Italy's new leader

Mario Monte has been selected to serve as Italy's next Prime Minister. Given the fact that Italy is Europe's third largest economy (keep in mind the turmoil that Greece's debt, Europe's 23rd largest economy, has caused), the steps that Mr. Monte will be able to take to bring Italy's debt crisis under control will have huge repercussions on the world's markets. Hopefully, he will be able to initiate reforms that will prove successful and show our own government leadership that fiscal responsibility is the only way forward.


Windwalker said...

It is my belief that our government leaders know that being fiscal responsible is the prudent course of action, but that it never plays well at the polls. Special interests group and all of these powerful lobby groups have pocket books that run too deep to make unhappy. Have you ever wondered how these old people can drive these huge motor homes and RVs down the freeway with no training whatsoever? They dont need special licenses like you need to operate a UPS truck for example, but they are much more dangerous to themselves and to us, than any UPS truck you may come across. It is because the AARP throws a fit, and a pocket-book fit, every time proposed legislation comes up. Thus, the old-timers keep on trucking. So be observant and be safe.

Dr. Tufte said...

Funny how they only call on an economist to run the government once the politicians have screwed up the economic situation. ;)

My take is a little different from Windwalker's. Government officials have always bought political support with economic favors. But, what has happened over the last century is the mass-marketization (if that's a word) of this concept. Our leaders no longer reward a few friends for their support, but now reward huge sections of the population with small amounts. It's the Wal-Mart approach.

Locke said...

The problem faced with many countries in the EU is the policies put in place. Italy is known as an easy entry country for many refugees. It is speculated that terrorist can also use the EU's policies to gain access to Europe through Italy. The increase of population can cause many problems including financial distress.
England, on the other hand, even though part of the EU, has strict policies regarding the entry of refugees. England can get away with bending the policies of the EU because it was one of the original founders of the EU.
Italy might be experiencing more problems because it has to jump through all the hoops set up by the EU.
Greece has been petitioning for help but because they are one of the lowest countries on the EU totem pole, the EU is reluctant to give aid.

Papa Smurf said...

In my opinion one of the biggest problems facing politicians is that they are trying so hard not to make anyone potential voter upset that they are afraid to make cuts. I really like the comparison Dr. Tufte made with the Wal-Mart approach. Politicians don’t want to make the cuts because when it comes time for re-election they don’t want those cuts thrown back in their faces by potential voters. I think that it is great that Italy has appointed an economist and not a politician. Politicians have to be people pleasers, and economists can just make the changes needed to fix the economy. Monti will not be worried about what people think or might say, instead he will do what he has studied and prepared for and help to straighten out the mess Italy is in. I find it ironic that many Americans yearn for the days of Ronald Regan, and it just so happens that one of the men who Regan listened to the most was, an outstanding economist, Milton Friedman.

Cameron said...

One of the challenges that Mr. Monte will face is the rampant disregard for paying taxes in Italy. Italians are notorious for dodging this unhappy consequence of government. By engaging in the underground economy many pay little or no taxes, thus causing the government to increase tax burdens for those who actually pay.

Sam said...

I think Italy made a good choice going with Mario Monti; however they are not out of the woods yet. Italy’s interest rates on debt skyrocketed this month as investors worry that Italy is too big for the Eurozone to bail out like it has done with smaller nations Greece, Portugal, and Ireland. These higher interest rates alone have a legitimate potential to fuel a devastating debt spiral that could bankrupt the country.

Dr. Tufte said...

-1 on Papa Smurf for a misspelling.

I think it's kind of funny that you folks think having an economist in charge will be helpful.

My statement that "they only call on an economist to run the government once the politicians have screwed up the economic situation" is actually quite a bit deeper than you guess.

First, being an economist is an endeavor, while being a politician is a response to your situation. I think you can turn an economist into a politician by putting them in office; I don't think you can turn a politician into an economist by putting them in charge of economic policy.

Secondly, isn't it odd that I can write that second clause (politicians have screwed up the economic situation) without any of you doing a double-take? We take it for granted that politicians should be involved in the economy, without every asking if this is any different than wondering if a submarine needs a screen door.

N.B. Mario Monte is actually quite the politician, but as an economist he has about the same number of citations in Google Scholar as I do.

Papa Smurf said...

I do agree with you Dr. Tufte. My response was not meant to be understood that an economist will solve everything just because that person is an economist. It is necessary to have balance in all things. Although Milton Friedman was not the only person that President Regan listened to he saw it necessary to have an experienced economist to sit in and advise him on many situations. And I am sure that President Regan was seeking advice from a number of other advisors who were not economists. It is not possible for one to perfectly predict the economic future based on decisions made in the present, but it is imperative that the possible impacts of those decisions are understood. And that is where the economist comes in.

Dr. Tufte said...

-1 on Papa Smurf for spelling errors.

No need to backtrack - I didn't take any offense.

I think the bottom line is that politics is an old school job to which we've appended a new school task: economics. The outcome won't be pretty.