Post by Fabrizio Ferrari, MSc Economics at the Catholic University, intern at the Studies Service of UbiBanca, and Peter Bullian, MSc Economics at the Catholic University –
Following the outbreak of the epidemic of Covid-19 and the subsequent lockdown, many politicians and journalists have decided to address the problem of “how and when to reopen?” trincerandosi behind the slogan is simplistic – such as “the value of a human life is not measurable in terms of Gdp”. Now, we are the first to be aware of the fact that a human life is unique and unrepeatable; nevertheless, we would not want that they lose sight of how Gdp is actually important in our existence.
It is neither a question of greed – remember Greta Thunberg, who rebuked the rulers of the world have at heart “fairy tales of eternal economic growth”? – neither the cold statistics: on the contrary, it is a matter that concerns our well-being and our ability to live a materially more satisfying.
Therefore, we propose the following little experiment: how could it be in Italy following a severe recession? In that Country we would live? To answer – without the claim of divination, nor of the exact scientific nature – we think it can be interesting to compare Italy and Greece.
Italy and Greece are the two Countries characterized by some elements of economic and social are very similar: both are characterized by a high level of public debt-to-Gdp ratio (in 2018 , 181,2% Greece and 134,8% in Italy), both have experienced in the course of the years 2000 the phenomena of the ageing of the population (Figure 1) and both have a fiscal policy (the result of a social pact in the inter-generational) that favors the pension system (Figure 2).
With regard to the level of material well-being, a good indicator for comparing the two Countries is Gdp per capita measured at purchasing power parity (PPP). Figure 3 shows us that, in particular, from 2011 to 2018, the Gdp per-capita Greek was, roughly speaking, between 25% and 30% lower than the Italian one.
In other words, the Greece of the past few years – with its socio-economic characteristics very similar to the Italian ones, and his level of per-capita Gdp much lower than our own – might well approximate the scenario where you would find an Italy where the ability to produce income was reduced, suddenly, about a third or a fourth. A scenario in which we could bring if the lockdown it were to last much longer.
Figure 3: Gdp per capita, purchasing power parity, PPP us$, current prices (left); (per-capita Gdp ITA Gdp per capita GRC) / per-capita Gdp ITA (dx).
Then, as you live in this Italy? Let’s try to imagine it by reading the last data available.
For a start, it would be a Country able to consume less goods and services for the protection of health: in fact, in 2018, the health expenditure in the Greek per-capita total (the sum of the voluntary and governmental) totaled 2.238 PPP us$, while that of italy was equal to 3.428 PPP us$; therefore, the purchasing power per capita lost it could reflect in a reduction of more than a third of the healthcare expenditure per-capita.
Also, remember that educating doctors and nurses has a cost, since the community must keep them until they are fully trained and productive: in fact, in 2016, in Greece, there were 10,2 graduates in medicine and 16 graduate in nursing every 100 thousand inhabitants, while in Italy, respectively, 13,3 neo-medici, and 20 neo-nurses. Here, too, the purchasing power per capita lost you could translate this, specifically, about 23% of new doctors and 20% of new nurses less.
Another chapter of expenditure, may go on suffering would be that of education, which – as we have learned, unfortunately at the expense of the younger generations – is one of the first to be sacrificed when resources are in short supply. In fact, in Greece, in 2016, you spent a total in tertiary education 4.095 dollars PPP per student, against the 11.257 of Italy. In other words, the loss of purchasing power per capita, could translate into a collapse of more than 60% of the per capita expenditure in university education.
A Country with a small budget for education would also be a Country less attractive for international students, with all that negative result would be in terms of lost opportunities of opening to the comparison with different cultures; in fact, while in Greece the students from the other Countries were in 2016 and 3.4% of the total in Italy was 5.3%.
In addition, an education of the poor would necessarily also on the performance – already poor – Italian students: the measurements “PISA”, 2018, in fact, the fifteen-year-old Greek have been shown to have mathematical skills which are below their Italian counterparts. While students of Italian males are placed – about 40 nations considered – at the twenty-fourth place, the peers, the greeks walking to the thirty-fifth. A little less unforgiving, the comparison between the girls: while the Italian place on the twenty-ninth place, the age of the Greek arrived trentaquattresime.
The Gdp allows the community to take care of the most vulnerable, such as the elderly and the unemployed. A significant loss of Gdp could be translated, in concrete terms, in the inability to ensure some of the levels of protection which our system of social protection has accustomed us; let us consider, for example, the replacement rate of the pension and the replacement rate of transfers to the unemployed (one year after the beginning of unemployment).
The comparison between the values of Italian and Greek of the first indicator, which measures the average ratio between the allowance the pension and the income received before retirement, gives us the image of a Country that would have less possibility of transferring resources to their elders: indeed, while in Italy the pensioner, male, average, perceived in 2018, a cheque for the net that is the 91,8% of what had been his income, his counterpart in Greek had to settle 51.1%. In other words, we would find ourselves in a Country that should considerably reduce the degree of protection afforded to its own retirees.
The second indicator, which measures the percentage of the income from work, on average, covered by the unemployment benefit for a year, confirmation as the level of per-capita Gdp is important to maintain the protections of the social: indeed, while the average unemployed Italian (a year after the start of unemployment, is seen to acknowledge, in 2019, a grant that covered 59% of his previous income, his counterpart in the Greek, has had to make do with the 38%.
The point at which we arrive is the following: every day, around the world, the protection of health is contemperata with the need to produce income to finance the economy of well-being that we have built. We grant, for example, factories and cars pollute the air that we breathe, in exchange for, respectively, more employment and a greater speed of movement.
We are forced to this compromise, all day, because the protection of our health – whether we like it or not – largely depends on our material well-being. The minister Boccia has declared that “comes before the health of the italians, then the economy”. Wonder that you forget, however, that without the economy there is not the health.
*the opinions are expressed in a personal capacity and do not involve UbiBanca.
 All the data presented here, unless otherwise indicated, are taken from https://data.oecd.org/ and https://stats.oecd.org/ ￼
 Eurostat: https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=teina225&plugin=1