Italy’s Recovery Plan Shows Why Public Spending Isn’t Always “Left-Wing”

Former European Central Bank chief Mario Draghi’s government has been widely hailed for using EU funds to invest Italy’s way out of crisis. Yet while the plan promises big spending, it’s mainly a transfer of public resources to private business.

Italian prime minister Mario Draghi receives the Next Generation EU recovery plan from Ursula von der Leyen, president of the European Commission, during a news conference in June 2021. (Alessia Pierdomenico / Bloomberg via Getty Images)

Last month, the Economist picked Italy as its “country of the year” — an award given “not to the biggest, the richest or the happiest” country, but the one that “improved the most in 2021.” The liberal organ’s praise was not aimed at Italy’s victory in the European football championships or its record haul of Olympic medals, but squarely at prime minister Mario Draghi’s so-called government of the best.

The former European Central Bank chief’s administration unites the main parties from the soft left to the hard right. But for all the talk of national unity behind “Super Mario,” 2021 in Italy ended with a general strike, called by the country’s CGIL and UIL union federations. On December 16, workers walked out across Italy to protest the Draghi government’s budget package. A mobilization on this scale had not been seen since seven years earlier, when workers rallied against Matteo Renzi’s Jobs Act.

All the forces that back Draghi’s administration, including parties that call themselves center left, criticized the strike, claiming that the unions were unfairly trying to threaten a country that was recovering from a crisis.

In fact, the unions’ demands for the December 16 strike themselves adopted the language of national recovery. There were calls for new industrial policies for the ecological and digital transition, and solutions to the industrial crisis and combating relocations — a fight in which they called on the Italian state to play a leading role. After the strike was announced, many union critics retorted that Draghi’s fiscal package for the post-COVID National Recovery and Resilience Plan (NRRP) really is expansive, bringing more public spending.

Yet on closer examination, the Draghi government’s plans, drawing on the loans and grants offered by the European Union’s Next Generation EU (NGEU) fund in the wake of the pandemic, show that public spending is not inherently left-wing. What we are instead seeing, in the guise of mass investment and “recovery,” is a massive transfer of resources from the public sector to private enterprise.

First Steps

Offering €390 billion in grants and €360 billion in loans, the NGEU funds are surely large in scale. Yet this only poses further questions about their use. How will these investments change the European industrial structure? What repercussions will they have for supply chains, global value chains, and the international division of labor? Will this increase or decrease the asymmetries between different European countries? Answering all these questions would require detailed study of information we don’t yet have. But the moves the Italian government is taking already are telling.

Among other conditions of the finance that the European Union is offering through NGEU, member states had to prepare national recovery and resilience plans setting out an agenda for “smart, sustainable and inclusive growth.” This matches EU calls for national governments’ spending plans to devote at least 37 percent of these funds to the green transition and 20 percent to digitalization.

Yet if the purported aim is to compensate for the market’s inability to cope with the current situation — as shown by the current row over vaccines — we are left wondering what a more “efficient” solution actually means, and who benefits. In the case of Italy’s NRRP, the aim seems to have been to prepare the conditions most conducive for private business rather than create jobs or meet the needs of the community.


The measures taken to tackle the COVID-19 crisis in March and April 2020 resulted in a net balance to be financed of almost €255 billion. Most of the resources were used to support businesses with nonrepayable loans. However, the government has been careful to disavow the option of intervening directly in company decisions and thus having a say in how these vast resources are used.

Moreover, no conditions have been set for the use of these funds, such as bans on dismissals, relocations, and so on. These resources were put in place with the declared aim of avoiding bankruptcies and therefore mass unemployment. But the government showed no interest in letting workers monitor the use of these public funds by these companies.

The Italian government has decided to use the entire amount available to Italy under the NGEU, namely €68.9 billion in grants and €122.6 billion in loans. Without delving into the potential conditions, they surely do exist and are essentially linked to the implementation of the European Commission’s policy recommendations to Italy.

