Scheherazade S. Rehman is a professor of international finance/business and international affairs at The George Washington University. You can visit her homepage here and follow her on Twitter @Prof_Rehman.
Today, in part, Europe's future will be decided. The Western world is waiting for the outcome of the Italian elections. This is the modern moment of truth for the Italians. If they miss this golden opportunity to fully jump on board the European Union integration project goals of development, competitiveness, and sustainability, the Italians will be left behind in a southern state of slow decline as they face the worst recession in two decades. They are sliding backwards on development with declining competitiveness, deteriorating fiscal health, one third of their youth unemployed, and being slowly locked out of the global capital markets i.e. access to cheap money. This moment of truth is very similar to the decision the Greeks faced when they were joining the euro i.e. "business as usual" or "time to grow up" as a country. The Greeks choose "business as usual" and we know what happened with that. Only this time it is Italy. Italy is much more significant and the third largest economy in the European Union. Italians can either get "real" this time or slide back into self-delusion. The Italian desire to return to the past is a pipedream; the world has radically shifted, and staying still and daydreaming will swiftly put any country (developed or developing) into an uncompetitive state. Essentially if the new Italian government is not credible and cannot forge through very difficult institutional and systemic reforms, the aging Italian voters have kicked the proverbial can down the road for their children to carry.
As I've mentioned in previous blogs, the Europeans fully deserve the Nobel Peace Prize for maintaining peace after centuries of warmongering that damaged not only themselves but also the globe. Moreover, Europe has to a large extent successfully delivered the world's highest living standards for their citizens in the aftermath World War II. While the Europeans have now muddled through and passed the apex of their financial crisis in which they were in a precarious state of economic chaos, political dysfunction, and social turmoil, they still facing looming hurdles to overcome. For example, zero or negative growth in the near future, unemployment at levels not acceptable in the West, impact of fiscal austerity for decades to come, difficult and no longer guaranteed easy access to the global capital markets, and perhaps, most damaging to the world, the loss of confidence in Western economic models and perhaps democracy itself.
This is a critical juncture for Europe, as they desperately need solidarity and leadership to move forward as they begin to shift from a monetary to an economic (fiscal) to a political union. The recent crisis fast-forwarded their path towards building a closer union. The Europeans have no choice: They either integrate or wither. The world has changed and is evolving faster than some European countries can transform—Italy being one of them. The question the Italians need to ask as they finish voting today is not what their new government can "give back to them", but what "new future" their new government can build for them. Going backwards in time and sitting on the sidelines is no longer an option for any country today (including the United States).
The key to Europe's future, and especially Italy's future, is regaining global competitiveness. The Global Competiveness Index states that there are 12 pillars needed to build and sustain a country's competitiveness. The 12 pillars are: "institutions, infrastructure, macro economic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation." Europe as a whole has a long road ahead on all 12 issues, and the Italians are no exception. To make matters worse the Italians have to accomplish the Herculean task of regaining global competitiveness amidst a global landscape of increasing challenges and competition with the pace of innovation moving towards breakneck speeds coupled by increasing global income disparity, labor markets shifts, extreme weather, mismanaged urbanization and water management, global governance failure, and natural resource limitations, to mention just a few.
As the most highly evolved developed region of the world, the Europeans are trying to manage all of the above mentioned challenges, and more, while trying to maintain their value system in that they are adamant, no matter what, they must maintain a certain lifestyle and civilized standard of living for all their citizens. This is a tall order and will take at least a decade—longer if the third largest economy in Europe (Italy) doesn't decide that it's time now to be a more responsible member of the European Union.
Most Americans are watching skeptically but in awe as the Europeans struggle to recover from a devastating financial crisis, regain global competitiveness, and stubbornly hold steadfast to the belief that every citizen in Europe must not be allowed to fall below a certain threshold of human dignity. Everyone is paying the price for this belief, albeit reluctantly, from the German taxpayers to the Spanish unemployed youth. We wish them luck.