The Sixties: Bocconi and Berkeley.
When, in October 1960, I entered the Faculty of Economics and Business Administration at Bocconi University, I had a clear vision of my future. Since my teens I had desired to become an economist. I felt that I had to improve my knowledge of the world and its changes, and I knew economics was a powerful lever to penetrate into the world’s inner social structure and its mechanisms.
In the 1960s, as Western Europeans, we were in a fortunate period. The economies were rapidly growing; unemployment in Northern Europe and Northern Italy was relatively low; welfare was progressing; peace in the EEC countries was guaranteed by the first phases of the difficult, but vital, construction of the European Union; the cultural, social and economic barriers between the industrialized countries of the West were gradually diminishing. Yet, in Italy and in the world enormous problems persisted. In Italy the divide between the North and the South and between the very rich and the very poor continued. The great flows of internal migrants and the outflows of Italian workers to Germany and other North European countries powerfully contributed to industrialization and economic growth, but created new tensions and social problems. The world great fracture between the capitalist West, dominated by the United States, and the socialist East, dominated by the Soviet Union, heavily persisted. The harsh confrontation between the two blocks raged under the dark shadow of the nuclear bomb. The unjust and bloody Vietnam war was escalating. De-colonization conflicts, brutal dictatorships and tragic local wars spread in all continents. The fruits of economic growth, where existing, were very unevenly distributed. The impact on the environment of unregulated growth had started to produce ecological disasters, gradually poisoning earth, water and air. Contrasting ideologies and the moral weight of these problems on the young generation were contributing to incubate the movements of students and workers, the social conflicts and then the terrorist actions of the late 1960s and the 1970s.
In July 1965 I graduated at Bocconi University with a thesis in economic policy on the analysis of cyclical fluctuations. My supervisor was professor Ferdinando Di Fenizio, who had been one of the first propagators of the Keynesian thought in Italy. Before the completion of my dissertation, I had spent two periods of work and study in England. I had earned some money picking hops in the Sussex rural district, and then I had been a special student at the London School of Economics for a semester. After my 1965 graduation, I obtained a voluntary (read: unpaid) assistantship to the chair of Economic Policy at Bocconi University, where professor Innocenzo Gasparini had just substituted prof. Di Fenizio. For a living, I taught math at a junior high school until I could obtain a state research scholarship at Bocconi University. There I began to participate in various didactic activities and studied problems of growth and the theory of capital and of interest. In 1965 I took part in a Summer course of Comparative economics held in Luxembourg by well-known French, British and Italian experts.
In 1966 I obtained a travel Fullbright grant and a small scholarship from the “Amici della Bocconi” association. I went to Berkeley, with my colleagues and friends Francesco Silva and Renata Targetti Lenti, for post-graduate studies at the Department of Economics. In nine months, I completed the entire program of the Master of Arts in Economics. I took nine Ph.D.-level courses in mathematics (2), macroeconomics, economic development (3), monetary economics (3). I also played in the soccer team that won the Berkeley intra-mural championship. In my sojourn I attended, among others, the courses of two great development economists, Hollis B. Chenery and Harvey Leibenstein, of an outstanding mathematical economist as Werner Hildenbrand, of the reputed expert in monetary economics John Culbertson. Moreover, I met, in seminars and other occasions, the French leading economist and econometrician Edmond Malinvaud, the great comparatist Gregory Grossman, the brilliant economic historian Carlo M. Cipolla. I learnt very much from all of them. To Cipolla, Grossman and Leibenstein, I later became a friend, but also Chenery, with his structural approach to development, had a great influence on my succeeding research.
In the Summer of 1967 I extensively travelled in the States, not by car or by air, but using a three-month pass for Greyhound buses, which allowed me to visit many beautiful sights and cities and horrid neighborhoods and to meet several poor or middle-class people. It was a period of vast social and racial tensions, both in the Campuses and the major cities. There were riots in Los Angeles, New York, and in other cities. In S. Francisco a rifle bullet hit the local bus where I was travelling with an American friend, just a few centimeters from our heads. Visiting the U.S. Southern States I clearly saw the persisting sharp social and economic divide between most white people and a large part of the black population. The risk of being drafted and sent to the Vietnam war heavily contributed to feed the juvenile and social turbulences. Later, in 1968, Bob Kennedy and Martin Luther King were assassinated. The civil rights movement and president Johnson’s “great society” program attenuated these problems, but it was the end of the Vietnam war, sanctioned at the 1973 Paris peace agreement, which could partly sedate the protest movements. From my first experience in the US, I got the vivid impression of a great economic and technological power, with many friendly and open minds and great economists and scientists, but with sharp, unsolved, social and territorial divisions.
