The “Relaunch” decree in perspective
(… following a consolidated tradition of this blog, let's put things in perspective. We have done it many times, for example here , here , here , and here … )
From the tone of many commentators and many politicians I seem to understand that the extent of the tragedy we are experiencing is not yet clear on the upper floors, those inhabited by those who have a voice. It is for underground men: VAT numbers, workers, farmers, fishermen, etc., who however have no voice, also because in this period going around to demonstrate can prove dangerous for health, not because of the virus, but due to unorthodox ways of managing dissent.
I'd like to tell the men in the underground that the men on the upper floors aren't necessarily bad, and it's not even that they're all stupid. To understand the economy you must have studied it: only in this way do you know where to find the data, how to present it, and how to interpret it, work that we have learned to do here over the long years, with friends like the one in the previous post .
For the benefit of those who are intellectually curious, I put current events into perspective by using the historical statistics of the Bank of Italy and the latest edition of the World Economic Outlook Database .
( … for the clarificationists, I used the GDP series at market prices at chain values of 2010 provided by Tab. 03 of the Excel sheet of the Bank of Italy, and I prolonged it with the growth rates provided by the World Economic Outlook, taking 2015 as the starting year, because from 2016 the growth rates of the Bankit and IMF data differed – for the simple reason that the Bankit secular series is not sufficiently updated, while the growth rates provided by the IMF are updated every six months … )
In the first graph I show you, in all their splendor, one hundred and sixty-one years of Italian GDP (from 1861 to 2021):
What has happened since the Lehman crisis onwards manifests itself as a fairly evident episode on a secular scale. But you know that a graphic designer of this type is misleading: it is the typical graphic designer with which a journalist would try to impress you, and he would succeed, but only with some of you: those who do not remember that 1 is 10% of 10 but l 1% of 100.
In practice, an incision such as that caused by the Second World War, in the middle of the graph, seems relatively minor compared to the disaster we have seen in recent years, but this is not the case: the 83891 million (euros in 2010 prices) of GDP lost between 1939 and 1945 today they would correspond to about -5% of GDP, but then they corresponded to almost 50% (in spans: actually -43%, but we understood each other; decimal fetishists can download the data and calculate the percentages up to the desired futile precision order).
Those who follow me know that to avoid this optical illusion you have to use the logarithmic scale. Since the logarithm "crushes" the high values of the low ones more, the variations of the logarithms, unlike those of the original data, correspond to percentage variations: on a logarithmic scale, an equal increase in the graph is an equal percentage increase in the variable represented.
Here it is:
Here we understand that in fact the Second World War was another thing. On the other hand, however, an expert eye is needed to appreciate the seriousness of the current situation. In fact, an untrained eye does not perceive, because it is almost impossible, a significant figure. Which? This:
The recession foreseen for this year, in the IMF estimate (-9.1%), which will almost certainly prove optimistic ( we know how they work ), is the most serious in the whole of Italian history, except, of course, for the Second World War . You can see it well thanks to the graph grid. If you follow the horizontal line at -10 you see that it is never reached, except during the Second World War (when it is crossed downwards) and this year.
Optimism is the spice of life and the working method of the IMF. From where they derive the certainty that the recovery will be V (i.e. that in 2021 we will grow by 4.7%) I can't tell you. After the last thud, that of 2009, which was -5.6%, the following year it grew by 1.6% (recovering not even a third of the thud, no more than half). Personally I am much less optimistic, because in addition to the real economy there is also the financial one. The approach chosen to face the crisis, based on making the States go into debt so that they make companies go into debt in order to pay taxes to the States against zero turnover, does not prelude to anything good. This mountain of debt will collapse, and so, after 2020, another 2009 will come, and of course, thanks to the MES, another season of austerity, etc.
But let's make an intermediate hypothesis: we ban both the pessimism of reason and the optimism of the IMF's goose goose, and we make a reasonable hypothesis, given that we are in the Eurozone and that the absurd rules that govern us have been suspended only for the duration of the crisis (duration to be decided elsewhere). Let's imagine that from next year Italy will return to growth at the average growth rate it has achieved since it has been in the Eurozone, obviously excluding this last catastrophic year. This growth rate is 0.44% per annum.
With this rate, the scenario that lies ahead is this here:
By 2050 we would finally return to the 2007 GDP level. Note: I said we would be (conditional), we will not be (future), because I don't think things will necessarily go like this. This exercise helps you evaluate orders of magnitude. In fact, I think things will be a little better, but only if we get rid of European rules, and of course (I have already told you this) after they have gone much worse. It is not said that we have hit rock bottom, given that, as it is clear to those who want to understand, austerity is not only in our past, but also, thanks to 5 Stars and PD, in our future.
But this who has had the misfortune of happening here has known for some time (and in fact someone is an expatriate) …
Good night and good luck!
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2020/05/il-decreto-rilancio-in-prospettiva.html on Sun, 10 May 2020 18:47:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.