The Return of the State

Tito Boeri

One day when we were deep in the red zone, I happened to bump into (in the literal sense of the term) a young man wearing two face masks and a scarf around his neck, who was so busy scrutinising the pedometer he held in his hand that he inadvertently walked straight into me. After he apologised, I couldn’t resist the temptation to ask why he was behaving in such a strange way. “If I’m walking I need to wear a FP2 face mask, if I walk fast a surgical mask is good enough, and if I run I can make do with a scarf. But how do I know if I am walking slowly or quickly, or whether I am almost running?”.

The coronavirus pandemic has led to the public sector entering our lives in an ever more invasive manner, regulating even the most intimate details of our everyday routine, from when we can go out to the people we can invite to dinner. To be clear: it has done so (albeit not always) for good reasons, and other countries with a less invasive state government have bitterly regretted it. The fact is, that when we come out of the emergency, we will find ourselves with a grossly enlarged state that has invaded fields previously left entirely to private initiative.

The end of the pandemic can be an opportunity to re-establish the confines of the state, reinforcing its presence wherever there is greatest need and planning a withdrawal elsewhere. What must the public sector do for its citizens and what should it instead limit itself to regulating, leaving the rest to private initiative? And how should it respond to a private sector that does not pursue only its own individual or business interests, but also organises itself into communities and volunteer associations capable of promoting the common good equally well, if not better, than the public sector.

The search for vaccines against COVID-19 has benefited from strong public sector support. Without this funding it would probably not have been possible to accelerate the process. Science had never previously taken less than 12 years to find a vaccine against viral pathogens. On average, it has taken 30 years, and for some viruses, such as HIV and hepatitis C, there is still no vaccine more than 30 years after their appearance on the face of the Earth. This time it has all been much quicker: after just over a year there are several vaccines available. The nations that took the greatest risks in funding the research of pharmaceutical companies have not only contributed towards offering everyone an effective weapon against the pandemic, but have also succeeded in procuring an adequate quantity of doses to administer to their own citizens. In cases like this, where powerful externalities are in play, it is right that there is an entrepreneurial state that shares business risks with the private sector. But what has all this got to do with those who today propose a new institute for industrial reconstruction or the creation of state banks?

Even once the perimeter of public intervention has been redefined, it would be sensible to ask oneself how to make the state more efficient in doing the things it should rightly do. The pandemic has been a very demanding stress test for the public administration. In some cases, it has done very well; we need only think of the commitment of medical staff and paramedics, and hope that this example will give everyone an increased awareness of how important it is to pay taxes to fund these services.

In other cases, public administrations have failed, and we must learn from these negative experiences, just as we have from the positive ones. For example, there is much to reconsider in the Italian form of federalism, which led to continuous arguments between regional administrations and central government in the toughest months of the pandemic, disorienting citizens and those called on to manage the emergency. There is also a great deal to learn about how to rapidly reach the people who most need financial support and healthcare.

When public intervention does not work properly there is invariably a tendency to blame bureaucracy. But what is bureaucracy and where does it originate? The suspicion is that it is often the result of encroachment by politicians, who do not trust the technostructure and control its actions with a long series of limitations. And in this context, what is the role of the intermediate class situated between politicians and the technostructure, which neither answers to voters nor is subject to the screening of skills required by the different administrations? Is it right that these figures at the top can be removed with every change of government, as provided for by the spoils system?

To what extent should public sector employees be treated differently from private sector employees? It is often said that in contrast with the private sector, access to public sector employment takes place through competitive examinations. But how many managers and middle-management employees in the public administration found employment without competition?

These are some of the questions up for debate in Trento and on the web during the period of the Festival. It is the second edition (and let us hope the last) to take place during the COVID-19 pandemic, so many will only be present in Trento virtually. However, this will drive even more people to attend the Festival in the streets and squares when we finally come out of this nightmare.

Tito Boeri

Scientific Director of the Festival of Economics