Berkeley remained, with Bocconi University, my “Alma mater studiorum”. I learnt very much in both institutions. In Bocconi there was a wider approach, with exams in Political Economy, Economic Policy, Public Finance, Math and Statistics, but also in Civil, Public, Labor, Commercial, and International Law; Sociology, Economic history, History of the Economic Thought, Technology processes, and various aspects of Business Administration. In Berkeley there was a greater focus on economic models, taught at a higher level, and in quantitative methods. Yet, in my Berkeley period of studies and in my succeeding visits to Berkeley, Brown, Harvard and MIT, I perceived two growing weaknesses in the prevailing American approach to the study of economics, problems that in one or two decades would spread also to Western Europe, Italy included. One was the fact that undergraduate and post-graduate students were seldom obliged, or induced, to study Economic History and some parts of the original works of the classics, Smith, Ricardo, Marx, Malthus, etc.; Walras, Pareto, Marshall and the great XX° Century authors (Keynes, Schumpeter, etc.). In Ph.D. programs History of Economic Thought and Economic History were usually present, but they were rarely compulsory, so that only a small part of the students chose to take them. The second problem was that in several Ph.D. programs the focus was almost only on the in-depth study of the most important “main stream” articles published in the preceding five years in the specialized field of research. The overall result was a lack of historical depth and the trend toward a greater and greater homogenization and specialization of studies. The risk was of knowing almost everything on very little, neglecting alternative approaches and the important relations between variables of different fields of economic research or of other social sciences.
My initial fields of research were growth and development theory, labor and education economics and economic policy. In the theory of growth, I was fascinated by two-sector models (Feldman, Mahalanobis, Hicks, etc.) and multisectoral ones (Von Neumann, Pasinetti, etc.). These models seemed to me more complete than the celebrated aggregate Solow growth model. Two-sectors and multisector models could explain both growth, structural change and relative prices changes, and in Pasinetti’s version also a little bit of the complex relations between aggregate demand, aggregate supply and technological change. In the book on the theory of growth that I edited with Giangiacomo Nardozzi in 1971, we presented a collection of the most important growth theory papers translated into Italian, and, in our introduction, we explained the importance of disaggregated models for the controversy on capital and distribution and for a better understanding of real growth processes. In 1970 I had translated into Italian Capital and Growth, the important book written by the British Nobel prize laureate John Hicks. In my introduction to the volume I analyzed the rich implications of his two- sector model for the study of dynamics, and of capital and distribution theory.
In that period, I alternated theoretical, empirical and economic policy work. I was convinced that labor and industrial relations were of crucial importance in any development process, that growth theory and development theory had to be connected and that in economic policy medium and long-term visions were essential, both for the State and the enterprises.
Of course, in the short-run, markets, expectations and tastes can abruptly change, as big waves rising in the ocean, but any good captain will steer the ship in stormy weathers while firmly maintaining the final direction of its journey. Unfortunately, so many politicians, top managers and entrepreneurs have a short-sighted and close-minded approach, cultivating their short-term interests and damaging the future of their countries or their firms.
In my first book, Programmazione e sindacati in Italia, 1970, (Planning and Labor Unions in Italy), I tried to analyze the complex relations between the, rather unsuccessful, state indicative plans attempted in Italy from the late 1950s to the beginning of the 1970s, the unsteady behavior of labor unions and entrepreneur organizations, and the actual working of the Italian economy in a phase of fast growth, but also of turbulent structural and social changes and rapidly growing internationalization.
In 1970, I obtained the role of assistant professor in Economic Policy at Bocconi University and a lectureship in Comparative Economic Systems at the University of Padua. So, I divided my working weeks and my research work in two communicating sections: the study of macroeconomics, development and economic policy and the comparison between different varieties of capitalisms and socialisms. I did not confine my analysis, as many comparative specialists did, on the important basic differences between capitalism and socialism, but I tried to also explore the thin texture flowing out in each country from a mix of history, systemic and institutional changes, development patterns, national characters, size, and economic and political power. So, in this view, the Soviet Union was markedly different from most Eastern European countries, though they had in large part followed its centrally planned model, and it was even more different from Maoist China and Fidel Castro’s Cuba. Big diversities existed also among Eastern European countries, between them and Tito’s Yugoslavia, as well as among most capitalist states.
