Air Date: February 17, 1998 Program 9807

ITALY'S ECONOMY; CONVENTIONAL WEAPONS

Guests:
Various Italian officials and residents Andrew Pierre, author, Cascade of Arms: Managing Conventional Weapons Proliferation

(This text has been professionally transcribed. However, for timely
distribution, it has not been edited or proofread against the tape.)

ITALY'S ECONOMY

JEFF MARTIN: This is Common Ground, a program on world affairs and the people who shape events.

EJIKE EJLOFOR: Those who have studied, been to the university, had their doctorate degrees, never, never, never find jobs adequate to the studies they have gone through.

MARTIN: In Italy the economy is expanding, the country is preparing to enter the European Monetary Union, but unemployment remains stubbornly high. In this edition of Common Ground, reporter Reese Ehrlich looks at the ways, including a shorter work week, being considered for reducing Italian unemployment. And then later in the program, an advocate for limiting the conventional weapons market.

ANDREW PIERRE: We put all our control efforts on nuclear weapons, which is important, but we haven't made the same kind of effort with regard to conventional arms.

MARTIN: Common Ground is produced by the Stanley Foundation. I'm Jeff Martin. After years of economic and political turmoil Italy seems poised on the brink of an economic Renaissance. It will likely be among the first 11 countries to join Europe's common currency group, the European Monetary Union. Italy has reduced inflation, cut its budget deficit and the country's stock market is booming. But some working people say they've been left out of the economic miracle. So in a concession to them the government is discussing shortening the work week to 35 hours within three years. Correspondent Reese Ehrlich reports from Rome about the ups and downs of Italy's economy.

REESE EHRLICH: Here at the Standa Department Store in a working class district of Rome clerks busily ring up sales of clothing and food products. Meanwhile Fiorello Rossi walks upstairs to start work. She's in charge of store displays and today she busily nails up some decorations. Rossi is also a union shop steward. In 1993 workers and management at Standa agreed to cut the work week to 36 hours with no loss in pay. Now the government is discussing whether to shorten the work week to 35 hours by the year 2001. So this seems like a good place to examine what impact the new law might have. In theory a shorter work week should create more jobs. If employees work fewer hours, the logic goes, companies will have to hire more people. Rossi says workers here were initially enthusiastic about their shorter work week.

FIORELLA ROSSI (via a translator): Before our workers couldn't shop because they always had to work when the stores were open. They could only market for example, on their days off. So the shorter work week makes for a better quality of life. But since we got the new contract in 1993 the store has hired only part-time workers. It was a trend in retail trade for some time. But it was stepped up. So our 36-hour work week did not help employ any more people. To an extent it created unemployment by forcing more people to work part-time.

EHRLICH: Rossi points out a basic contradiction with the shorter work week. If employers are hostile to the concept they will do everything possible not to hire new people. They either force employees to work overtime or hire part-time workers. The Confederation of Italian Industry, known as Confindustria, argues that under current circumstances a shorter work week will cost companies too much money. Giampaolo Galli is Confindustria's Chief Economist.

GIAMPAOLO GALLI: We don't like it of course and the reason why we don't like it is that it is going to increase labor costs for industry and for other sectors of the economy by very large amounts. Our estimate is that the increasing costs for industry will be between 10 and 15 percent. So that's the increase in labor costs per hour. Therefore also the increase in cost of labor, cost per unit of output. Clearly the way, the workers will not accept a cut in their wages so as to offset that.

EHRLICH: However, many ordinary people support a shorter work week. After all the idea of a 40-hour week seemed revolutionary in decades past. Daniella Diangeles, a graphic artist, says something must be done to change Italy's 12 percent unemployment rate.

DANIELLA DIANGELES: I am completely in favor because there should be the only occasion to give work for young people. Because in Italy the unemployment for young people is very, is a big, big event....

EHRLICH: A big problem?

DIANGELES: A big problem. And we need to solve.

