Low Interest Rates Increased Zombie Firms After Economic Crisis of 2008

ZombieFirmsIncreaseGraph2018-10-03.png

Source of graph: online version of the WSJ article quoted and cited below.

(p. A1) Italian clothing maker and retailer Stefanel SpA became famous for its knitted coats and cardigans.

Many economists, investors and bankers know Stefanel as something starkly different: a zombie company. It has posted an annual loss for nine of the last 10 years and restructured its bank debt at least six times, including several grace periods when Stefanel only had to pay interest on what it owed.
After booming during Italy’s post-World War II expansion, Stefanel and its lumbering factories were overwhelmed by Spanish fast-fashion giant Zara and then battered by the economic slowdown that hit Italy in 2008.
Stefanel is still alive but staggering. So are hundreds of other chronically unprofitable, highly indebted companies being kept afloat with new infusions from lenders and shareholders, especially in Southern Europe.
Economists and central bankers say zombies undercut prices charged by healthier competitors, create artificial barriers to entry and prevent the flushing out of (p. A10) weak companies and bad loans that typically happens after downturns.
Now that the European economy is in growth mode, those zombies and their related debt problems could become a drag on the entire continent.
“The zombification of the corporate sector and banks [is] a risk for future living standards,” Klaas Knot, a European Central Bank governor and the head of the Dutch central bank, said in an interview.
. . .
In some ways, zombie firms are an unintended side effect of years of easy money from the ECB, which rolled out aggressive stimulus policies, including negative interest rates, to support lending and growth. Those policies have been sharply criticized in some richer eurozone countries for making it easier for banks to keep struggling corporate borrowers alive.

For the full story, see:
Eric Sylvers and Tom Fairless. “Zombie Companies Haunt Europe’s Economic Recovery.” The Wall Street Journal (Thursday, November 16, 2017): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the article has the date Nov. 15, 2017, and the title “A Specter Is Haunting Europe’s Recovery: Zombie Companies.”)

No Known Maximum Life Span

(p. D3) Since 1900, average life expectancy around the globe has more than doubled, thanks to better public health, sanitation and food supplies. But a new study of long-lived Italians indicates that we have yet to reach the upper bound of human longevity.
“If there’s a fixed biological limit, we are not close to it,” said Elisabetta Barbi, a demographer at the University of Rome. Dr. Barbi and her colleagues published their research Thursday [sic] in the journal Science.
. . .
Dr. Barbi and her colleagues combed through Italy’s records to find every citizen who had reached the age of 105 between 2009 and 2015. To validate their ages, the researchers tracked down their birth certificates.
The team ended up with a database of 3,836 elderly Italians. The researchers tracked down death certificates for those who died in the study period and determined the rate at which various age groups were dying.
It’s long been known that the death rate starts out somewhat high in infancy and falls during the early years of life. It climbs again among people in their thirties, finally skyrocketing among those in their seventies and eighties.
. . .
Among extremely old Italians, they discovered, the death rate stops rising — the curve abruptly flattens into a plateau.
The researchers also found that people who were born in later years have a slightly lower mortality rate when they reach 105.
“The plateau is sinking over time,” said Kenneth W. Wachter, a demographer at the University of California, Berkeley, who co-authored the new study. “Improvements in mortality extend even to these extreme ages.”
“We’re not approaching any maximum life span for humans yet,” he added.

For the full story, see:
Zimmer, Carl. “What Is the Limit of Our Life Span?” The New York Times (Tuesday, July 3, 2018): D3.
(Note: ellipses added.)
(Note: the online version of the story has the date June 28, 2018, and has the title “How Long Can We Live? The Limit Hasn’t Been Reached, Study Finds.” The NYT article says the Science article was published on “Thursday,” but the citation for it that I found says it was published on Fri., June 29, 2018.)

The Science article mentioned above, is:
Barbi, Elisabetta, Francesco Lagona, Marco Marsili, James W. Vaupel, and Kenneth W. Wachter. “The Plateau of Human Mortality: Demography of Longevity Pioneers.” Science 360, no. 6396 (June 29, 2018): 1459-61.

The More Governments Tax, the Less Workers Work

(p. A17) European countries trail the U.S. in working hard and controlling taxes, and their economies have lagged in comparison. France has a tax-to-GDP ratio of about 44%, and in Italy it’s 43%. The French and Italians work almost 30% fewer hours per person than Americans. Notably, the French economy has flatlined since 2010 while Italy’s has contracted.
These patterns are not a coincidence: High taxes discourage work and capital formation. Data from the Organization for Economic Cooperation and Development suggests that a 1% increase in a nation’s tax rate is associated with a 1.4% decrease in hours worked per person in the working-age population. U.S. data dating to the 1970s also shows that higher taxes cause workers to limit their hours, reducing economic output.

