Southern Italy and East Germany: an evergreen comparison

For years, the comparison between Southern Italy and East Germany has been the leitmotif of many economists and commentators on the unlikely solution to the karst southern issue. The latter is always present but, just like a karstic river, it appears and disappears in the public debate. With the research entitled “Mezzogiorno e Germania Est: un confronto” (Southern Italy and East Germany: a comparison), coordinated by Luigi Ruscello and published in the series dedicated to Eurispes studies with Rubbettino Editore, the Institute has carried out a painstaking task of data collection and bibliographic consultation to assess what has been done in Germany and Italy to overcome the gap between the most backward and most developed areas.

The report compares the unification process, population trends, income, overall and per capita, financing of development, consumption, trade balance and the labour market.

Among the various aspects, a topic hardly ever present in the debate was examined: the role played by the single currency. While in Germany this process has had exacerbating consequences for the eastern industrial system, in Italy, albeit to a lesser extent, it has had an equally negative outcome for the Mezzogiorno, contributing in no small measure to the formation of general economic dualism. In short, in both cases, the best efforts were not made to achieve a harmonious union.

As far as population trends are concerned, there is a similar problem to the Italian one, as the former GDR is also experiencing a process of population reduction and a considerable internal migration flow. In contrast to Italy, however, if on the one hand, a shrewd immigration policy has made it possible to reverse the trend, drastically reducing the decline in population at national level, on the other hand, the forecasts show a similar result to Italy, namely that the population in the less developed areas will continue to shrink to a greater extent and in a not exactly negligible manner.

The effects of the policies adopted are tangibly noticeable in the more specifically economic sector – that is, the production and distribution of wealth. In particular, the global GDP shows greater growth in the East, which is catching up, albeit partially, by increasing its weight on the total. In contrast, in Italy, the incidence of GDP produced in the Mezzogiorno is lower than in the Centre-North, so that even when considering per capita data, there is a deterioration. In Germany, after the collapse in the immediate aftermath of reunification, the previous values were recovered as early as 1995 and then a continuous run-up began, although what Vera Lutz called “approximate parity” had not yet been achieved. In Italy, on the other hand, the situation remains stationary, so much so as to foreshadow a situation of permanent underdevelopment.

The comparison between East Germany and our Mezzogiorno, therefore, indicates a significant deterioration of the Mezzogiorno compared to the East. Whereas in 1995, the ratio of the per capita GDP of Southern Italy to that of East Germany was 78.45%, it plummets to 61.89% in 2020. The explanation for this difference, however, is very simple because it is given by the amount of resources used in the two countries to support the economy of the most disadvantaged areas or, to put it in a more elegant way, for the territorial cohesion policy. The comparison, in fact, is almost impractical given the very considerable difference in the capital used for the two territorial entities. Suffice it to say that in Germany, and in just five years, i.e. from 1991 to 1995, as much as 433.6 billion euro was spent, i.e. almost one and a half times the amount spent in Italy from 1951 to 1998. In Italy, not even the most diverse laws have ever succeeded in achieving true territorial equalisation. In Germany – demonstrating what it means to be a people – an extraordinary contribution was paid to partly finance the development of the East.

The general economic conditions, however obvious, are reflected in the consumption sector and, despite the fact that Germany’s development model is based on exports, which squeezes the possibility to invest and spend more, the German consumption level is much higher than the Italian one. Firstly, from 2000 to 2019, in parallel with the growth in per capita GDP, a strong advance in consumption emerges, and it is the new Länder that drag the percentage up, because its +38.32% is contrasted by the West’s +28.21%, in opposition to Italy, where there is actually a reduction. Secondly, the Italian-German comparison highlights that in 2000, the Mezzogiorno prevailed with an expenditure of 2,045 euro per month, compared to 1,558 euro in East Germany. In 2017, on the other hand, it is the latter that prevails with 2,124 euro against the Mezzogiorno’s 2,042.

The trade balance survey highlighted the German and Italian approach to exports, but with Germany only being able to stop the Covid-19, albeit partially. The export-led direction of German economic policy has provoked much discussion and controversy, which is well documented in the text. It also explains why Germany is not sanctioned for exceeding the trade surplus threshold and Italy is for excessive debt. One of the 14 indicators of the economic scoreboard, in fact, states that an imbalance exists if the current account reaches +6% of GDP in the case of a surplus and -4% of GDP in the case of a deficit. For the debt/GDP ratio, on the other hand, exceeding the 60% threshold is grounds for sanction.

In conclusion, the fundamental lesson that can be drawn from reading this research is that investment in infrastructure is certainly indispensable, but not sufficient for the complete development of the most backward areas. And, therefore, in addition to demonstrating the need for an indigenous production system, it also justifies the need to intervene in the social sector to support the weaker section of the population.

The full research can be downloaded by clicking here


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