EHRLICH: Interestingly enough the country's main union federation is lukewarm on the idea of a 35-hour work week. Federation leaders say a shorter work week could damage the Italian economy. Walter Cherfeda is National Chair of the Italian General Confederation of Labor, the country's largest union federation.

WALTER CHERFEDA (via a translator): There are still many sharp economic differences between the North and South in Italy. The effect of reducing the work week nationwide would be devastating for the South because production costs for the southern enterprises would be too high. That would be destructive.

EHRLICH: Some here in Parliament take exception to that view. Walking through the security gate towards his office, Neori Nesi says some union leaders talk more like corporate executives. Nesi is an economist and member of Parliament with the Refounded Communist Party, a militant left-wing group that holds 8 percent of the seats in Parliament. His party is the main proponent of the shorter work week. Nesi says the working class supports the new law and the General Confederation of Labor is just jealous.

NEORI NESI (via a translator): I have the greatest respect for the General Confederation of Labor. It is the biggest union federation, although not the only one. I understand that confederation is not very happy that a political party was able to obtain what the unions never did.

EHRLICH: Both sides in the 35-hour work week debate assume Italy's economy will continue to prosper. But here on Rome's Metro, it's easy to find people who have been left out of that prosperity. Unemployed workers mix with Eastern European migrants like this man trying to survive by playing accordion and begging for donations (sound of accordion in background). Italian unemployment remains stubbornly high at 12 percent. It's even higher for immigrant workers from Africa and Eastern Europe who have flooded into Italy in the past 8 years. (Sound of subway train stopping) Getting off the Metro at the Piazza Vitorrio near the center of Rome, one sees a very different Italy than the posh stores of the Via Veneto (background sounds of street vendors) Vendors hawk everything from suitcases to fresh beef. Many immigrants work here trying to survive in Italy's gray market economy. Some sell items from blankets spread on the sidewalk, others hope to find low-paid, off-the-books construction work. This immigrant from Bangladesh explains in halting English that he's been in Rome for 8 months. I asked how much he had to pay for his passage and illegal entry into the country.

MALE IMMIGRANT: Ten thousand dollars, U.S. come here. But I cannot tell you, one day working is hard at $10-15. No, I cannot do this.

EHRLICH: Where do you live?

MALE IMMIGRANT: I live in Vittorio.

EHRLICH: In an apartment?

MALE IMMIGRANT: Yeah.

EHRLICH: How many people in the apartment with you?

MALE IMMIGRANT: In one room?

EHRLICH: Yeah, in your room?

MALE IMMIGRANT: Fifteen people.

EHRLICH: This immigrant's experience is not unusual. Employers seek workers for back-breaking and low-paying jobs that Italians are unwilling to do. Many companies can get away with ignoring Italy's labor laws because of the continual flow of new workers from Africa, Eastern Europe and the Middle East. There's always someone new willing to work cheap and off the books. Fifteen years ago Ejike Ejlofor was one of those eager immigrants. The university-educated Nigerian originally came to Rome as an employee of the United Nations. He stayed on and now owns a small food store near Piazza Vittorio. He occasionally scoops rice from a large sack as he explains the situation facing even highly educated foreign workers from the Third World.

EJLOFOR: Those who have studied, been to the university, had their doctorate degrees, or whatever diploma they must have got, never, never, never find jobs adequate to the studies they have gone through. The job opportunity is that of cleaning houses and doing jobs actually Italians have no intention of doing.

EHRLICH: Many in Italy are hoping that joining the European Monetary Union will help improve conditions for immigrants for all unemployed. In theory if Europe has a single currency Italy will become more competitive against the U.S. and Japan. The economy will expand and jobs increase. I asked Ejlofor what impact joining the Monetary Union will have on people he knows.

EJLOFOR: Nothing. I tell you quite frankly, nothing.

EHRLICH: Ejlofor says the benefits of an expanding economy rarely trickle down to the poor. But many Italians disagree. (background sound of Italians talking). In random interviews around Rome many Italians supported joining the EMU. Street vendor Teresa Porfru was typical.