In the 1970s, especially after the 1973-4 first great energy crisis, the “Golden Age” of growth of the West (the US, Western Europe and Japan included) came to an end. The rate of growth of real GDP fell; the cost of oil and other raw materials surged; high inflation and high unemployment persisted; in several countries terrorism was raging and social problems were worsening. Yet, the end of the Vietnam war and the gradual consolidation of the EEC (European Economic Community) reduced some sensitive international tensions. In the Soviet Union and Eastern Europe, the consequences of the two great energy crises (1973-74 and 1979-80) were delayed and more gradual, but contributed to determine the economic and political crises of the 1980s.
In these years, I began a long-ranging research program. Firstly, I studied and visited the US and several Western and Eastern European countries and analyzed the main systemic differences between capitalist and socialist countries (Sistemi economici capitalisti e socialisti, 1974).
Secondly, I studied the economic development of three important Western economies in a comparative framework. I wrote a book on Italy (L’ economia e la politica economica in Italia, 1977), another on the United States (Il sistema economico americano, 1978) and I edited a volume on West Germany (L’economia tedesca, 1981). In particular, my book on on the Italian economy and its economic policy was a success. It was adopted in several University courses; it had several reprints and three editions (1977, 1979 and 1982) and was translated in Japanese and in Chinese. The empirical core of the book was partly due to a research on the real aspects of the Italian economic development conducted at Bocconi with a group of colleagues and friends (Giorgio Lunghini, Giangiacomo Nardozzi, Fabrizio Onida, Francesco Silva, Ferdinando Targetti, Renata Targetti Lenti). The book was based on a macroeconomic and on a disaggregated analysis of Italian development and its relations with inequalities between families and regions. It included a critical view of the short and long-term economic policies and of the weak, timid approach, both of the state and the firms, as regards regional differences, extensive investment, employment, higher education, on- the- job training, R&D expenditures and the environment.
Finally, I began to analyze the way in which a country like Japan had experienced over two decades of full employment and of extraordinarily rapid economic development. In the late 1960s and in the 1970s, I had contributed to the initiatives of two important Italian institutes for the study of international affairs, IAI and ISPI, and to launch at Bocconi the Isesao – Istituto di Studi Economico-Sociali per l’Asia Orientale, then directed by Innocenzo Gasparini and sustained by the passionate work of Gianni Fodella, Gianni Salvini, and Maria Weber. We had perceived that a deeper understanding of the development patterns of a growing economic giant as Japan, of a big potential one as China, and of other important realities, such as South Korea and Indonesia, was essential. Eastern Asian countries were destined to change the world economic and political equilibria, and Italy and other Western countries were at that time ignoring, or heavily undervaluing, their rapid and profound changes and their growing influence on our economies.
The Eighties: Padua, Bocconi and Turin Universities, Japan and China
I had visited Japan twice for short stays, wokshops and International Conferences and in 1982 I was invited at the Institute of Economic Research of Kyoto University as a visiting professor. It was an important experience. I could enjoy the knowledge and friendship of the director of the Institute, professor Hisao Onoe, of other eminent Japanese economists and of Harvey Leibenstein, who was visiting the Institute in the same period. Moreover, I could understand the depth of a very different culture and another way of looking at economics and world events.
My first reflections on the Japanese economy were published on a couple of papers in the 1980s. A few decades later, profiting also from some meetings and discussions held in the 1990s with two great Japanese economists, the late Michio Morishima and Masahiko Aoki, and with Andrea Boltho and Angus Maddison, I up-dated and revised my interpretation of the Japanese economy in “Growth and Crisis in the Japanese economy”, chapter 3, in my 2017 book The Economic Rise of Asia: Japan, Indonesia and South Korea.
