ion o he sec o al inancial balances om 2001 o 2019 o Ge many and I aly. We
epo he go e nmen budge on he e ical axis and he cu en accoun on he ho izon-
al axis, bo h exp essed in pe cen o GDP.
7
The diagonal 45-deg ee line ep esen s all
combina ions o go e nmen budge and cu en accoun whe e he inancial balance o
he p i a e sec o is in equilib ium ( ha is, whe e sa ing is equal o in es men ). Abo e he
equilib ium line, he p i a e sec o eco ds a de ici while below he equilib ium line, he
p i a e sec o egis e s a su plus. We can obse e how o e ime bo h Ge many and I aly
mo ed owa ds he a ea ha we ha e highligh ed in g ey. In he g ey a ea, h ee condi ions
a e simul aneously me : a cu en accoun su plus, he compliance wi h he Eu opean de ici
ules ( he g ey a ea is limi ed below by a do ed line cu ing he e ical axis a he 3 pe cen
ma k) and he su plus o he p i a e sec o .
In he case o Ge many (Figu e 2a), we obse e how s a ing om he beginning o he
2000s, he coun y ook a clea me can ilis s ance, unning high and pe sis en cu en
accoun su pluses (Zezza 2020). A he same ime, he p i a e sec o egis e ed la ge su -
pluses, hus becoming a ne lende o he coun y’s ading pa ne s. The go e nmen sec o
d as ically educed de ici spending so ha in 2012 i eached a balanced budge , and om
2013 i s a ed o eco d con inuous budge su pluses un il 2019 (Ge many’spa hen e s he
g ey a ea abo e he ho izon al axis in 2012–2013). As o he ea ly 2000s, I aly’s cu en
accoun is nega i e and he go e nmen de ici is nega i e. The p i a e sec o is in su plus
(excep o 2008). A e he GFEC o 2007–2009, we can see how he coun y’s ajec o y
o a es coun e -clockwise and i s a s heading owa d he g ey shaded a ea. In ac , an e en
mo e es ic i e Eu opean iscal policy amewo k pushed he coun y o un cu en
accoun su pluses. Simila o I aly, he eu ozone as a whole ollowed a coun e -clockwise
ajec o y. A e he c isis, he eu ozone needed o achie e pe sis en cu en accoun su -
pluses in o de o o se sh inking go e nmen de ici s imposed by he es ic i e iscal
ules (Zezza 2020).
8
As highligh ed by Hein (2019), be o e he c isis, he eu ozone showed
he ea u es o a domes ic demand-led egime while, a e he c isis, he eu ozone u ned
owa ds he expo -led egime. A eco e y s a egy d i en by o eign demand is he e o e
he only a ailable op ion when iscal policy is hinde ed o s imula e domes ic agg ega e
demand and he p i a e sec o wishes o sa e (K egel 2018). As we will see in he ollowing
sec ions, in he case o I aly, he policies adop ed o boos expo s dep essed domes ic
demand wi hou s imula ing expo demand, u ning he g ow h pa e n o he coun y
in o a ailed expo -led egime.
3 GERMANY AS A ROLE MODEL AFTER THE CRISIS
3.1 The c isis
The economic and inancial c isis exposed he agili ies ha had been building up wi hin
he EMU since he incep ion o he single cu ency. Fo he pe iphe al coun ies o he
eu ozone, including I aly, he i s yea s a e he in oduc ion o he single cu ency
7. Such g aphical ep esen a ion o he sec o al inancial balances is based on Zezza (2020) and
K egel (2018), which in u n d aws on he amewo k p oposed in Pa en eau (2010). This g aph has
also ound i s way in o some he e odox mac oeconomics ex books (Mi chell e al. 2019; La oie
2022).
8. The g aph o he eu ozone can be ound in Zezza (2020). A dynamic g aph showing he e o-
lu ion o sec o al balances o indi idual eu ozone coun ies can be ound a he ollowing link:
www.alessand ob amucci.com/g aphs/dynamic_g aph.h ml.
