Italy “Abolishes Poverty” by Spending More Money

Economists have pondered for centuries, if not millennia, how to get rid of poverty, starvation, and all other kinds of social ills. Seemingly they did not think about asking Luigi di Maio, the 32-year-old deputy prime minister of Italy.

When the new Italian government, which is headed by di Maio’s Five Star Movement and the right-wing Lega, presented its first budget in September, di Maio was in the mood for some celebration. After all, he said, “We, in a decisive manner, with this budget law, will have abolished poverty.”

It is a budget that has caused much controversy ever since. Indeed, it is set, as of this week, to lead to a major clash between Brussels and Rome and could lead to another crisis in Europe, and even more so, for the euro, potentially speeding up the imminent fall of the common currency.

But what magical policies are included in this miraculous budget, one has to wonder. To put it into two words: more spending. Italy was planning to have a deficit of 0.8 percent of GDP in 2019; now this will rise to 2.4. New programs to the tune of 20 billion euros, all promised during the tumultuous elections earlier this year, will be implemented. This includes a “minimum income” — akin to a universal basic income — of 780 euros a month as well as tax cuts for at least 1 million Italians. The minimum pension age will also be lowered.

Whether all of this is a good idea for a country that already has one of the highest government debts in the world — currently standing at 131.2 percent of GDP — may be doubted. Expecting that the government “will have abolished poverty” also seems unlikely. Rather, these Keynesian policies will in all likelihood lead to even more underwhelming economic growth (until it turns to a contraction), higher unemployment, and, with new incentives available, increased corruption.

Even some in the Italian government seemed to think that. While di Maio was celebrating his achievement on the balcony with his fellow Italians, Giovanni Tria, the economic minister who has to sign the budget, refused to do so at first, only resorting to it after having his job threatened if he rebelled. Indeed, anyone rebelling could be in for a treat. Rocco Casalino, the spokesperson of di Maio and the Five Stars, said that if the Treasury can’t find enough money for all the programs, “then we’ll devote the whole of 2019 to getting rid of all these pieces of shit.” Or, to put it differently, “a mega-vendetta is ready.”

The current events in Italy show how the only government of Europe in which two “populist” parties rule together in a coalition, having swept away the establishment, is doing its best to do even worse than its predecessors, trying everything to finally drive the Italian economy against the wall. Conservatives, and curiously enough, even some liberals, have been cheering on the government of the Five Stars and Matteo Salvini’s Lega ever since it came into power.

The two parties are a prime example, however, that being against the status quo is simply not enough — not even if parties are portraying themselves as being on the right. Rather, it is crucial to look at what they are in favor of. As I wrote when the new government took over, Italy’s populists might be occasionally correct in what they are opposed to or at least skeptical of, such as the EU, but they are quite wrong on what they want to implement instead. Indeed, what the Italian government shows most of all is that all forms of collectivism, regardless of which side of the aisle they come from, are dangerous.

Speaking of the EU, the seemingly imminent clash between the European Commission and the Italian government would see two different sorts of collectivism fight over who is right (or more wrong). The EU could penalize Italy for not sticking to the guidelines put out by Brussels. Legally speaking, it seems to have every right to do so. But it has never done so, despite practically every member state having broken the fiscal rules at some point. Only now that the violators are Euroskeptic does it seem to matter.

In any case, liberty will lose out in the battle: If the EU abstained from penalizing Italy, the next economic crash would only become worse and more fiscally responsible countries would need to pay the bill. Meanwhile, if the EU tried to penalize di Maio and Salvini, the two could portray themselves better than ever before as the last knights against the centralized and bureaucratized European Union. For those trying to put forth a liberal critique of the EU, however, it would only get tougher.

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