In 1980, I had become full professor of Economic Policy at the Faculty of Statistics of Padua University, and I continued to maintain also a lectureship of Economic Policy II at Bocconi University until 1984, when I moved to Turin University to teach Economics and then Economic Policy and Comparative Economic Development. I was happy to come to work with well- known colleagues as Terenzio Cozzi, Bruno Contini, Michele Salvati, Giorgio Brosio, Claudio Napoleoni, Franco Momigliano, etc. For some years at the end of the decade I had also the honor to be the director of the Laboratory, then Department, of Political Economy “Cognetti De Martiis”.
In the Summer of 1982 I had been invited, with a delegation of Italian comparative economists, to visit China. We had a series of meetings with Chinese politicians and economists, and many visits to the main cities, industrial plants and rural communes. Deng’s economic reforms had begun in 1978 and had been gradually extended thereafter. Three matters mainly struck me. First, at that time, the objective of the country’s leaders was to partly imitate the Hungarian reforms, with limited openings to the market for a part of the rural production and for small industrial and services activities, while in China the trend toward more market and more decentralization subsequently has evolved much more rapidly and extensively. Secondly, there was a great contrast between the living conditions in the main cities, in the rural zones close to the cities and in the more internal rural zones. The sharp increase in inequalities was already evident. Thirdly, we saw, in an internal rural zone, the completion of a road-bed, almost completely made with bare hands, with very scarce, even rudimental, tools. It was a form of original accumulation of capital, but with a great human effort under the torrid sun, and a labor productivity extremely low. Yet, the country’s economy was briskly accelerating, and, as I observed also in other visits to China, the drive towards better living conditions was extreme, with historically unprecedented rates of investment. In the last four decades, I continued to study the rapid advancement of the Chinese economy. In some writings and in my 2015 book, The Economic Rise of China and India, I tried to give a partially new interpretation of the Chinese economic development. I defined the present China as the economy of the triple mix, a mix of planning and the market, of centralized and decentralized decisions, of public and private ownership of the means of production. After 1978, the pendulum had gradually switched towards more market, more decentralization, more private ownership, but the leaders of the Communist Party have continued to maintain a firm direct and indirect hold on the economy, through various means, including the conservation of planning directives, public banks, and State firms in the strategic sectors; the action of public local authorities; a strict control on China’s currency, stock exchanges and capital movements; constraints on mass media and Internet big data; a limitation of civil rights, and a tough fight against corruption.
One basic element of my interpretation of the Chinese economy after 1978 was an analytical tool I had previously introduced for the study of the US economy and of some Western European countries, the concept of the Fordist model of development. This concept derives from the macroeconomic part of the concept of Fordism introduced in the 1930s by Antonio Gramsci to analyze the American economy and society, characterized by big industrial corporations, such as the Ford automobile group, operating with Taylorist practices, the use of large productive chains and a strong alienation and division of labor. My approach has also some points of contact with the Verdoorn- Kaldor model, where production and productivity are positively associated and economies of scale are very important. A large and rapidly growing economy, such as the US in the 1910s and 1920s, several Western European economies and Japan in the 1950s and in the 1960s, and China in the 1980s and 1990s, has great economies of scale and thus high rates of growth of productivity. This can be used to increase investment, employment, and unit wages and to reduce the prices of the goods produced in the Fordist sectors. A rapid increase in consumption, net exports and new investment, and so in aggregate demand, real GDP, productivity, etc. will follow. In the United States in the 1910s and 1920s the central Fordist sector was the automotive industry and the other associated sectors (steel, energy, roads building, etc.). In the 1950s and 1960s a similar process was present also in Japan and in several Western European countries. Instead, In the 1980s in China, the Fordist model was accompanied by some post-Fordist elements and the central Fordist sector was the electric domestic appliances industry, accompanied in the 1990s by the ICT and the ship industries, and then, in the 2000s, by automobile, airplanes, fast trains, internet, and associated industries. The model was initially favored by the radical 1978-79 agricultural reforms, which strongly contributed to increase the productivity in agriculture. A large part of the growth of the agricultural surplus was channeled to finance the industrialization of the country. There were enormous rates of saving and of investment, with abundant capitals supplied to the firms by the State and State banks, by local governments through their TVEs (Township and village enterprises), by, at that time disguised, private capital, and by multinationals operating into the SEZ (Special Economic Zones).