In sea ch o a g ow h model o I aly 119
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
co espond o a pe iod o (ligh ) expansion. The con e gence o in e es a es due o he
disappea ance o exchange a e isk a ou ed he in low o capi al om he co e coun ies
o he cu ency a ea, p edominan ly Ge many. Capi al in lows boos ed domes ic (deb -
inanced) demand, suppo ing g ow h and employmen . Cu en accoun s be ween he
co e and he pe iphe y o he eu ozone s a ed o de e io a e as he exchange a e be ween
eu ozone coun ies was now ixed. A he same ime, highe g ow h a es in pe iphe al coun-
ies led o highe p ices and nominal wages, which in u n con ibu ed o u he loss o
compe i i eness o he pe iphe al coun ies is-à- is co e EMU coun ies.
9
I aly su e ed
om he in oduc ion o he eu o as he coun y los he exchange a e ins umen ha
i used o eso o in he pas in o de o imp o e i s o eign ade balance. The single cu -
ency, oge he wi h his o ically highe in la ion a es compa ed o he co e EMU coun ies,
con ibu ed o he e osion o I aly’s ex e nal compe i i eness. In Eu ope, he in e na ional
c isis soon u ned in wha in he mains eam in e p e a ion became known as he ‘so e eign
deb c isis’in ol ing, in pa icula , G eece and I aly as well as o he pe iphe al coun ies o
he EMU. The deb c isis was in e p e ed as a p oblem o excessi e public spending, and o
s op he specula i e spi al ha had o med in he inancial ma ke s a ound he public deb o
pe iphe al EMU coun ies, se e e aus e i y policies we e imposed.
10
Fo Ge many, he ea ly 2000s we e ins ead yea s o economic c isis as he coun y was
s ill bea ing he bu den o euni ica ion. Wi h he in oduc ion o he eu o, Ge many
expe ienced he opposi e si ua ion compa ed o I aly. Thanks o he eu o, a weake cu -
ency wi h espec o he olde Deu sche Ma k, Ge many imp o ed i s in e na ional com-
pe i i eness ou side he eu ozone. In addi ion, hanks o lowe in la ion a es compa ed o
he es o he eu ozone, he coun y was able o gain a s ong compe i i e edge is-à- is
pe iphe al EMU membe s. S uc u al e o ms and, in pa icula , labou ma ke e o ms
( he well-known Agenda 2010 and he Ha z IV e o ms o he ed-g een poli ical coali-
ion) pushed wage g ow h below p oduc i i y g ow h boos ing he compe i i eness o
Ge man expo s.
3.2 The pos -c isis Eu opean policy agenda
Thanks o i s new ound economic and hus poli ical s eng h, Ge many, oge he wi h
Eu opean and in e na ional ins i u ions ( he ‘T oika’), dic a ed he policies o he
Eu opean pos -c isis eco e y agenda. In he dominan iew, Ge many’seconomicsuc-
cess since he mid-2000s was a ibu ed o a se ieso pain ulbu a hesame imeneces-
sa y economic e o ms. Thanks o labou ma ke lexibilisa ion measu es and es ic i e
budge a y policies (Schuldenb emse) Ge many was able o quickly u n om he ‘sick
man o Eu ope’ o he leading Eu opean economic powe showing posi i e GDP g ow h
a es, low unemploymen a es, la ge cu en accoun su pluses and a declining deb - o-
GDP a io. Due o i s apid economic success, Ge many and he ‘Ge man model’soon
became a ole model o he en i e EMU and in pa icula o he c isis- idden coun ies
o he pe iphe y (Pia oni/No e mans 2021; No e mans/Pia oni 2021). The dominan
in e p e a ion o Ge many’s economic success was c i icised in se e al espec s. Hein/
T uge (2005) ques ioned he mains eam assump ion o ins i u ional scle osis, ha
is, igid labou ma ke egula ions and a gene ous wel a e s a e, being a he oo o
9. Real wages in I aly ha e been s agnan since he 1990s. See he cha in Buchholz (2023).
10. We know well how in pe iphe al EMU coun ies he deb - o-GDP a io was s able o e en
dec easing as in he case o Spain and inc eased d ama ically as a esul o he global c isis.
120 Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
gene a ions o ad ance he coun y’s u u e echnological on ie . As we can see om
Table 4, in 2019 (as in 2001 and 2007) go e nmen educa ion spending in I aly lagged
behind F ance (2.8 pe cen ) and Ge many (2.4 pe cen ). Recen empi ical analysis
showed how he unde unding o public uni e si ies in I aly con ibu ed o he mig a ion
o young uni e si y esea che s wi h he consequen loss o skills and human capi al
(Nascia e al. 2021). In addi ion, T uge (2016) showed how public spending on educa-
ion was subjec o hea y budge cu s du ing he c isis yea s, pa icula ly in he pe iphe al
eu ozone coun ies, wi h ob ious nega i e consequences on long- e m g ow h po en ial.