TERESA PORFRU (via a translator): I think it will probably be a good thing. There will be more trade so probably more employment as well. People seem to be spending more now. Business is good. Interest rates are coming down. So people are spending more. They can afford to buy more stuff.

EHRLICH: Not everyone was so sanguine. Giovanna Giordana owns a tobacco shop. She was standing nearby when I talked with the vendor.

GIOVANNA GIORDANA (via a translator): I am not very optimistic. I disagree with that woman. I'm also in retail trade. But I don't see a growth in business. I'm open to the idea that people will buy more when we join the EMU but people are also trying to save money. They're worried about the future.

EHRLICH: While the women in the street may disagree about joining the EMU, it's no longer even a point of debate among the country's political and business leaders. The country is expected to enter the first round of the EMU in April, along with ten other countries. By January 1st 1999 these eleven countries will all begin using a common currency called the Euro.. A few years after that they'll eliminate their national currencies altogether. The common currency is supposed to make member countries more competitive and help lower interest rates which will promote business expansion. Antonio Marzano is an economist and member of Parliament with the Conservative Forzi Italia Party.

ANTONIO MARZANO: The advantages are evident. Probably we will have a level of interest rates lower. This rate of interest will go towards the level of the German and French.

EHRLICH: Professor Paulo Leone is also an economist who supports joining the EMU.. But he notes that in the short run Italy could face some problems. Right now each country in Europe sets its own monetary policy and interest rates. With the single currency that won't be an option. The smaller countries will be at the mercy of central bankers in Germany and France, according to Professor Leon.

PAOLO LEON: The Germans insist, and the French a little less, that the Euro has to be a strong currency. A strong currency is a currency which at least on the price level makes your commodities less competitive vis-à-vis other currencies which are not as strong. In order to be able to export in such conditions you have to be competitive on grounds of reducing the labor force and the cost of it. But this means unemployment; if you make your currency too strong it means unemployment.

EHRLICH: In short, Italian working people could lose their jobs because of monetary policy determined in Bonn. That's just one issue that concerns the political left. The Refounded Communists support Italy joining the EMU but argue that workers shouldn't make all the sacrifices. Refounded Communist Parliamentarian Nesi.

NESI (via a translator): These cries of "Europe! Europe!" are actually "Euro! Euro!" Public opinion now thinks that once we join Europe we will have solved all our problems. But it's not true. Refundazione thinks it's very important that Italy joins the first round of EMU, but we don't think it's so dramatic or historically important as most parties think. It's important but not fundamental. It will not solve all the country's economic problems. The Refounded Communists want greater, not less spending on needed social services and infrastructure; more scientific research; more education; a better health system. We want to improve the lives of our people.

EHRLICH: Over the past two years the Italian economy has rapidly expanded, giving both businesses and unions an optimistic view of the future. Italy is poised to join such economic powerhouses as Germany and France in the first round of Monetary Union. But the country still faces high unemployment and increasing unrest over issues of social service cutbacks and immigration. If not addressed those issues could lead to future political clashes. In Rome, I'm Reese Ehrlich for Common Ground.

MARTIN: We'll take a break for a moment. When Common Ground continues, the need to limit conventional weapons trade.

PIERRE: If Country A purchases arms then Country B has to rival it by purchasing arms also and we then get into situations where regional balances, where they exist, can be upset by a sudden, massive acquisition of arms.

MARTIN: Printed transcripts of Common Ground and audio cassettes of this program are available. Listen at the end of the broadcast for details on ordering. Common Ground is a service of the Stanley Foundation, a nonprofit, nonpartisan organization that conducts varied programs and activities meant to provoke thought and encourage dialogue on world affairs.

CONVENTIONAL WEAPONS

MARTIN: Thirty-two billion dollars worth of conventional weapons are bought and sold in the global marketplace each year. While most nations have legitimate security concerns, spending on arms is often the greatest diversion of resources away from economic and social development programs in countries where those programs are most needed. Keith Porter spoke with one expert hoping to draw attention to the dangers of a growing demand for conventional weapons.

