Massimo Taddei: the economy sends us signals, but we ignore them. Here’s why “the numbers don’t add up”

“The verdict from economics is the same as that of a doctor who is desperately trying to persuade us to heed the signs suggesting that we change our lifestyle and thus reverse the trend.”

article and interview by Alessio Cardinale

Over the past twenty years, economic terminology has become increasingly embedded in everyday speech, and words such as GDP, inflation, the Anglicism spread, the highly mysterious tax wedge (which is not a geometric figure invented by the Revenue Agency), and terms such as tax evasion and tax avoidance – whose difference many people do not know – have become widespread almost everywhere, from barroom chat to social media, via newspapers and TV debates. In all these channels of communication, opposing opinions face off in solitary combat over economic phenomena that affect everyone’s lives, but they often do so with little preparation on the numbers.

More often than not, in fact, the debate is based on feelings, opinions and personal ideologies, rarely supported by a deep knowledge of the subject and, above all, by objective evidence. And so, when they are mentioned, the numbers are almost always confused, contradictory, partial and incomplete, adjusted to one’s own opinion or to one’s own political interpretation. In particular, there is a tendency to ignore the comparison between national figures and those of the wider continental context in which we find ourselves. For example, the country’s TV news love to report that Italy’s unemployment rate is at historic lows, but they almost never say that our employment rate is nearly ten points below the eurozone average; or that we are the only European country in which, over the past 35 years, real wages have fallen; or again that the very high level of youth unemployment has repercussions for the welfare and pension system.

These ways of telling the story of the economy give citizens a very partial picture, where positive (but incomplete) news then clashes with the facts on the ground. A careful reading of the numbers, therefore, can “save” the debate on the economy from an excessive burden of opinions and mistaken interpretations, and that is what Massimo Taddei* (in the photo) aims to do with his book “I Conti Non Tornano” (Rizzoli, February 2025, 228 pages), which starts from the concept of economic stagnation to explore the causes that have led us to stop growing; all this through more than 50 charts explained with great clarity. P&F interviewed the author, asking him a number of questions on topics that are often debated precisely on the basis of feelings not backed by facts.

Dr Taddei, let’s try to dispel a myth: did entry into the European Monetary Union, directly and/or indirectly, contribute to Italy’s failure to see real incomes grow, or not?
No! Joining the EU was in fact a great advantage for our country, which was able to access a united economic area, without customs duties and with common rules. What has damaged us is the fact that it has become increasingly difficult to “cheat” in order to boost our exports. Before the advent of the euro, our central bank tended to devalue the lira so that our products would cost less for those buying with foreign currency. This is a method that has many negative consequences for the national economy, but it favours firms with low added value, which can compete thanks to their weaker currency. With the euro, that is no longer possible and those companies have run into trouble. They have had more than twenty years to reinvent themselves and they are still there, struggling. Are we sure it is the euro’s fault?

Let’s use our imagination: where would Italy be today outside the European Union and with the lira? Advantages and disadvantages
With Economika we tried to tell this story in a video. In short, leaving now would be a disaster because the way our economy works is inextricably linked to the single currency, and leaving it would be a severe shock. If we had stayed out from the start, perhaps things would not be so problematic today, but it is likely that our GDP would have suffered even more than it has over the past decades. Remaining in the single currency, for example, was crucial in reassuring the markets during the sovereign debt crisis. We would still have the advantage of being able to devalue the lira, but control over the currency, for a relatively small country with a currency as insignificant as the lira, would not have been particularly useful.

At present, what is the pay gap, for the same job or duties, between Italian workers and European ones?
Unfortunately, it is not so simple to answer this question, because it is not easy to define what “the same duties or job” means. We can, however, look at how the average wage gap has evolved, that is, how much less Italians earn on average compared with workers in other European countries. For example, in 2008 German employees had net salaries 26 percent higher than Italian ones, whereas today that difference has risen to 57 percent. Unfortunately, the comparison is similar with most countries.

In terms of purchasing power, how much has the stagnation in real incomes weighed so far on the average Italian?
Very heavily. In effect, our incomes have remained the same as they were 30 years ago. On average. We know not everyone has lost purchasing power: those who earn more, above all, partly because they have greater bargaining power, have seen their pay increase. If the average level remains unchanged, however, it means that this growth has not affected everyone—quite the opposite. The increases enjoyed by some have been offset by a net loss of purchasing power for other workers, especially the young.

In Italy, it is tolerated that young people are offered humiliating hourly pay compared with the rest of Europe. Is this practice an implicit necessity expressed by the labour market in order to create jobs, or simply a form of exploitation of young labour?
It is a mix of many things. Certainly Italian businesses, which generate less turnover, have fewer resources available to pay employees. The fact is that entrepreneurs often do not ask themselves the question of increasing turnover in order to earn more. Fair enough, doing business in Italy is very difficult, consumer spending is lower, and so on. At the same time, however, people seem convinced that these difficulties are the result of some divine design and are unaware of the real causes of these problems. The book tries to show them, so that each person can act directly to change things.

What prevents our economic system today from raising average wages while at the same time controlling the possible negative effects (e.g. higher domestic consumption, rising consumer prices)?
Productivity. To distribute more resources, we must necessarily produce more. This can be done in two ways: by increasing inputs, that is, the number of workers or resources we use for production, or by improving our ability to use those inputs efficiently, that is, productivity. On average, Italian workers produce in an hour the same amount of goods and services they produced thirty years ago, while in Germany productive efficiency has increased by 16%. Until we create that “extra slice” on top of what we produce now, we can never hope to distribute more value among citizens.

After 35 years of stagnating real incomes, and after witnessing the substantial disappearance of the middle class, a feeling of distrust towards our economic system and of surrender in the face of labour-market adversity has spread among Italians. Will we manage to regain trust in our economy?
Yes, but only if we decide to get off the Dream Generator. Economics is not arbitrary; its laws are not imposed from above and do not follow a random logic. Economics merely describes reality and interprets it. For decades it has been sending us signals that we choose to ignore, as if they were coming from an “owl”. In reality, the verdict of economics is the same as that of a doctor who is desperately trying to convince us to change our lifestyle because all the signs point in that direction. When we decide to heed them, perhaps we will also be able to reverse the trend.

* Economic journalist, Co-founder and Director of Economika (Starting Finance group)