Excesses and Limits of the Public Sector in the Italian Economy. The Ongoing Reform

This paper provides factual evidence on the extent of public intervention in the Italian economy. It further illustrates the internal contradictions and weaknesses of public action in Italy. New policy proposals to solve old structural problems of the Bel Paese are then discussed. Among them, a major privatization programme decided since 1992 is analysed, together with drastic budgetary cuts aiming at curbing public debt to maintain sustainability. Finally, the paper tries to explain why, in spite of all the excesses and limits of the policy-making, the performance of the Italian economy is apparently quite brilliant. The conclusion is that Italian society is already doing de facto what I suggest in the text that the Government should allow it to do, primarily by introducing deregulation and flexibility in economic matters. Italy is achieving these goals through the underground economy, by evading taxes and union rules in small private enterprises, but it is largely failing to do so in larger companies and in the public sector. In short, the country is developing thanks to what the Italians call `l'arte d'arrangiarsi', their generalized talent for improvization, thus providing living proof that deregulation and flexibility work.