KEITH PORTER: So much world attention is focused on controlling nuclear, chemical and biological weapons that we often forget about the spread of conventional arms. Yet these are the very weapons most likely to be used in an armed conflict. And they're becoming more plentiful and more lethal each year.

PIERRE: It is conventional arms, that is to say non-nuclear arms or non-biological/chemical arms that kill. We haven't had, fortunately, a nuclear war, ever. We've had some but not much chemical and biological conflict. We've had about 125 wars of one type or another since the end of the Cold War—since the end of the Second World War and they are conventional arms that kill people.

PORTER: Andrew Pierre is the editor of a new book titled Cascade of Arms: Managing Conventional Weapons Proliferation. Dr. Pierre is a Senior Associate at the Carnegie Endowment for International Peace.

PIERRE: We are aware, very much so and properly so, of the dangers of the proliferation of weapons of mass destruction—nuclear, chemical, biological and so on. But in fact the arms that are proliferating the most are sophisticated aircraft like F-18's and Sukhoi-30 aircraft; are missiles to places like Iran and Pakistan. All types of weaponry, including light weapons in areas such as Central Africa. So that the world is becoming awash now with conventional arms in the same way that pistols are in some Western societies. But we haven't made much of an effort to control them. In other words, we put all our control efforts on nuclear weapons, which is important, but we haven't made the same kind of effort with regard to conventional arms. Of course it's not the arms that kill in themselves, it's the people who shoot, so there's a lot more to this story involving why arms are used and acquired and so on. But this is the neglected dimension of arms control today. And that is the reason that I have turned my attention to it.

PORTER: Who is supplying the majority of the world's conventional arms and who is buying?

PIERRE: Well, that's an important question because actually if one talks about relatively sophisticated arms—aircraft, naval vessels, submarines, missiles, and so on, really five countries manufacture and sell 85-90% of the world's military weaponry. And the United States is by far the leader. The Soviet Union was, but Russia is now ranked about 4th or 5th. Britain and France are 2nd and 3rd; China is up there. Actually, it's the three countries, Britain and France and the United States, that are by far the largest suppliers. The ranking varies a little bit from year to year but for the past ten years the United States has been at the top..

PORTER: And who's doing the most buying?

PIERRE: The largest area of acquisition of arms in the past decade has been the Persian Gulf and the Middle East, for obvious reasons, because of the tension in that part of the world. Also because a lot of the oil-producing countries have the weapons to buy the arms. And there's been a....

PORTER: They have the money?

PIERRE: They have the money. Sorry. They have the money. And they have the rationale, that is to say a conflict or conflicts within the regions. And weaponry in the Persian Gulf or the Middle East has reached now the highest level of sophistication. That being said, there is another region, Asia and particularly Southeast Asia, and Northeast Asia also, which is rapidly coming to an equal par let's say, in terms of arms acquisitions with the Persian Gulf and Middle East. And I'm thinking of countries like South Korea, Taiwan, Malaysia, even more modestly, Indonesia, and so on. So the Asian

PORTER: Tell us about, just your theory, on what does this type of production and purchasing do to the economies of both the buyer and the seller?

PIERRE: Well, with respect to the seller, of course defense production is good for the economy. In the United States and in Western Europe the reality is that we built up, during the period of the Cold War, large military-industrial complexes, which we don't need on the same scale anymore because the French let's say or the British or the Germans or Italians, are buying fewer arms for their own armed forces. And even we are buying fewer number. We're notching up the technological caliber so they are expensive. But in fact in all the western industrialized societies that produce arms there's been a decrease in employment. And a decrease in total production. Therefore the pressure to produce arms, excuse me, for export, to export arms, has increased. In order to maintain unit costs and maintain production runs. Then one has to talk about the former Soviet Union—Russia—which had a large military-industrial complex, by far the largest in proportion to the rest of the country of any country, and which has seen a virtual collapse of its own domestic market of arms for sale to military forces, is having difficulty exporting arms and is having difficulty maintaining the viability of the force structure or even the viability of Russian armed forces. So that's a particularly difficult case and that's one of the reasons why the Russians are now tempted and sometimes pushing for arms sales to what we call rogue states—countries which we'd like to see have a few arms as possible. I'm thinking of places like Syria and North Korea and Libya and so on.