At first, in the 1980s and in the 1990s, in the modern sectors China has mainly bought, or imitated, or adapted, more advanced foreign technologies. Yet, it increased very rapidly the educational level, the expenditures in R.&D. (from 0.6% of GDP in 1990 to 2.1% in 2017) and the knowledge acquired by its workers engaged in modern Chinese firms and by its engineers and experts operating in the Joint-ventures with foreign multinationals. In the 2000s China had strongly reduced its technological gap. In some activities, such as electric batteries and vehicles, solar panels, PCs, mobile phones, internet firms, etc. China has reached the upper section of the technological frontier. Private Chinese firms have also bought the control of foreign middle and high- technology firms, such as Volvo, Pirelli, the PC division of IBM, the mobile division of Motorola, etc.
Comparative economic development
In the 1980s and in the following decades, I also focused my interest on other great Asian economies: India, Indonesia and South Korea. For India I had the pleasure to discuss some points of my analysis with the late Angus Maddison, and with Sanjay Reddy, Sunanda Sen, and Giovanni Balcet. India, like China, was bound to become an economic giant. Yet, while at the end of the 1970s it had a per capita GDP higher than China, in the 1980s China has rapidly surpassed India and the economic gap between the two countries had then continuously increased until 2014. What are the reasons for such widely diverging trends? There are complex and multiple causes, but probably the most important one has been the persistence of large divisions between castes, ethnic, linguistic and religious groups in the Indian society. In the economy these divisions and a biased economic policy have contributed to determine the sharp dualism between the formal and the informal economy. In the formal economy regulations are strict and heavy, but productivity, wages, welfare benefits and labor security, are much higher. In the informal economy (which accounts for over 85% of total employment) productivity and wages, or incomes, are low, and jobs and welfare are often precarious. Consequently, dualism dominates also the society. The opportunities to reach higher education and good jobs, high consumption levels, etc. are mainly reserved to people whose family members participate in the formal economy. The possibility to profit from the advantages of the Fordist model of development is so reserved to less than one fifth of the population, while in China it regards over half of its population. Moreover, though for software, medicines, steel, cars, etc. India has obtained some good results, on the whole its technological progress is hampered by the low expenditures in R.&D. activities, which in percent of GDP have stagnated around 0.6%. Yet, since 2014, in India the rate of growth of real GDP has surpassed that of China, while per capita GDP growth remained slightly lower, because of the higher rate of growth of the Indian population. But, of course, GDP is a rough and very limited indicator. At present, India has less per capita income, less industrialization, more mass poverty, but more democracy, lower income inequalities, lower pollution and less ageing than China.
South Korea and Indonesia are the other major Asian economies that I have studied with deep and growing interest since the 1980s. The case of South Korea had always puzzled and attracted me. How was it possible that a very poor country, plagued by the terrible consequences of the bloody Korean war, was able to experience more than half a century of rapid economic growth, interrupted only by the 1997-8 severe East Asian financial crisis and just partially weakened by the 2008-2009 American and European Great Recession? How was it possible that a relatively small country has been able to become a strong world competitor in medium and high-tech sectors, such as automobiles, ships, PCs, smartphones, while evolving from a brutal dictatorship to a full democracy?
After several meetings and workshops with reputed South Korean Economists, such as Moon Woosik and Kim Joon-Kyung, in 2010 I spent a semester as visiting professor at Seoul National University. Moreover, in the Summer of the same year, in Berkeley, I could benefit from illuminating discussions with Irma Adelman, the originator of South Korea’s economic strategy. I have therefore tried to answer those questions in my 2017 book The Economic Rise of Asia: Japan, Indonesia and South Korea. My main thesis is that the South Korean economic success was principally due to a mix of five elements: a) the post-WW2 economic reforms, including an agrarian reform, which strongly contributed to reduce economic inequalities; b) the active developmental policy of the government, which heavily sustained the rapid industrialization process, the expansion of exports and the growth in knowledge; c) the high rates of saving and of physical investment; d) the high propensity of main corporations to invest in new machines and new products at first by means of imitative processes and then also by autonomous innovations; e) the partial exploitation of the Fordist-Toyotist model of development since 1987; e) the almost ferocious determination of most Korean families to expand the future job opportunities of their children by means of long and intensive studies at schools and Universities. It is not a case if South Korea has become one of the top countries in the levels of spending in public and private education and in R.& D. as percent of GDP, and has been able to reach very high levels in the quality and quantity of per capita education and in various high- tech economic activities.
