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Ethiopians, Indians and Italians do better abroad

Ethiopians, Indians, Italians (and a few others) usually do better abroad than at home.

For a century, under emperors Menelik and Haile Selassie ("Mr. Ten Percent") and later under communist dictator Mengistu, Ethiopia hit negative records in poverty, hunger and hopelessness. But Ethiopians abroad proved active and successful. Most parking garages in Washington DC are owned and managed by Ethiopians, for instance.

Ever since Jawaharlal Nehru shaped India as a state-run, top-down economy, stagnation prevailed. Generations of Indians left the seemingly hopeless country and established themselves as merchants in East Africa, as pharmacists in Britain and, more recently, as IT specialists in Silicon Valley and later in a few urban centres back home in India which gave the country some growth and glamour while the countryside and the smaller centres remain stagnant.

Italy saw a burst of growth and modernization in the decades after World War II hoping that it might even surpass the United Kingdom and become one of the world's most powerful economies. But then the growth faltered and stagnation set in, years before Italy joined the euro zone. Public indebtedness rose to levels not before seen in Europe. By tweaking its statistics, Italy managed to get into the euro community, hoping that the new currency would reanimate growth and help repay debts. But, alas, that did not happen. The economy continued to stagnate and the debts continued to rise. Britain again took the lead and even Spain temporarily challenged Italy's position.

When the world financial crisis occurred and a combination of empty coffers, high debts and rising interest rates for state bonds forced countries to apply austerity programs, Italy was hard hit. Soaring unemployment and bankruptcies, political chaos, despair and pessimism were the results. Again, as in the 1960s, Italians are leaving the country in droves.

Italian migrants did not always strike gold abroad. When on home visit, thousands of Sicilians and Neapolitans, who had migrated to the U.S. after the war and established shabby pizzerie in small villages where the mafia of Philadelphia or New York could not find and tax them, were surprised to see new wealth in their paternal villages. Those who stayed at home had fared better. But these glorious years of growth in Italy are over and those leaving the country now on a one way ticket can reasonably expect a better future in exile. Why?

What caused economic stagnation in Ethiopia, India and Italy were the decades of institutional under-development and rigidity. In Ethiopia it was only during the rule of the late Meles Zenawi und his successor Hailemariam Desalegn that the country managed to break the deadlock of medieval customs, the exploitative land ownership of the church, and the socialist state economy. Since then Ethiopia has become an African tiger nation with growth rates over 4 percent a year. India is still struggling to modernize and tries to attract expertise and investments by its diaspora community. And Italy?

Like in Ethiopia and India before the reforms, Italy's stagnation shows that its economy has reached a ceiling, the maximum size possible within the prevailing set of institutions, habits and infrastructure. By breaking up institutions and improving infrastructure, Ethiopia and India eventually succeeded in stepping forward.

Italy has not yet done so. Instead of launching a comprehensive modernization effort needed to break the ceiling, Italy is wasting time and, in the meanwhile, is collecting even higher debts. One third of all small and medium businesses face problems of liquidity. Banks are reluctant to provide credit and charge excessive interest rates. Usury is booming. While occupation rates in the industrial North and Centre are still comparatively good, the South is heavily losing jobs and investments and is dropping into poverty and unemployment.

Instead of focusing on reforms, most Italians are blaming all sorts of imaginary foes for their dilemma. It's the euro, no, it's the austerity drive, it's the greedy banks, it's the cheap Asian competition, it's Brussels, Merkel and her power lusting Germans. If the International Monetary Fund was ever asked to help bail out Italy, the Italians would have one more culprit to add to the list.

Since institutional change is stalling and the economy is limited by the ceiling, stagnation — and more recently even recession — continue to prevail. Under these sad circumstances migration seems indeed the best choice for Italians. Their chances to migrate successfully are comparatively good. Italians are readily accepted and integrated in many countries, in the Anglo-Saxon world, in Latin America, in Germany, Britain and elsewhere in northern Europe. In Germany, there is such a strong demand for Italian life style, groceries, espresso and pizza that an association of Italian businesses launched a label to be attached to the entrance door "True Italian" to distinguish the place from the plethora of imitators who flag the tricolore but manage no word of Italian.

The downside of emigration is that it acts as a pressure valve and encourages those staying behind to defend the old ways and institutions, hoping that the economy will by itself restart growth or God and Brussels will save the country. The fact that Italy experienced at least two decades of stagnation and on the way collected immense debts shows that it is extremely resistant to reform and modernization. But there is, in the longer run, only one alternative to reforms: default or its painful European equivalent: bailout.

Maverick opposition leader Beppe Grillo expects the default of Italy to occur in the fall of 2013. Although he is basically right, the date envisaged by him is debatable.

In conclusion: Italy's status is indeed very bad. Without reforms no future growth. But without a solid political majority determined to conceive and implement the necessary reforms, nothing will happen. To achieve such a majority, elections will again be needed. What if elections only reconfirm the current political deadlock?

According to recent polls, two thirds of Italians see the current depressed status of their country as irreversible. They have lost all hope.

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—— Benedikt Brenner