PORTER: That was the idea of what does this production do to the sellers, the producers. What about on the other side, the buyers?

PIERRE: That's very important also. A couple of points I'd make there. Why are countries purchasing arms? For some countries have real security needs and they need therefore legitimate level of weaponry, let's say. But, very often countries purchase arms for reasons of prestige or status or simply to keep the army happy on the part of the politicians. The net result is with any expenditure on armaments by a developing country, it is likely to be a diversion of scarce economic resources from education and transportation and housing and development and so on. So that it is very easy for a less-developed country to over-acquire arms at the expense of other needs. And of course most countries live in a regional situation and if Country A purchases arms then Country B has to rival it by purchasing arms also and we then get into situations where regional balances, where they exist, can be upset by a sudden, massive acquisition of arms. And the best example of this to-date really is the acquisition of arms by Saddam Hussein in the 1980s. The other point that I think needs to be made in this regard is that more and more countries don't want to purchase arms off the shelf like you would purchase a box of Wheaties in a Safeway or Grand Union. They want to work out an arrangement whereby the technology or part of the arm is brought from overseas and then local employment is used to either assemble the arms or even to manufacture the arms based on outside technology. So that there's a rationalization which takes place, which is that by assisting the development of your local arms industry you are in fact assisting the development of the national economy.. Therefore there's a growing number of countries which are producing arms for themselves and they in turn are trying to export them. Brazil is a case in point. But as I said earlier, for the large, big-ticket items, the major weapon systems, it is still a handful of countries that do most of the supplying of arms to other countries.

PORTER: Is it possible to control or as you say, manage, this type of proliferation?

PIERRE: Well, that's the big question of course. And one has to have a sort of variated answer. First point that should be made is that not all arms sales are bad. It's just like you give pistols to your police force; hopefully they'll be used for a good purpose, though sometimes they aren't. But sometimes they get out of control of the people who have it, and that's happened too. We're worried bout the leakage of arms to non-national sources and so on. But the judgment about arms sales is not the same judgment as I would make at least about nuclear proliferation. I think most of the world believes nuclear proliferation is a bad thing. You can't say the same about conventional arms. On the question of control the most important breakthrough that's been made and that has not received much attention is the creation of a 20, now 33-nation grouping called the Vothnar Arrangement, named after a town in the Netherlands where the agreement was signed about two years ago, which is an attempt to develop a system of consultation and exchange of information on arms sales among the major suppliers and some of the recipients so as to pay some attention to the impact of arms sales upon not only national entities, states and so on, but also upon regional balances. That is not yet a control system, may indeed never become a real control system, but it is a system which has transparency, which is designed to allow information exchange so as to make assessments. The Vothnar Arrangement is still in a very rudimentary stage. It has some promise but it hasn't received a great deal of public attention up to now.

PORTER: That is Andrew Pierre, from the Carnegie Endowment for International Peace. His book, Cascade of Arms, has been published by the Brookings Institution Press. For Common Ground, I'm Keith Porter.

MARTIN: Cassettes and transcripts of this program are available. The transcripts are free, cassettes cost $5.00. To place an order or to share your thoughts about the program, write to us at the Stanley Foundation, 216 Sycamore Street, Suite 500, Muscatine, Iowa 52761. Be sure to refer to Program No. 9807. To order by credit card, you can call us at 319-264-1500. Transcripts are on our World Wide Web site. Go to http://www.commongroundradio.org. And our e-mail address is commonground@stanleyfdn.org. Again, cassettes are $5.00, transcripts are free. For Common Ground, I'm Jeff Martin.

B.J. Leiderman created our theme music. Common Ground was produced and funded by the Stanley Foundation.


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