In the last decades, also Indonesia has reached democracy and a relatively good rate of economic growth, but its investment in education, R.& D. and infrastructures have been limited and in several industrial and mining sectors the major corporations are controlled by foreign capital. Yet, the large population and the wide extension of the domestic market might provide growing economies of scale and of network, though persisting economic and social inequalities and unemployment are higher than in South Korea and in Japan, while education, health care and welfare are much lower.
In 1970-71 at the University of Padua I had taught the first course in Comparative economic systems in Italy, decades after the appearance of the discipline in the United Kingdom, the United States and several other countries. In a few years the subject entered into many other Italian University programs and several economists began to specialize in comparative studies. In 1984, in Florence, with Giangiacomo Nardozzi and a group of colleagues and friends, we founded AISSEC (The Italian Association for the study of Comparative Economic Systems), with an initial membership of 173 scholars and I was elected president of the new association for the years 1984-85. Several European economists participated in AISSEC’s workshops and conferences. So, in 1989 at an AISSEC conference at Urbino University, with a group of Western and Eastern European scholars, we decided to found EACES, the European Association for Comparative Economic Studies, which in 1990 held its first general Conference at the University of Verona, mainly thanks to the scientific and organizational skills of Silvana Malle. In the Conference I was elected president for the years 1990-1992. EACES initial members were 228, coming from 31 countries. Both AISSEC and EACES have organized a number of workshops, general conferences and other initiatives, and have contributed to promote, under the impulse of Marcello Signorelli and many other European, American and Asian colleagues, two World Conferences on Comparative Economics held in 2015 in Rome and in 2017 in Saint Petersburg, each of them with over 800 participants.
In the 1980s, in Europe, the comparative economic studies had been dominated by the comparison between systems, the socialist and the capitalist systems, but the fall of the Berlin Wall in 1989, the beginning of the transition in Eastern Europe and the crisis of the Soviet Union had radically changed the terms of the debate. I encouraged the passage to a broader approach and tried to stimulate the use of the instruments of the comparative method to explore, both at the macroeconomic and microeconomic level, the main differences and similarities between countries; agricultural, industrial and tertiary activities; the policies of governments and firms; development strategies; investment, knowledge and welfare policies, etc., taking into consideration the diversity and similarities in institutions and in development and historical conditions.
Labour problems and policies
During the 1970s, 1980s and 1990s, I had studied also various problems of labor economics, industrial relations and macro-economic policy. As regards labor, I analyzed in particular the relations between investment and employment and between working time, employment and the quality of life. The empirical analysis of several countries shows that, on the long run, total employment has a good performance if the growth rate of real investment is sufficiently high. Yet, there are two kinds of investment: intensive investment, which aims at increasing productivity, but not production and employment, and extensive investments aimed at rising production and employment. Intensive investments are frequently labor-saving: in the short run they help maintaining or increasing international competitiveness and net exports, but, if not accompanied by massive extensive investment, they weaken employment and learning by doing processes, thus increasing social problems and the growth of the domestic economy. Therefore, a wise government policy would primarily encourage extensive investments and the introduction of new goods and services helping the upgrading of the technological content of the productive system. This has been extensively made in Japan in the 1950-1989 years and in South Korea since the 1960s, much less in Southern European countries.
In my analyses of employment, I was probably the first economist to use, since the 1970s, the concept of the employment rate, defined as the percentage of total employment on total population or on working age population. This indicator is complementary, and in some aspects superior, to the more widely used concept of unemployment rate, which does not take into adequate account the existence of discouraged unemployment, i.e. of people that abandon the active research of a job after some failed attempts and therefore disappear from the statistics of the labor force and of unemployment. I also introduced a new concept, a sort of modular working time system, called in Italian fasce d’orario. This concept has been presented in several international conferences and workshops, in some papers and in a book I edited in 1988 (Tempo di lavoro ed occupazione: il caso italiano). It basically consists in the attempt to modulate working time, not only on the basis of the choices of the firms, or of rigid collective agreements, but also on the basis of the preferences of individual workers, according to their life-cycle, their family and health conditions, etc. I worked up a general proposal, which anticipated some advancements in the working time legislation and collective agreements of the following decades in some North European countries and in a few other economies. My proposal might reduce the paradox, prevailing even in rich countries, of the co-existence of people with a long, exhausting work-load for several decades of their working life, and a lot of people without any work, or with casual, precarious, usually poorly paid, unsatisfactory jobs. The former live for the work, rather than working for living; the latter badly suffer from lack of working opportunities and the related earnings. Economists and other social scientists widely discuss about equity in income distribution, not enough about equity in working time, with their deep consequences on employment, income disparities, free time and quality of life.
