Socialdemocracy and mixed economy

In Italy, and probably in other countries, the prestige of Germany is steadily rising. This is not surprising. Given the very good performances of this country in a period of heavy global depression. Nonetheless, I see that the economic model of Germany and other socialdemocracies is poorly understood. The “social model” of Europe – a “third way” between the pure liberism of the United States and the socialism of Soviet Union – had in fact two very different declensions: the socialdemocracy of Central Europe, and the mixed economy of Britain, Italy and partly France. Many believe that Italy has been fundamentally a socialist country, modelled after the Soviet Union, but our model was rather Britain and its mixed economy. The sanitary service, for instance, is cleary shaped after the British Sanitary Service.

Both socialdemocracies and mixed economies envisage strong state intervention in economy, but in a very different way. In socialdemocracies enterprise is almost exclusively private, but there is a strong, progressive taxation that redistribute wealth from the rich to the poor via a very developed network of universal social services. In mixed economies there are state enterprises that coexist with private enterprises and often represent a consistent fraction of national economy. In Italy the publicly hold IRI represented the largest enterprise in the country, but coexisted with other big corporations such as FIAT or Ansaldo. In Britain the fraction of publicly hold enterprises was perhaps even bigger. In mixed economies taxation is relatively low and not strongly progressive, and social services are present but less developed than in socialdemocracies. Somebody could say that taxation is Italy is very high, but, although in principle it is strongly progressive, in practice taxes are paid almost exclusively by the lower classes, given the existence of extensive fiscal evasion in the upper classes.

Today socialdemocracies not only survive but show very good economic performances. Mixed economies, with the exception of France, have disappeared: public enterprises have been sold and Britain and Italy have changed from a mixed socialist/liberist model, to an almost completely liberist economic model with a relatively well developed welfare (the persistence of a welfare system today is the main difference with USA). In Britain the transition to a liberist model happened in the early 80’s, while in Italy it is more recent and successive to the collapse of the Soviet Union.

It must be said that Prodi and Bersani had in mind to follow a German model and to transform Italy into a socialdemocracy, but their project failed largely because of the opposition of PD. The majority of former communist party in fact converted to liberism after 1989, and never considered the possibility of a socialdemocratic model, largely, I suspect, because of poor knowledge of the redistributive model of Central European economies. In Italy, before 1989, we had a conflict between socialism and liberism, and few knew exactly what happened in Sweden, Germany, Denmark.