19 April 2011

The Two Italys

The FT's fascinating discussion of economic differences between northern and southern Italy suggests that the different regional approach to innovation helps to explain the almost 100% difference in per capita GDP (chart above).  The north is linked to Germany and sees innovation as central, whereas the south is more state oriented:
Marco Fortis, an Italian economist, says the fate of tens of thousands of entrepreneurs scattered across north and central Italy has for decades been linked to the development of German industry. The small and medium-sized companies that are the backbone of the Italian economy specialise in the manufacture of premium finished products that are bought by German multinationals for assembling high-end goods, be it cars or washing machines.

The fruits of this relationship are reflected in the similar levels of wealth creation in Germany and north and central Italy.

Despite Italy’s sluggish growth of about 1 per cent a year for the past decade, per capita gross domestic product in north and central Italy is more or less equal to that of Germany as a whole. But in Italy’s south GDP per capita is below Portugal, and among the lowest in Europe.

While entrepreneurs in the north and the centre of Italy imitate Germany, industry in the south is far distant, both geographically and culturally. Although there are examples of entrepreneurism in the south, such as wine growers in Sicily, most industry is traditionally controlled and financed by the state.


  1. The people in Southern Italy are just as smart, energetic and innovative as those in the North. They are crippled by pervasive organised crime and corrupt government.

    I lived in Italy for seven years--if you want to see a real economic boom, remove the shackles from the south of Italy.

  2. Of all the historical differences between Italy's north and south, I'd put innovation rather low on the list. You can go back almost a thousand years and see the same difference. Venice and Genoa were the peninsula's great Mediterranean traders, not Rome or Naples. The Renaissance? Northern Italy, not southern. The industrial revolution in Italy? The north. Northern Italy can be considered the homeland of capitalism, and was so at a time when Italy as a state - or even a concept - didn't exist.

    Just running factories requires infrastructure and human capital that have nothing to do with innovation. They may allow for innovation along the way, but innovation is just one part of industrial society. Southern Italy is a Third World country grafted on to Europe's belly. They don't need innovation, they need to come in to the 19th Century, and then go from there.

  3. Roger,

    When I lived there 20 years ago, there was a movement in the north called the Lombard League (Milan is in Lombardy) which advocated splitting the country. They were tired of paying for the freeloaders in the south.

    The south is dominated by the mafia. Back then, more than 10% of those in the south got govt disability checks. Qualifying was about having a connection to a powerful politician (or the mafia boss who owned him). A lot of people worked a govt job and real job.

    In the north, far more entrepreneurs.

    And throughout the country, the difference in customer service from a state run business and a private business was just staggering.

    The govt and the corruption which accompanied the govt served as a huge anchor on the productive parts of society. Which is why tax cheating became rampant. People got tired of being the only suckers in the game.

  4. Comment #2 has it. Correlation =/ Causation.

  5. My impression of the northern Italians (and I’m going back to the 1970s and 1980s when I lived and worked in Germany) is that they were culturally and attitudinally more like Germans than other Italians, even several hundred kilometers south of Bolzano / South Tyrol where a quarter to a third of the populace speaks German as their first language. At the time businesspeople I spent time with did talk about the Lombard League and the need to secede from the rest of Italy.

    Their view was generally that the southern Italians were used to and even welcomed the organized crime and corruption, bemoaning the fact that the taxes generated up north were spent on the south. They said it was no mystery why autostrada tolls where higher when traveling north than south: make it easier to travel south and make escape expensive.