For the full commentary, see:
Winkler, Rolfe and Justin Lahart. “Government Spending Discourages Work; The French and Italians pay higher taxes and put in 30% fewer hours per person than Americans.” The Wall Street Journal (Tuesday, Feb. 27, 2018): A17.
(Note: the online version of the commentary has the date Feb. 26, 2018.)

Italian Bureaucracy Leaves Innovative Restaurateur Feeling “Psychologically Violated”

(p. A7) ROME–The campaign leading up to Italy’s national elections on March 4 [2018] has featured populist promises of largess but neglected what economists have long said is the real Italian disease: The country has forgotten how to grow.
Take Gianni Angelilli’s pizzeria in downtown Rome. He uses an innovative dough mix and flexible cooking methods, drawing long lines and rave reviews. But Italy is too bureaucratic, the locals have no money and his ambition isn’t what it used to be, Mr. Angelilli said. If he opens more outlets, they will be abroad.
“Now, foreigners have more desire to eat well than Italians,” he said. “Italy is dead. Italy is finito.”
. . .
Italian politics have become measurably more chaotic since the country’s old party system–largely frozen during the Cold War–collapsed amid corruption scandals in the early 1990s. Data collected by Einaudi economist Luigi Guiso and others show that since 1992, coalitions have become more likely to crumble, lawmakers to defect and governments to need confidence votes in parliament. Politicians jostling for attention push more frequent, longer and more-complicated legislation.
“An excess has cluttered the bureaucratic machine,” says Mr. Guiso. “The country has become cumbersome.”
Yet the weakness of transient politicians has paradoxically made the public administration more powerful, at the same time as constant legal changes immobilize it, he says.
Mr. Guiso has practical experience. He is helping to set up a government-supported program to send young Italians to learn about entrepreneurship in Silicon Valley and at U.S. business schools, and he said Italian civil servants decided a tender offer inviting U.S. organizations to participate could be published in Italian only. After much persuasion, the civil servants agreed to publish the tender in English too–but insisted all applications must be in Italian, said Mr. Guiso. He said political friends apologized, saying there was nothing they could do.
Mr. Angelilli said his encounters with Italian bureaucracy while running his Pinsere pizzeria have left him feeling “psychologically violated.” He said he had to pay a fine recently because his oven’s air extraction, made to comply with European, national and regional laws, ran afoul of new city rules.

For the full story, see:
Marcus Walker and Giovanni Legorano. “The Real Italian Job: Rev Up Productivity.” The Wall Street Journal (Wednesday, Feb. 28, 2018): A7.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the article has the date Feb. 27, 2018, and has the title “Italy: The Country That Forgot How to Grow.”)

Italians Learning to Eat the Jellyfish That Thrive with Global Warming

(p. A8) MARINA di GINOSA, Italy — As a small boat loaded with wet suits, lab equipment and empty coolers drifted into the warm turquoise sea, Stefano Piraino looked back at the sunbathers on the beach and explained why none of them set foot in the water.
“They know the jellyfish are here,” said Dr. Piraino, a professor of zoology at the University of Salento.
While tourists throughout Europe seek out Apulia, in Italy’s southeast, for its Baroque whitewashed cities and crystalline seas, swarms of jellyfish are also thronging to its waters.
Climate change is making the waters warmer for longer, allowing the creatures to breed gelatinous generation after gelatinous generation.
The jellyfish population explosion has blossomed for years, but got a special boost since 2015 with the broadening of the Suez Canal, which opened up an aquatic superhighway for invasive species to the Mediterranean.
The jellyfish invasion has now reached the point where there may be little to do but find a way to live with huge numbers of them, say scientists like Dr. Piraino.
. . .
Convinced that climate change and overfishing will force Italians to adapt, as they once did to other foreign intruders, like the tomato, his team has launched the Go Jelly project, which roughly boils down to, if you can’t beat ’em, eat ’em.
The study, which officially gets underway in January, will attempt to show that the enormous and increasing jellyfish biomasses can be the inexhaustible Jell-O of the sea.
While overfishing, warmer seas and pollution may wipe out ocean predators, they are allowing jellyfish to thrive — and reproduction comes easily enough to jellyfish.
. . .
Dr. Piraino has plumbed the mysteries of the creature, more than half-a-billion years old, for its possible uses. Those include the potential to fight tumors, and also using collagen-heavy species as a source for more voluptuous lips.
Then, there is food.
Antonella Leone is a researcher at Italy’s Institute of Sciences of Food Production, and since about two months ago, Dr. Piraino’s wife. At their wedding this summer, the couple celebrated with a tiered cake dripping with confectionary jellyfish.
A leader of the Go Jelly project, she thinks that Italians, with their zeal for locally sourced regional ingredients, might just find a taste for jellyfish.
Others already have. The Japanese serve them sashimi style in strips with soy sauce, and the Chinese have eaten them for a millennium.
. . .
Dr. Piraino cut a piece that he said was full of protein and omega-3 fatty acids.
“It’s great,” he said, as it slipped out of his hand.
The chef marinated a piece in garlic and basil for the grill. He prepared another on a bed of arugula next to a sweet fig to balance out what everyone agreed was an intense saltiness.
At the end of the tasting, there were several untouched specimens on the table. Dr. Leone packed the foodstuff of the globally warmed future into a jellyfish doggy bag.

