A public-private agreement to become competitive again

The recent downgrade (the cut of our government bond rating) by Moody's that occurred despite the efforts made so far by our country is a symptom of a disease that unfortunately still plagues us. Even though these signals may sometimes seem incomprehensible, we believe that they should be taken very seriously. Fiscal consolidation, if it is not matched with a development policy that is suitable to overcome the challenges of international competitiveness, can also backfire. Monti's government has been able to work on the spending and that deserves distinct recognition. In fact, the recent decree on the spending review, although lacking a systematic approach, is a good painkiller. However, it risks having narrow and counterproductive effects, unless it is combined with at least two further steps.

1. The introduction - in connection with a gradual reduction of direct supply - of a new financing system of public services, able to shift the spending decisions from the public authority to families and individuals.

2. A competitiveness policy able to set the conditions for the renovation of our business system towards highly productive sectors, also contributing to a restructuring of supply.

Overall, these steps communicate a new agreement between the public and private sectors, both in terms of the reorganization of the public sector and in terms of the relationship between tax authorities and taxpayers, in the pursuit of reducing the tax burden and fighting tax evasion.

Concerning the first aspect, we believe that such a policy would allow for the reassessment and reduction of public spending and therefore for the creation of new opportunities and new markets, thus promoting, by implementing the principle of horizontal subsidiarity, a transition from welfare state to welfare society. The second aspect is instead about leaving behind any form of industrial policy that is likely to support uncompetitive enterprises and starting a strict competitiveness policy. In this context, the role of the public can only be that of redefining a legal and institutional framework in order to guarantee the correct functioning of the market; to provide regulation and control its proper application; to encourage enterprises to strive for innovation and seize opportunities in foreign markets; and to directly intervene, in terms of subsidiary, only where the private and third sectors are unable to operate independently. Businesses, however, will have to look again at themselves, relying on technology, on the quality of manufacturing processes and products, on professional qualification, on organizational and managerial efficiency, and on dimensional growth and the capacity of pool resources.

We believe that, if put into practice, this could be Italy's way to a "highly competitive social market economy."

To this end, the Catholic world is called to play a leading role, becoming again, as it did in the aftermath of World War II, a unifying element of a country that for too many years has appeared unable to overcome the corporate heritage that inhibits its growth and undermines the foundations of its future.

Flavio Felice is an adjunct fellow at the American Enterprise Institute

 

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