A new survey on the household budgets by the Bank of Italy gives food for thought on the evolution of the Italian economy. We were used to think that the Italian regions follow two different patterns: the North, with European standards of living, and the South, the Mezzogiorno, trying to catch up but always far behind.
The Italian central bank (Banca d’Italia), who has a very efficient research center, released the results of its biennial survey, with some surprising results. It shows that the Italian families, on the average, from 2002 to 2004 have kept their income steady, with a 5,8 increase in two years becoming less than 1% in real terms, without inflation. However there are big differences within these figures. The most surprising is that while the households in Central Italy (that means regions like Tuscany, Umbria and Lazio, the region of Rome) increased their net income by 7,5% in real terms, the families of the North (that means the industrialized regions of Piedmont, Lombardy, Veneto, Emilia) have lost almost 3% of their purchasing power.
More or less in the same time of the Bankitalia release, others figures came out showing that in 2004 Rome increased its Gross domestic product by 4,1 % while Milan, the most important business city, grew only of a poor 1.2% , always in real terms. What does all this mean? I tried to interpret these figures in more detail in an article in Italian published on Terza Repubblica. However the general meaning is that Italy, instead of getting a unified economy, is more and more developing three different patterns.
1. The North, which used to be the richest part, is suffering all the troubles of the globalization process: industries unable to keep up the Chinese competition, for example like shoes and textiles. The companies of the North suffer also for the lack of capacity by the Italian government to support the growth of medium and large scale firms, while the entrepreneurs are outsourcing many activities in Eastern Europe.
2. Central Italy has all the benefits of the good image of the Italian way of life: relaxed living in efficient towns, good Mediterranean diet, blue skies and wonderful art around. More and more people from all countries in Europe dream to visit Central Italy or even to buy a home here for their retirement. Even Rome, the city of government employees that used to suffer from the cut in the public budgets, is now catching up very well, handling rather efficiently more and more tourism every year.
3. And the South? The Mezzogiorno could follow the same pattern of development of Central Italy, having the same beautiful landscapes, good cooking, wonderful works of art. But till now it has been too inefficient to keep advantage of all this. Besides, same areas have a very bad image because of organized crime, and (some) tourists eventually visit them, but very few consider these regions as a place where you can invest in a second house for your old age.
I know that these thoughts are very general. You can find good living in the North, deindustrialization in the Center, and many exceptions to what I have been trying to interpret. But, if family incomes described by Bankitalia have kept the same rate of growth in 2005, we can suppose that families in Central Italy are earning more (around 33,000 euro, net of taxes, every year) than in The North. Believe me, for Italy it is a revolution.