In 1930, John Maynard Keynes, in his famous speech “The Economic Possibilities for our Grandchildren” affirmed that in about a century (in 2030) incessant capital accumulation and technological change, the law of compound interest and economic growth might multiply by eight the standard of life of progressive countries so that ”on the long-run mankind is solving the economic problem” and that making “what work there is still to be done as widely shared as possible…” it would be enough for everybody to work for “three-hour shifts or a fifteen -hour week..” Unfortunately, his view has proved to be utterly utopian, while reality has been much worse. Although, up to 2019, Keynes’s forecasts on long-run economic growth were even inferior to the economic results obtained by main industrialized and emerging countries, the economic problem is far from been solved, and employment, working time, income and wealth are very unevenly distributed between and within the countries. Keynes had largely undervalued three phenomena. First, technological progress, while it favors the growth of consumption goods and services, helping to satisfy old needs, continues to create new goods and services dramatically enlarging the number of needs, so that the economic problem is far to be solved. Technological and economic advancements make old dreams to be new needs. In the mid-1880s to be able to instantly communicate at great distances, or to have the probability to win a cancer, or to travel on ground much faster than on horseback, or to fly, was a dream; now all this is possible and it has become a need, but a need with a cost. So many people are willing to work long and tiring hours in order to be able to pay for these new needs, and if they cannot obtain a good job or enough money to satisfy them, they feel dejected. But there is a second phenomenon, even a worse one. While Keynes imagined that around 2030 the economic problem would be solved and so we will think that “.. the love of money is detestable ….and we shall once more value ends above means and prefer the good to the useful..”, the present trend is instead towards a growing dominance of big money in a large part of the world. According to WID data, in 1980 in the United States the richest 1% of the population controlled 10.7% of national income, while in 2014 its percentage was almost the double, superior to 20%. In terms of net wealth the situation was even worse. In 2014 in the US the richest 1% families accounted for over 40% of net national wealth and also in a socialist country like China the percentage had risen to over 27%. There has been, in the last four decades, a sort of law of increasing greed, with many insatiable billionaires, and CEOs surpassing over 500 times the average income of the employees of their firms.
A third phenomenon, technological unemployment, acutely perceived by Keynes in his 1930 speech, but considered a temporary problem, solved in the long-run by a wise sharing of worktime, is on the contrary much worse to-day. The progress in ICT, AI (Artificial intelligence), robots, big data, etc. are not only rapidly penetrating into industry, but also into many services and even agricultural activities, reducing the need of employees, or maintaining only a number of menial, underpaid jobs, where it is not practicable, or convenient, to introduce costly innovations. Since the 1970s rapid de-industrialization and unregulated globalization have contributed to worsen the problem in the US and several other industrialized countries. The shift from relatively well paid and stable jobs in manufacturing unionized sectors, and, more recently, from some structured service sectors, to unemployment or more precarious, badly paid, tertiary jobs, has heavily contributed to increase income and wealth differentials and has gradually paved the road for the appeal of populist leaders to suffering members of the middle class.
Back to economic policy and development studies
In the 1980s and in the following decades I have also contributed to the debate on macro-economic policy and economic development with a series of textbooks, monographic volumes and papers. My textbook on Economic Policy had four editions and many reprints. The fifth 2010 edition was also enriched by three additional chapters by Roberto Burlando and Aldo Geuna. The textbooks were in part innovative since they gave equal importance to short-run macro-economics and long-run growth and development theory and mixed theory with institutional and empirical analyses taking into account many aspects of contemporary economic events regarding Italy, the EU, the US, China and several other countries.
