Ending turf licences is not enough for Mr Prodi

 

There are things you could not conceivably have thought possible until the moment you hear that they have been abolished. In this category fall the latest liberalisation measures of Romano Prodi’s rainbow coalition.

 

I had no idea that those great news vendor kiosks in the town centre of Italian cities actually had turf licences with a value estimated in some case to be worth over €100,000. The same goes for petrol stations. I have often wondered why Italy is one of the few European countries where you can still drive up to a petrol station and get an attendant to fill up. You can do this in the US, of course, but this is because the US still provides services the Europeans have stopped providing a long time ago. But who would have thought that of all European countries, Italy would be so service-oriented. Now I know that this has to do with the licensing system. Those petrol stations had turf monopolies. No Italian supermarket was allowed to open one of those depressing petrol stations where you fill up yourself, where you cannot buy anything apart from motor oil and windscreen wipers, and where they do not accept American Express cards.

 

These two liberalisations measures were the most notable and worthwhile elements of what is known in Italy as Bersani II, a package of 100 or so measures named after the economic development minister, who is also a senior politician of Piero Fassino’s Democrats of the Left. Bersani I included the liberalisation of the notaries fixed income structure, and the liberalisation of pharmacies.

 

These are worthwhile product and service market liberalisation efforts. I would even accept that the insurance and petrol station liberalisation could bring some real benefits. But so what? As welcome as these are, I doubt they will affect Italy’s GDP growth rate even by a decimal percentage point. When it comes to these reforms, I side with Francesco Rutelli, the deputy prime minister, and leader of the liberal Margherita Party, who has called this programme “ridiculous”. It creates massive popular resistance without solving the country’s real problems, which are a voting system that encourages fragmentation, an over-bloated public sector, an insufficient education system, and increasingly malfunctioning corporatist institutions.

 

The abolition of the turf monopolies of news vendors and petrol stations are pure sound-byte reform. They create a lot of noise, and raise political opposition to further reforms. They are the kind of reforms that give reforms a bad name. One of the most important lessons we have learned about economic reform processes in recent years is that the process only succeeds if it is subject to an overarching strategy. There is no such strategy in sight in Prodi’s rainbow coalition.

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