A “festival of economics” sounds like a contradiction in terms. What next? A bacchanalia of boredom? A celebration of sophistry? Thomas Carlyle dubbed economics “the dismal science” for good reason.
This year’s theme, merit, diversity and social justice, could not have been more timely. There is a fierce global debate going on about the subject, with both the right and the left united in denouncing meritocracy as a sham. Italy has also been in perpetual turmoil about the relative claims of family loyalty and open competition, la dolce vita and self-discipline, new men and ancient traditions.
Italy is in many ways the world’s great pioneer of meritocracy. Venice became a global power in the early middle ages by embracing open competition: governed by a doge, who was selected by a council of wise men, rather than by a royal dynasty, it showered opportunities on new men and new economic forms, principally commenda, prototypes of today’s joint-stock companies. Venetian sailors, estimated to number 36,000 in the early 15th century, popped up as far away as China. Renaissance Florence saw “the discovery of the individual,” in Jacob Burckhardt’s evocative phrase, meaning the discovery of the individual as a self-defining creature rather than as a member of a clan. The Risorgimento was a liberal revolution against feudal princelings.
Italy has produced some of the world’s great meritocratic thinkers. Niccolò Machiavelli may have dedicated “The Prince” to Lorenzo de Medici with his signature cynicism but he argued that “open republics” are more successful than principalities because they choose their leaders on the basis of their fitness for the job and can get rid of them when their job descriptions change. Vilfredo Pareto believed that history is shaped by the vital few and that the key to social progress is “the circulation of elites.”
Italy also has a tradition of calling on meritocratic rulers when the times demand it, including, in recent years, Mario Monti, Lamberto Dini and Carlo Azeglio Ciampi. The current prime minister, Mario Draghi, is meritocracy made flesh: He trained as an economist at MIT, worked for the World Bank and Goldman Sachs, and, after a spell as Italy’s central banker, ran the European Central Bank during the euro crisis, famously declaring that he would “do whatever it takes” to save the euro. It is hard for an Englishman to listen to Italians praising their current leader for his various virtues — his consummate professionalism, civic-minded patriotism and aversion to cheap populism — without a sense of shame about Britain’s prime minister. “He understands the nitty-gritty of a market economy,” says Mario Calvo-Platero, a veteran Italian journalist. “He also knows how to get things done.”
Yet there is also another side to Italy that smothers the principle of merit. “Nepotism” is, after all, derived from an Italian word, nepotismo. In 1297, Venice excluded new talent from its governing council in what Venetians came to call La Serrata or the closure, which culminated with the publication of an official list of top families, the Book of Gold (Libro d’Oro) in 1315. Decline followed. The Renaissance collapsed in fleshly decadence.
Today, Italy’s technocrats are temporary alternatives to two very different groups: a permanent ruling class of political bosses and placemen, bound together by loyalty and clientelism, and populists who rail against this system, dubbed La Casta in a best-selling book in 2007, only to replace one form of incompetence with another. This is the country of Silvio Berlusconi more than Mario Draghi.
This ambivalence about the merit principle runs through the backbone of corporate Italy, the family-owned midsize companies that employ most of the country’s private-sector workers and give it its unique flavor. From one perspective, these companies limit the spread of public-sector clientelism: They operate in the open market and transmit skills from generation to generation. If they stumble, they have only themselves to blame. But from another perspective, they are barriers to open competition, with family ownership discouraging outside talent and provincialism limiting opportunities. A few become global stars: Technogym in exercise equipment, Zegna in fashion, Lavazza and Illycafe in coffee and Eataly in restaurants and food distribution. Most punch below their weight.
The overall mood of the conference was skeptical about the case for meritocracy. Michael Sandel got a warm reception for his condemnation of the “tyranny of merit.” Pedro Gomes talked enthusiastically about how “Friday is the new Saturday.” Numerous participants focused on the difficulties of creating a meritocracy: How exactly can you define “merit”? How do you measure it even if you can define it? How do you provide equality of opportunity in a world of growing inequality? And, besides, isn’t meritocracy just an excuse for plutocracy? Local activists told tales of social exclusion and racial discrimination.