The volumes were, the already cited: The Economic Rise of China and India; the Economic Rise of Asia: Japan, Indonesia and South Korea; but also L’Europa e l’economia mondiale, Carocci 2002 (Europe and the World Economy), and L’economia americana da Roosevelt a Obama, Carocci 2010. Later on, in November 2018, I published with Palgrave Macmillan the new English edition, The American Economy from Roosevelt to Trump, fully revised and updated and enriched by two new chapters. In this book I suggested three main interpretative lines, which contribute to explain the different phases of American development in the 1870-2018 period: the existence of the advantages of the frontier until the beginning of the XX° Century; the Fordist Model of Development, with its positive effects on growth in the years 1908-1929 and 1950-1970 and its negative impact in the Great Depression; the attempt to create an economic and financial empire in order to face some growing structural weaknesses appearing in the American economy from the 1970s up to now. The main weaknesses were: the crisis of the Fordist model of development; the dependence on imports for strategic raw materials; the strong increase in inequalities in wages, income and wealth since the 1980s; the rapid de-industrialization, partly associated to unregulated globalization, automation and big data; the structural deficit in the balance of current accounts; the excessive financialization of the economy; the worsening environmental conditions, etc. In the last three chapters of the book I have analyzed the economic policy of Obama, the rough, conservative and populist approach of Trump and the main causes of the relative economic decline of the US economy, confronted with the rise of giant emerging economies such as China and India, the aggressive Russian international policy, Islamic terrorism and the persisting turmoil in the Middle East and in North Africa.
Among the many papers and chapters I wrote in the last two decades, I will focus on two chapters and a few papers. The chapters regard the long-run view of the Italian economy. The first one (Growth and Crises of the Italian Economy) was published in a volume edited by Riccardo Bellofiore and Giovanna Vertova (Elgar, 2014) and tries to explain the long-run determinants of the structural crisis of the Italian economy, begun in the 1970s and aggravated in the 2000s. The second one (in Italian) Le vie dello sviluppo (2014), examines the causes of the structural crisis and of the severe consequences of the Great Recession on the Italian economy, and tries to outline possible policies to re-launch the enfeebled Italian productive system.
The papers regard the analysis of structural change and economic development in China and India (Valli and Saccone 2009 and 2015) and the causes and consequences of the Great recession in the US and in the European Union (Valli, 2017). In particular, the latter explores the complex feedback between stocks and flows, which had a great impact on the depth and duration of the financial and real crises and strongly influenced the effectiveness of the economic policies attempted by the governments and central banks.
In a working paper written in 2011 with Donatella Saccone, Economic development and population growth: an inverted-U-shaped curve, we introduced the idea that it can exist a sort of Kuznets curve
In the relation between the dynamics of population and the rate of growth of per capita GDP. For distinctly different reasons, countries with a very low and very high rate of growth of the population tend to have a lower rate of economic growth than countries with an intermediate rate of growth of the population. This preliminary result will be checked with a more comprehensive and updated empirical analysis in a future contribution.
In the 1990s and in the 2000s I have also collaborated in the rise of physical and human capital at the University of Turin. As member of the Board of Directors of the University and president of the Commission on University buildings for eight years, I have cooperated in the improvement of University facilities including the new urban campus “Luigi Einaudi” designed by the great British architect Norman Foster. As regards higher formation I founded with Terenzio Cozzi, Onorato Castellino, Bruno Contini, Giorgio Brosio, Elsa Fornero, Enrico Colombatto, Giovanni Zanetti and other colleagues, a Ph.D. course in Economics and CORIPE, a Consortium which organized Master courses in Economics, in Finance, and in Health Economy and Policy, and which I directed for 20 years. I also contributed in the activities of the Collegio Carlo Alberto in Moncalieri and then in Turin, and of the Luigi Einaudi Foundation in Turin. Since 2014, I have also been associate director and then vice—president of OEET (Osservatorio sulle economie emergenti- Torino) founded with Mario Deaglio and Giovanni Balcet and located at the Collegio Carlo Alberto in Turin. The Observatory studies the main emerging economies (China, India, Indonesia, Brazil, etc.) and disseminates the results of its activities by means of its site (https://www.osservatorio-economie-emergenti-torino.it), workshops, seminars, lectures and a quarterly newsletter.
At present I am working at two new mid-term projects. A book on the economic confrontation between China and the United States and a study on the relations between Power and Economics, a problem that in present times has been more explored by political scientists and sociologists than by economists, while it has a great and growing importance for a deep comprehension of the world economy.