Second, we look a R&D spending (public and p i a e). Again, I aly lags cons an ly
behind Ge many and F ance. We can see ha in 2019, Ge many’sR&Dspending
(3.1 pe cen ) was mo e han double he igu e o I aly (1.4 pe cen ). Indeed, he e is
a posi i e ela ionship be ween R&D, inno a ion and expo pe o mance. The empi ical
s udy by Gua ascio e al. (2016) highligh ed he exis ence o a ‘ i uous ci cle’be ween
R&D spending, new p oduc de elopmen and inc eased expo ma ke sha e. In hei
econome ic s udy, he i uous ci cle b eaks down when he sample is na owed down
o Cen al/Medi e anean coun ies (F ance, I aly, Spain), con i ming how I aly’slow
alues in R&D spending had a signi ican nega i e e ec on expo pe o mance.
Thi d, ollowing Kohle /S ockhamme (2022) and Hein/Ma schin (2021), we look
a he Economic Complexi y Index (ECI). This indica o p o ides an excellen measu e
o he deg ee o compe i i eness o expo s goods.
16
He e he gap be ween I aly and
Ge many is e iden . While in 2019 Ge many eached he ou h posi ion in he ECI
anking, losing wo posi ions compa ed o 2001 and 2007, I aly eached he se en een h
posi ion, losing ou posi ions compa ed o 2001. We can he e o e conclude ha despi e
he simila i y in he ange o expo ed p oduc s, I aly did no manage o p ope ly emula e
16. Fo a de ailed accoun abou he cons uc ion o he ECI, see Hidalgo/Hausmann (2009).
In sea ch o a g ow h model o I aly 127
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
Table 4 Go e nmen educa ion spending, R&D spending and economic complexi y index,
selec ed yea s
2001 2007 2019
Go e nmen educa ion spending* (% o GDP)
F ance 3.2 2.9 2.8
Ge many 2.7 2.5 2.4
I aly 2.5 2.4 2.1
Spain 2.2 2.1 2.1
R&D spending** (% o GDP)
F ance 2.1 2.0 2.2
Ge many 2.4 2.4 3.1
I aly 1.0 1.1 1.4
Spain 0.9 1.2 1.2
Economic complexi y index ( ank)
F ance 10 13 15
Ge many 2 2 4
I aly 13 18 17
Spain 19 26 34
No es: *Seconda y and e ia y educa ion. **Public and p i a e; las alue 2018.
Sou ces: Eu os a (2022), Wo ld Bank (2022) and OEC (2022).
he ac o s ha make Ge man expo s compe i i e. This explains he decline o I alian
expo s in inc easingly compe i i e in e na ional ma ke s.
5 CONCLUSIONS
We ha e a emp ed o explain he disappoin ing pe o mance o he I alian economy a e
he GFEC o 2007–2009 as he ailu e o an expo -led eco e y s a egy. This does no
mean ha he poo g ow h pe o mance o he I alian economy s a s a e he GFEC.
The s agna ion o he I alian economy has pe sis ed o almos 30 yea s. In his con ibu ion,
we ha e decided o ocus on he pe iod 2001–2019, in es iga ing I aly’s g ow h model and,in
pa icula , he shi o he g ow h model a e he c isis in he con ex o he EMU and he
ela i e economic policy cons ain s. Fi s , we ha e looked a g ow h con ibu ions and sec-
o al inancial balances. We ha e shown how I aly ans o med om a s agnan domes ic
demand-led economy in he pe iod 2001–2009 o a s agnan expo -led economy in he pe -
iod 2010–2019 (Hein/Ma schin 2021). We ha e also obse ed how ne expo g ow h was
he esul o he decele a ion o impo s a he han o genuine expo s g ow h, aising
doub s on he in e p e a ion o he I alian g ow h model in he pos -c isis pe iod as
being uly expo -led (Kohle /S ockhamme 2022). Based on he a i hme ic o he sec o al
inancial balances, we ha e a gued ha cu en accoun su pluses a e equi ed when he p i-
a e sec o aims a unning inancial su pluses and he go e nmen sec o is cons ained by a
balance budge policy. A g ow h s a egy based on o eign demand was he e o e he only
iable op ion, o I aly and o he eu ozone as a whole. In an a emp o pu sue expo -led
g ow h, howe e , de la iona y policies we e adop ed ha ins ead o s imula ing o eign
demand ha e educed domes ic demand (K egel 2018; Zezza 2020).
