Vogon Today

Selected News from the Galaxy


Zooming out: the history of Italian GDP

(… an update of this post , to give you an idea of ​​the orders of magnitude …)

My dearest brothers and sisters (an older and nobler version of "tutti e tutte", to be pronounced strictly tuttitùtte, à la Schlein, with Sforzando on the second "u"…), I return to talk to you about our history, whose role, in this blog, is the one to teach us lessons that no one learns, not even us.

The history of the Italian GDP, for example, is very, very instructive, and its lesson would also be easy to learn. Too bad that few tell it and even fewer listen to it. Today I'm going to the University of Salerno to tell Preterossi's students about it, together with a prominent protagonist of this blog: Stefano Fassina. Here are two notes that might be useful.

Let's start with a routine check: where is the night? Are we at least back to where we were before the financial crisis ( subprime , Lehman, austerity,…)? The answer is inside ISTAT and is "wrong":

No. We are still 2.8% below the 2007 level, which means that we have literally been at a standstill for over 15 years. Following drawing:

(the more observant will notice that the order of magnitude of the two graphs is different, simply because the base prices are different: in the latest edition of the ISTAT National Accounts they are those of 2015, in the series I will use for the graphs they are those of 2010. Obviously nothing changes in terms of percentage changes: even the series at 2010 prices in 2022 is 2.8% below the 2007 level).

Those who don't know what GDP is might even find a trend of this type normal. Those who think they know it, i.e. the degrowthists and singer gretineria , on the other hand, could find it desirable. The fact is that with a little perspective we realize that it is somewhat anomalous. It is not enough, however, to zoom out to the start of Monetary Union:

We need to make an extra effort, go back to "O partisan, take me away!", to understand how much it cost us to betray the spirit of independence that animated the Liberation, how much it cost us to put our politics in the hands of our opponents of then, to feed the illusion that they are not our adversaries today (albeit in less bloody forms):

Just to be clear: we have gone through energy crises with quadrupling of the price of oil:

(not the bullshit that is freaking out those soft millennials ), through hot autumns (not boiled Landini), through financial shocks with increases in the real interest rate of the order of several percentage points:

(taken from an article that those who haven't read should read ), through the years of lead, when as it is known there was no hatred, or at least some senators could not see it from their downtown apartments, but if you were dressed in a certain way and you went down the wrong road and didn't get home, or you came back very battered (other than the "washable" paint on the monuments, my freaks…), we've been through everything and more, always going straight as a time zone around a linear trend of about €27 billion more per year. Are we really sure that a crack in the United States (not the biggest in history) was enough to cause all this mess?

Obviously it is implausible: what has had an impact is the lack of an adjustment mechanism to external shocks (the adjustment of the nominal exchange rate) and the presence of highly pro-cyclical rules. Curiosity can come (and it should come) to see where we would be now if we had continued on our trajectory, which was not disturbed by a major shock, but by a major (and wrong) reform of our way of reacting to shocks. We would be here:

that is, we would be up by 30% compared to where we are (by the way, we would be up by almost 500 billion euros).

I propose a counterexample based on a scenario made three years ago and admittedly paradoxical: the calculation of the years it would have taken to get back on the slope of COVID if we had maintained the growth recorded since the beginning of the Eurozone (obviously excluding from the calculation the shock of COVID):

We did it here by commenting on the "Relaunch" decree, and if you read it again you will find this sentence: "actually, I think things will go a little better, but only if we get rid of the European rules".

On May 10, 2020, when I was doing this exercise, the rules had been suspended for 58 days. A little bit to see the beneficial effect of their suspension. Now we can see it well:

Instead of 2050, the return to the 2007 level, using the forecasts of the DEF updated with the latest ISTAT results, is foreseen for 2025. it has made it possible to recover 25 years of economic life (obviously this spanometric analysis would have to be validated with more refined models, and the orders of magnitude would probably change: but even if we had only recovered 10 years, would this make it more sensible to lose them on the basis of shamanic truths?).

I add the usual caveats : the graph in natural units tells us little about the percentage size of the various shocks . Put like this, it appears that COVID was a greater shock than WWII. But no, but to appreciate it you need logarithms:

It is clear that the Second World War was a stronger schicchera than the psycho-pandemic, and this should not surprise us: lead killed more than the virus.

I also anticipate the usual gnegnegnè of those Luciano calls "expertologists", those who say "But growth had been running out since the 1960s, Italy was already a sick country, because the clique, caste, corruption, the blue cars, the small family businesses, the scalable tobacconist and the file truck… ". As I explained to you, the graph often used by decline scoundrels :

it tells us nothing about our country (also because it refers to another country, but this doesn't change anything, given that this was the case in every country due to neoclassical convergence ).

The economic physiology of growth, which tends to a steady state, is one thing, the psychiatric pathology of degrowth is one thing, the political quackery of the rules is another thing.

But now I have to leave you: I'll be on stage in a bit, and I have to collect my ideas…

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/2023/05/zooming-out-la-storia-del-pil-italiano.html on Mon, 22 May 2023 12:11:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.