I have argued elsewhere, as I argued at the conference, that there are compelling answers to all these questions. I have also argued several times in my columns, as I argued at the conference, that the best solution to social exclusion is to search more vigorously for talent in every corner of the population (and in every form that it might take) rather than to focus on group rights and wrongs. But much as I enjoyed the to-and-fro of the proceedings, I couldn’t free myself from one overwhelming thought: that the last thing Italy of all places needs is a large helping of skepticism about meritocracy. Whatever is wrong with meritocracy is as nothing compared with its opposite — the suffocating system of patronage and clientelism that smothers the country.
Italy’s lack of meritocracy is contributing to its corporate malaise. Only nine Italian companies make it onto the 2022 Forbes list of the world’s 2000 biggest public companies, with the biggest, the electricity company Enel, coming in at number 110 followed by the oil-and-gas conglomerate Enel at number 11. Fiat, the carmaker that built modern Turin, is now part of a conglomerate called Stellantis headquartered in Amsterdam. Ferrero, the maker of Nutella, has decamped to Luxembourg, despite the fact that inhabitants of the company’s hometown of Alba, near Turin, wept in their thousands when the company’s founder, Michele Ferrero, died. The company that produces Campari, the liquid accompaniment to la dolce vita, moved its legal seat to the Netherlands, Bulgari has been subsumed into France’s LMVH and Gianni Versace International is owned by Michael Kors USA.
Lack of meritocracy is driving talent abroad. American universities are a haven for Italians like Luigi Zingales, a star finance professor at the University of Chicago’s Booth Business School, who said that, as a young man, he faced a choice between staying in Italy and spending years as a bag-carrier to a senior professor, with every chance that the professor might offer his patronage to somebody else, or going to America and being judged on his publications. Draghi’s supervisor at MIT was another ex-pat Italian, Franco Modigliani. The World Bank employs so many Italian economists that, during the sweltering summer, Italian is the dominant language at its private country club – sorry, “recreation center.”
With talent fleeing, corporate Italy is becoming a gerontocracy. The country’s most prominent businessmen (and “men” is deliberate) are octogenarians: Berlusconi (85), Leonardo Del Vecchio of Luxottica (87), Luciano Benetton (87), and Giorgio Armani (87). Half of first-generation family firms have an owner-boss who is over 60, according to a 2017 study by Guido Corbetta, of Bocconi University, and a quarter have one who is over 70.
Above all, lack of meritocracy is reducing the country’s productivity, and hence its long-term prosperity. Mr Zingales has teamed up with another economist, the University of Maryland’s Bruno Pellegrino, to examine the impact of meritocracy on productivity. They constructed a meritocracy index of advanced countries on the basis of two things: the World Economic Forum’s survey of who holds senior positions (essentially whether they are appointed on the basis of connections or qualifications) and, more broadly, the level of meritocracy in the wider society (quality of government, rigidity of employment laws, quality of judicial decisions, size of the black market, vibrancy of the high-tech sector). Sweden comes at the top and Italy at the bottom.
The authors also demonstrated that a low meritocracy score is becoming more of a problem for productivity as information-technology takes root. Italy’s loyalty-based management style had no negative consequences for productivity growth in the decades before 1995. But when the IT revolution took off in the 1990s, loyalty-based management reduced Italy’s productivity growth by between thirteen and sixteen percentage points. The penalty for refusing to embrace meritocracy is growing fast.
The most compelling argument I heard all week was about quality of life. America’s uber-meritocrats may be more productive than their Italian equivalents with their 80-plus hour work weeks and lavishly-remunerated berths at giant consultancies or law firms or investment banks. But at what cost? Neglecting their children, rushing their meals, answering e-mails late into the night. By contrast, Italians enjoy long lunches and even longer dinners (Turin was the birthplace of the slow-food movement) while working for companies that operate on a human scale.
I, too, prefer long lunches to bloated work-hours, particularly when so much work time these days is spent filling out convoluted forms from today’s equivalent of Charles Dickens’ circumlocution office, the HR department. Yet ultimately the argument is unconvincing, not least because so many bright young Italians are voting with their feet and moving to the US. In the long run you can’t preserve the good life, with its slow food and lazy evenings, without having a productive economy to fund it. Meritocracy is not the antithesis of a civilized society, but the precondition for its survival.
(Corrects the spelling of Carlo Azeglio Ciampi in the sixth paragraph.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Adrian Wooldridge is the global business columnist for Bloomberg Opinion. A former writer at the Economist, he is author, most recently, of “The Aristocracy of Talent: How Meritocracy Made the Modern World.”
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