For the full story, see:
JASON HOROWITZ. “As Jellyfish Swarm the Seas Off Italy, a Fix Emerges: Try Ragu, or Sashimi.” The New York Times (Mon., SEPT. 18, 2017): A8.
(Note: ellipses added.)
(Note: the online version of the story has the date SEPT. 17, 2017, and has the title “Jellyfish Seek Italy’s Warming Seas. Can’t Beat ‘Em? Eat ‘Em.”)

More Evidence that Once-Dynamic Florence Is Now Stagnant

(p. C1) New research from a pair of Italian economists documents an extraordinary fact: The wealthiest families in Florence today are descended from the wealthiest families of Florence nearly 600 years ago.
The two economists — Guglielmo Barone and Sauro Mocetti of the Bank of Italy — compared data on Florentine taxpayers in 1427 against tax data in 2011. Because Italian surnames are highly regional and distinctive, they could compare the income of families with a certain surname today, to those with the same surname in 1427. They found that the occupations, income and wealth of those distant ancestors with the same surname can help predict the occupation, income and wealth of their descendants today.

For the full story, see:
JOSH ZUMBRUN. “Florence’s Rich Stay Rich–for 600 Years.” The Wall Street Journal (Fri., May 20, 2016): C1-C2.
(Note: the online version of the story has the date May 19, 2016, and has the title “The Wealthy in Florence Today Are the Same Families as 600 Years Ago.” Where there are minor differences in the two versions, the passages quoted above follow the online version.)

The Barone and Mocetti working paper, is:
Barone, Guglielmo, and Sauro Mocetti “Intergenerational Mobility in the Very Long Run: Florence 1427-2011.” Bank of Italy Working Paper #1060, April 2016.

A More Dynamic Labor Market May Be the Answer to Italy’s “Quo Vado?”

(p. A19) ROME — A balding government clerk in his late 30s has one true love: “il posto fisso,” a job for life. He doesn’t want to compete in the labor market; he has no urge to move on. He doesn’t even want to earn more. Give him a desk, a chair and a 9-to-5 job in the “pubblica amministrazione,” and he’s happy. Clocking in late, chatting with colleagues, accepting small bribes from taxpayers (most favored: quail), a regular salary — that’s life!
And, of course, there are rubber stamps. The clerk loves them. Slam! Slam! Slam! When his boss, who wants to get rid of him, asks angrily: “What have you contributed to this department?” he shows her his stamping prowess, and almost demolishes her glass table.
This is, more or less, the story of “Quo Vado?” a new comedy that has smashed Italian box office records. It had its premiere on Jan. 1, and in its first week made $39 million; “Star Wars: The Force Awakens,” in three weeks, reached just $23 million. According to The Hollywood Reporter, “Quo Vado?” — or “Where Am I Going?” a modern spin on the Latin question “Quo vadis?” (“Where are you going?”) — is on course to beat the box-office record for an Italian film in the country, currently at $56 million, set by 2013’s “Sole a catinelle.”
. . .
Italians aren’t afraid of a more dynamic labor market. There is still the dream of making it in the private sector, even if it is less secure than the public-sector jobs that have long been the backbone of the Italian work force. Two out of three workers, according to a recent survey in the Turin newspaper La Stampa, wouldn’t mind taking a risk, as long as it meant the prospect of career advancement.
To foster this more proactive mood, Prime Minister Matteo Renzi — who has seen “Quo Vado?” with his family — last year introduced labor-market legislation known as the Jobs Act (in English, mysteriously). It makes hiring and firing easier, but only in the private sector. For state jobs, like Checco’s, things stay the same. Once you’re in, you’re in.

For the full commentary, see:
Severgnini, Beppe. “More Popular than ‘Star Wars’.” The New York Times (Sat., JAN. 16, 2016): A19.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date JAN. 14, 2016, and has the title “The Secret Behind Italy’s Favorite New Film.” Where there are minor differences between the print and online versions, the version above follows the online version.)