In this regard, it is worth emphasizing the concept of industrial policy that shines through from the Italian NRRP, which perfectly reflects the definition advocated by the EU. The state must limit itself to making those investments that are not sufficiently profitable for private businesses to make themselves — in the case of the Italian NRRP, mainly meaning network infrastructure. In other words, the cost of these investments is to be socialized, while the profits are privatized.

At the same time, the Italian state is meant to do everything necessary to remove obstacles to the operation of free competition; for example, by simplifying procurement rules, inspections, and environmental audits. With regard to in-house procurement — the self-production of public goods or services — the plan explains that “specific rules should be introduced to require the administration to give strong reasons for not having recourse to the market.”

Unable to impose the liberalization and privatization of local public services, the Italian government is instead trying to make it harder for the state to draw on public rather than private service providers. But why should recourse to in-house services require a detailed explanation — just to justify daring not to rely on the market — while outsourcing to private individuals requires no explanation at all?

Workers’ organizations reacting to such moves should flatly reject this definition of industrial policy and propose an alternative one — demanding direct state intervention in the economy (i.e., planning). Designing industrial policy is not about creating the best possible environment for private enterprise but about designing and implementing public interventions aimed at creating jobs and meeting the needs of the community.


We can also see these dynamics in the particular sectors where the investments planned in the NGEU program and in the Italian NRRP are concentrated, starting with digitalization.

One of the primary objectives is the adoption of digital tools by businesses, especially small and medium-sized enterprises (SMEs). This is particularly important for Italy, which has long been on the way to becoming an integral part of European value chains headed elsewhere, mainly in Germany.

Large companies have adopted lean management models oriented toward eliminating all activities that do not directly produce value added and maximizing supply chain flexibility. Warehousing — and thus the associated costs — must be reduced to a minimum; components and semifinished products purchased from external suppliers must materialize on the line at the exact moment they are required, not a minute later, not a minute earlier. The small companies involved in these processes become de facto branches of the company at the head of the chain, which often dictates the times, methods, costs, and work organization systems.

In order to function, these business models require the adoption of digital technologies by every single link in the chain — thus making digitalization a decisive concern for Italian SMEs. In this sense, the massive investment set in motion by the NGEU program will help to complete the restructuring process in European capitalism that has already been underway for several decades, namely the phenomenon that Riccardo Bellofiore has called centralization without concentration.

Another myth that needs dispelling is the idea that innovation is always a good thing, no matter in whose interests it is carried out. Productivity gains imply a reduction in the number of working hours needed to produce certain goods and services. That’s a good thing if it lowers the time workers have to work for the same wages, but not if it just means a rationalization of the labor process in the interest of boosting profits. Organizations that aim to represent the working class should recognize this fact — and stop framing their demands as if they’re partners seeking to help boost company profitability.

As for the effect on job numbers, the abovementioned investments are unlikely to produce additional employment in Italy, whose market share in the production of connectivity hardware and software is practically nil. The same applies to the other major sector in which public action will be concentrated: energy transition. In this case, too, given the need to transition toward renewable energies, it will be necessary to install solar panels, wind turbines, and hydrogen energy production plants. Solar panels, for example, are manufactured by Chinese and German companies. Turbines and other components for wind farms are also mainly produced by German firms. We see, then, a likely greater reliance on imports, further worsening Italy’s balance of trade.

Who Decides?

In essence, the Draghi administration has prepared a massive investment plan aimed at creating the most favorable environment possible for private companies, and especially for large German-led businesses reliant on Italian SMEs further up the supply chain.

The point here is not to pit Italy and Germany against each other on nationalist grounds, but rather big business on the one hand and Italian and German workers on the other. The question is whose priorities will determine how Europe emerges from this crisis.

Leaving full freedom to the market, of course, means leaving economic decisions in the hands of capital, which by its nature seeks profit, not the welfare of the community. Organizations that aim at representing the working class should therefore put planning at the heart of the political discourse.

Any objective in contrast to the maximization of profit, and thus the capitalist exploitation of workers and the environment, can only be pursued through the direct management of economic activity by the state. And insofar as this also involves innovation and new technologies, we need to judge them by standards other than “efficiency” defined in terms of private profit.