North and South: The Tragedy of Equalization in Italy

Publication, Equalization, Frontier Centre

An Executive Summary

  • Decades of interventionism have failed to address the economic disparities between Italian regions.
  • Instead of closing the gap, over time Italy’s powerful central government has engaged in policies of equalization that have made conditions worse for poor regions.
  • A very expensive “Fund for the South” merely expanded rent-seeking and public interference in the economy.
  • Despite significant political pressures for reform, the system of equalization and the negative incentives it creates are entrenched.
  • Attempts at fiscal equalization between regions have done nothing to spur needed development in the South.
  • A bias towards public infrastructure for “have not” regions has expanded dependency and criminality.
  • Efforts to equalize employment have driven poorer regions into unproductive activity and accentuated the dominant role of the private sector in the North.
  • Wage equalization prevents the South from attracting more private investment.
  • A better solution lies in a less powerful, decentralized state and free markets.
  • Full Backgrounder in PDF