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Spain, Italy: time to be serious about promoting new businesses

Over time I've become a big fan of Vivek Wadhwa, whom BAIA had the pleasure of hosting in a panel last year.

Vivek now regularly writes for the The Washington Post, among many other gigs that keep him crazy-busy. In a recent column, he talked about Spain and pointed his finger at the difficult environment to start a business as one of the main reasons for Spain's sluggish economy, together with over-regulation and a inflexible labor market.

Sounds like Italy? Yep. Had he analyzed the Italian situation (Vivek, look at Italy next!), he would have likely come to similar conclusions.

In fact, let's look at the very report that Vivek points to in his piece: the World Bank's list of the best places to start and run a business.

Rank for best place for doing business:

Rank for best place for starting a new business:

So - compared to Spain - Italy is a "better" place to start a new business (after 67 other "better" places to do the same), but a much worse place to run and grow your business (there are 79 other places where it's easier to do business, according to this study).

Spain and Italy: please listen to a guy like Vivek. Or to someone like Fabrizio Capobianco. Seriously: these are smart dudes, and they're good guys too! They don't have a second agenda. They simply wear their hearts on their sleeve and speak their minds. These are the people to listen to.

Time is going by fast. These really are the days for radical reform, both at the regulatory, and at the cultural level.

Mr. Tremonti: this is the time to think outside of the box, and hire guys like Vivek or Fabrizio to write simple guidelines for innovative, ground-breaking legislation like StartUp Chile. If it' doesn't work, you can blame them. What's to lose?

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BAIA TeamPermalink Reply by Matteo Fabiano on September 22, 2011 at 6:11am

Well said. I just want to say that for those who are skeptical about this rankings, there is plenty of details about the methodology of this research that leaves NO DOUBT about the strength of the arguments and the value of the ranking.

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BAIA TeamPermalink Reply by Matteo Fabiano on September 29, 2011 at 10:10am

We are still in firefighting mode:... http://www.marketwatch.com/story/italy-spain-extend-short-selling-b...

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BAIA TeamPermalink Reply by Matteo Fabiano on January 21, 2012 at 3:47pm

Here's a new take from the NYT on the latest growth plans: http://www.nytimes.com/2012/01/21/world/europe/italy-plans-new-meas...

What do you think?

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Permalink Reply by Massimo Arrigoni on January 24, 2012 at 5:59pm

It seems to me that they're on a "better" path (e.g. addition of 500 notaries) although not the "right" path (no government-defined limit in the number of notaries). I think this government knows what they are doing. They know which cards they can play. I personally remain optimistic and hopeful.

The real issue, though, remains the labor market and I can only hope that things don't turn violent once they start those reforms.

What we can do from here is keep reiterating what we know to be the truth, from our own experience with our own entrepreneurial successes and failures:

Companies grow and shrink, for all sorts of reasons
If they can't grow and shrink the employee count, they will fail, move elsewhere or not come at all
Labor laws must become more flexible (and I personally support Mr. Pietro Ichino's "flexsecurity" [sorry, link in Italian] approach, which is based on a Northern-European labor market model)

As I always tell my friends in Italy, you simply need to ask yourself this simple question: who will hire my son? Who will give my daughter a job? Be honest, be optimistic, and do whatever you can to make it easier for entrepreneurs to create those jobs.

"Chi creera' i posti di lavoro per i miei figli?" Once you ask yourself that question, the economic and labor policy implications all of a sudden become a lot clearer.

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BAIA TeamPermalink Reply by Matteo Fabiano on January 27, 2012 at 3:09pm

I also looked into the Flexsecurity framework and it does seem like a reasonable middle-ground approach. I think it is frankly too much to expect that a labor reform along those lines will gather enough political steam to pass under this government. But I may be underestimating the extent to which political parties may be willing to abdicate leadership (like they had any, actually) to this government, under the weight of a public opinion that is so fed up that it may have reached a point of no return.

There is no doubt that expecting a bankrupt treasury to take care of providing government jobs and "cassa integrazione" to all is just not viable.