When is an economic reform not an economic reform? When it is done Italian style.
My ancestral homeland does a lot of things well. We all know about the culture, but people do not realize that Italy is also a leading industrial power. Northern Italy is like the industrial heartland of Germany, while the southern, Mezzogiorno region is like Greece.
The North’s forté is luxury goods and not just handbags and jewelry for the ladies. The North also churns out supercars with outrageous profit margins.
You may think that the government would attempt to free markets in order to nurture growth in its industrial heartland, but then you probably do not know much about Italy. Rather than selecting policies which foster gorwth, the central government rolls out economic reforms which raise taxes on its own luxury goods. Ultimately, these tax increases reduce the sales of these luxury goods resulting in less tax revenues.
How does such a stupid plan get passed by the legislature? It’s the politics. Just like in the United States, the poor regions have outsized political clout, which they use to suck revenues from the rich parts of the country. This is why Northern League supports the north seceding from the rest of the country. This is also why Italy is in trouble.