Italy: Escaping the Traps

How much is a country's success or failure a result of their people's decisions?  Or, were countries fates determined from the start because of their location?  As emerging markets continue to grow, bringing prosperity to places it had been previously lacking, there is group of countries that can't seem to join this ascension from poverty.  Paul Collier refers to these as the "Bottom Billion".  In his book of the same name, he outlines four "traps" these countries fall into which hold them back from the pack.

Instead of picking the cliche failed states in Africa and talking about how screwed they are, I decided to focus on Italy, possessing the eighth largest economy in the world.  It isn't at the very top, nor is it without serious financial issues, but it certainly is not part of the bottom billion.  Why is this?  I'll go through the traps Collier outlines and explain Italy's success in their context.

The first trap is being landlocked.  Obviously, this one is directly tied to a country's location.  Access to the sea is one of Italy's least concerns.  Not only is it situated right in the middle of the Mediterranean, but it is a peninsula.  This means it has an unusually large amount of coastline for its size.  This allows it to thrive on sea trade, bringing economic prosperity.

The second trap is the natural resource curse, which is also directly related to location.  Italy does not have major deposits of natural resources so its economy never became dependent on any one commodity.  Its economy developed already diversified, allowing it to be isolated from price shocks.  This also helped it avoid the currency inflation associated with Dutch disease.

The third trap is conflict.  This refers to a cycle of civil war and instability in which each conflict provides fuel for the next.  After Italy's unification in the 19th century, the only war fought internally was World War II.  Italy escaped a recurrence of this violence mainly due to the Allies recognition of their failure in resolving the previous world war.  Policies like the Marshall Plan helped mitigate the economic effects of war.  Italy's location had very little to do with their ability to escape the conflict trap.  It was leader's ability to learn from past mistakes.

The final trap is bad governance.  In 2011, Italy's Prime Minister Silvio Berlusconi resigned due to a combination of pressure from the Eurozone crisis and personal legal issues.  Mario Monti was his replacement.  He was not elected.  Although these events seem to indicate that Italy's government is not particularly stable, compared to the bottom billion, this is nothing.  The amount of corruption, lack of legitimacy, and outside intervention that occurs in bottom billion countries is on a whole other level.  While Italians are not happy with their current economic and political situation, they still rank at the top in quality of life, GDP, and other measures of success.  Could their political stability be a result of this strong economic underpinning, and not a cause of it?  Obviously, the relationship between politics and economics works both ways, but to which side is the scale tipped in Italy?  It may be hard to tell until we see how they resolve their current economic hardships.  If there are strong links between economics and politics, then once again, geography plays into this trap.  As shown in the first two traps, location has a huge impact on economic growth, which in turn plays a role in politics.

Thus, using Italy as an example, it is apparent that geography sets up some initial conditions, but does not solely determine a country's future.  By learning from past mistakes, country's can escape traps that result from human error.  Unfortunately, Italy is not an example that provides much hope for countries not blessed with a great location.  Italy has not had to overcome any major obstacles that were out of their control.  This does not suggest that we can't overcome geographic barriers.  Italy is just one instance. Unfortunately, studying their history won't teach those in the bottom billion how to overcome the their respective traps. Instead, what is an example the bottom billion model?  Tell me below.