Lessons of the Italian Perspective

In the past six months we have had the great opportunity to travel outside the US three times – to the Dominican Republic, Belize and now, Italy. I’m writing this shortly after 1pm on our seventh day of this beautiful country – sitting outside with a mozzarella and tomato sandwich watching the people go about their daily business, which at this time of day principally means eating lunch.

Unlike the Dominican Republic, Belize and the rest of the Caribbean and Latin America, life in Italy is a different paradigm and it holds some valuable lessons for those of us living in the American culture.

Our first day was in Rome set the stage for six days in the Tuscany region of the country. Rome was important as a first stop in that the age of the country & culture was reinforced everywhere we looked. Our tour guide explained that one area we visited was a “new” section of Rome – meaning that the buildings were just 200 years old. It took me a while for that reality to sink in to my American brain. Most of what we saw was over 500 years old, and much of it in excellent shape. We didn’t see any new building and just a few renovation projects.

There are areas of Tuscany where no new building has been permitted for hundreds of years – before the US independence in 1776. We met owners of vineyards which produce wine & olive oil where the family business is over 400+ years old – from generation to generation in a seemingly unending script of life.

It seems to me that we can learn a couple of lessons from just a few days in Italy.

First, the American sense of urgency helps drive our economy, but also helps drive us to an early grave. Almost immediately upon arrival, I could feel the stress of life wind down. We spent two days in New York City prior to flying from JFK to Rome. When in NY, just standing on the corner we can feel the stress of everyone that passes by. Similarly in Tuscany, the relaxed and generational culture of the region exudes a peacefulness that can’t be explained.

As someone who has worked incredibly hard and under immense stress since 2008, the contrast is striking. If I take just one thing away from this trip it is that I need to schedule more down time – and not just a week at a time, but a month or more at a time. In the walled city of Lucca we saw a real estate flyer with a two bedroom furnished apartment for 800€ per month – spending the month of May or June in such a setting would be perfect.

As hard driving American’s we need to learn to also be intentional at getting the down time we need – I’m convinced that the down time will increase our effectiveness overall and that the time “lost” will be more than replaced with clarity of thought and purpose when we return.

The second lesson is more a macro-economic lesson. The people of Italy are hurting and are being crushed by excessive taxation and government regulation. Our tour guide told us that her taxes, including all the add-on items like healthcare and other social programs takes about 75% of her income. While I have no idea how much she makes, a tour director isn’t a top earning profession and yet she still pays 75%. Italians play a game to hide from the government as much income as possible – and Italians, like those in Greece, do whatever they can to not pay their taxes.

France is learning the same lesson now as the new administration raised marginal tax rates to as high as 75%. The result? The wealthy leave France for England or other countries. The middle class gets crushed.

It is amazing to me that politicians can continue to be so stupid. Yet the President and others in his party want ever higher taxes – as if that will increase tax collections. The opposite happens as the wealthy learn what to do in order not to pay the full tax rate and it is the middle class that suffers.

It appears that Italy is not close to an economic bottom. As a prominent member of the PIGS, the collapse of the Greek economy and likely broad default on Greek bonds will almost certainly be repeated in Italy.

Money will not likely flow into Italy to help solve the problems. We were told that a typical tax on an Italian purchasing real estate is 10% – while it is 30% for a non-citizen. Who is going to pay a 30% tax on a home that is located in a depressed economy which is still contracting? The stupidity of such rules may keep the Italian culture pure, but it will also insure that outside investment will not happen and thus the Italians are in a no-win situation.

Without a currency to depreciate, Italy cannot stimulate exports. With high tax rates and lack of exports, the local economy can’t expand. And without outside investment, there are no new jobs. The unemployment rate for young people exceeds 40%.

The last straw is the illegal immigration of over 1.5 million people from Africa. These “boat people” are coming to Europe to get away from the depressed economies of Africa. So at any of the tourist areas we saw dozens and dozens of Africans all selling selfie sticks, handbags and “authentic” Rolex watches.   Italy can’t provide jobs to its own citizens, much less provide jobs, housing and healthcare to a couple million immigrants.

From an investor viewpoint, Italy is far from bottom.

One can only hope that the American government can learn the simple lessons of Italy and Europe, rather than blindly rushing to implement the same policies that have decimated the southern half of this continent.