Second, we ha e a gued ha a e he GFEC o 2007–2009, Ge many and he
‘Ge man model’became a ole model o he en i e EMU and, in pa icula , o he
c isis- idden coun ies o he pe iphe y. In he dominan iew, Ge many’s economic suc-
cess since he mid-2000s was a ibu ed o a se ies o pain ul economic e o ms. Thanks o
s uc u al e o ms, in pa icula labou ma ke lexibilisa ion policies coupled wi h es ic-
i e budge a y policies, Ge many was able o quickly u n om he ‘sick man o Eu ope’
o he leading Eu opean economic powe , showing a se ies o posi i e mac oeconomic
indica o s. The Ge man model became a ac i e o I aly, ano he la ge expo -o ien ed
manu ac u ing economy wi h close simila i y o Ge many in he a ay o expo ed p o-
duc s. Bo owing e minology om S o m/Naas epad (2015), we ha e a gued ha I aly
a emp ed o es o e expo compe i i eness ollowing he ‘w ong’Ge man model, ha
is, he model adop ed in he Eu opean e o m agenda, while he success o Ge man
expo s, o he ‘ ue’Ge man model, was based upon no only non-p ice compe i i eness
ac o s such as s ong in es men in R&D and educa ion, bu also he in e na ional eo -
ganisa ion o ou le ma ke s and he es uc u ing o he p oduc ion ne wo k. In I aly, an
expo -led eco e y s a egy based on wage comp ession has ailed o subs an ially boos
expo s. Ins ead, i has dep essed domes ic demand, apping he coun y in pe manen
s agna ion. The endu ing s agna ion in he coun y is he e o e he esul o misguided
policy. This eminds us o S eindl’s no ion o ‘s agna ion as policy’inspi ed by Kalecki’s
wo k ‘Poli ical Aspec s o Full Employmen ’(Hein 2016: 33).
This s udy su e s om wo majo limi a ions. Fi s , i emained pu ely desc ip i e and
he a gumen s p esen ed we e based on he exis ing li e a u e. The e o e, econome ic
wo k on he de e minan s o expo s o I aly and Ge many is equi ed. In addi ion,
we decided o ocus exclusi ely on goods expo s. Fu u e esea ch should also look a se -
ices expo s. Second, while no he n egions may enjoy a success ul expo -led g ow h
128 Eu opean Jou nal o Economics and Economic Policies: In e en ion, Vol. 21 No. 1
© 2024 The Au ho Jou nal compila ion © 2024 Edwa d Elga Publishing L d
model, sou he n egions may be cu o om he g ow h p ocess. The e o e, he I alian
g ow h model dese es close a en ion also om he egional pe spec i e. To conclude,
e en i I aly had success ully implemen ed an expo -led eco e y s a egy, expo -led
g ow h is no a sus ainable g ow h model in he long un as i con ibu es o he accumu-
la ion o in e na ional mac oeconomic imbalances (Simonazzi e al. 2013; Hein 2019).
Fo his eason,wea guein a ou o ag ow h e i albasedondomes icdemand,
bo h public and p i a e, in I aly and in he en i e eu ozone. Whe he his will be possible,
i emains o be seen.
ACKNOWLEDGEMENTS
P elimina y e sions o his pape we e p esen ed in Oc obe 2021 a he 25 h FMM
con e ence and in Oc obe 2022 a he IPE online wo kshop ‘F on ie s in G ow h
Regimes Resea ch - Theo e ical Pe spec i es and Coun y Cases’. I hank he audience
o bo h p esen a ions o hei help ul commen s. Special hanks go o Eckha d Hein,
Achim T uge , Genna o Zezza, Sa ah Goda , he colleagues o he IPE Be lin and
wo anonymous e e ees. The usual disclaime s apply.
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