ITALY’S ECONOMY; CONVENTIONAL WEAPONS

Program 9807
February 17, 1998

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.

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