ROME: Among the many devastating effects of the current global financial crisis, one of the most pernicious in the developed world is the upward trajectory of the unemployment rate for youth, which rose by six percentage points in the OECD area from 2007 to 2009, with Spain experiencing an alarming 42% youth unemployment rate in 2010. When young people cease to be the engine of an economy, long-run economic growth is endangered, and social unrest becomes a real threat to the democratic political order.
In this sense, Italy represents an extreme case, since even highly skilled young workers, though usually over the age threshold of the youth-unemployment rate (29.5% in the country), are being marginalized. Nevertheless, understanding this phenomenon and its political consequences sheds light on what other OECD countries might face in the near future.
As one of the fastest aging societies in the world, with an economy and a political system inaccessible to its young people, Italy has all the makings of a gerontocracy. According to a study by LUISS University, half of the country’s top business leaders and political officials are 60 or older. Moreover, the national statistical institute, ISTAT, points out that in 2009 about 60% of people aged 18-34 (and 30% among people aged 30-34) were living with their parents as a result of their inability to support themselves. Two million in the same age range were classified as NEETS (not in employment, education, or training).
The system is slowly cracking, and Italian youth risk becoming the first generation in modern history that is worse off than its predecessors. It comes as no surprise that 79% of the unemployment generated by the financial crisis is attributable to young, precarious workers. Even if the country is still far from the radical impulses of “1968,” Italy’s lockout of its young people sets the stage for a generational revolt.
Over the last 30 years, Italy has fallen into an old-age trap – a self-reinforcing mechanism whereby rent-seekers (old people) have used control of the political system to prevent new generations (the most dynamic and innovative part of the population) from getting a slice of the pie. Young people used to believe that, once old and with access to power, their own welfare would be at least as high as that of previous generations. Instead, the gerontocracy has simply realized older generations’ dreams of equity and social security at the expense of today’s youth, who have been shouldered with a crushing burden of public debt.
Lavish favors, demographic trends, and the absence of serious family policies guaranteed the demise of the social contract now under threat. First, high levels of debt will limit both welfare benefits and future governments’ ability to swap favors for votes. Second, globalization, a low-quality educational system, and weak institutions generate uncertainty and insecurity for young people, thereby threatening Italy’s growth prospects – and thus the prospect that future generations will be compensated in old age for a lifetime of hard work and sacrifice.
The process of escaping the old-age trap, and allowing younger generations to assume their key role in the economy, can be either gradual and relatively smooth, or abrupt and relatively traumatic. In the former case, politicians implement structural reforms aimed at redistributing costs and benefits among generations. In the latter case, we face an inter-generational clash.
This situation resembles that of declining organizations, as described in Albert O. Hirschman’s seminal treatise Exit, Voice, and Loyalty. When the quality of an institution or a political system decreases, its members can withdraw (”exit”), improve the situation through direct action (”voice”), or passively accept the decline in conditions (”loyalty”).
“Exit” and “loyalty” dominate in Italy. The former can be physical (according to some studies, Italy is the only European country experiencing a “brain drain” rather than a “brain exchange”) or silent (for example, low voter turnout). But the difficulty of critical thought in an environment of low press freedom, together with intra-family wealth transfers to young people, keep the majority loyal to the system.
“Voice” is almost absent in Italy, as dissatisfaction, however widespread, remains far from sufficient to give rise to an organized protest movement. Instead, “Exit” and “loyalty” delay the collective consciousness-raising that Italy needs in order to ensure a gradual escape from the old-age trap. Once all citizens are aware of the situation, it will be too late: the system will have collapsed, and “voice” will become so strong that inter-generational conflict will be unavoidable.
Will that conflict be peaceful or violent? In the former case, a youth party might use democratic institutions to press for sharp cuts in old people’s benefits. In the latter case, violent protests could lead to a revolutionary wave similar to 1968. Then, protesters wanted to free disadvantaged classes from the oppression of capitalism; nowadays, they would seek to free disadvantaged generations from the fetters of gerontocracy.
Unfortunately, demographic trends make the latter scenario more likely, since young people will be a minority, unable to win power through democratic channels. Only by adopting serious family policies, or by enfranchising new immigrants, who are usually quite young, would a democratic economic transition be more likely.
Leaders of OECD countries should look at Italy and recognize the dangers emerging from their young people who are being left behind. In Italy itself, it is high time that older generations start acting with wisdom.
Edoardo Campanella is an economic advisor to the Italian Senate, and was formerly an economist at the World Trade Organization. This commentary is published by DAILY NEWS EGYPT in collaboration with Project Syndicate (www.project-syndicate.org).