The Crisis that never was – An Italian perspective

By: Giovanni Ponzetto

Covid notwithstanding, I believe that the authorities do not yet appreciate the extent of the crisis now facing the EU…..they will, but we are not there yet.

One of many things about Europe that irritates me, during such uncertain times, is how LITTLE we have changed the way we do things, given the scale of the problems facing the broad populace. No! This is not a particular gripe against the Draghi government, it goes way deeper and way beyond the Italian borders.

It comes, in part, from my years of history fandom. Above all military history: War is the ultimate discoverer of real truth.  It is a terrible master  that like Atropos[1], cuts the life of unsuccessful ideas short. 

Think Maginot line. Up until 1940, France had a perfectly reasonable strategy going forward, quite suited to a country which had suffered a “lost generation”, dead on the fields of Verdun, Flanders, Ypres. They had even been rational in preparing for the possibility of Germany going through the Low Countries. Yes, it had been a well thought out strategy, designed by the best minds on offer, which in parallel succeeded in suppressing the more radical ideas of leaders, such as de Gaulle. And guess what? It failed. It was not fit for purpose. Contrary to expectations, the result was Dunkirk and the fall of France.

War and Crises are NOT interested in whether people are right or wrong: they reveal what WORKS, NOT what is carefully crafted, planned, and thought out. This fact permeates all aspects of life, both big picture, as above, but also more micro issues, such as whether urgently needed products are fit for purpose. To illustrate, using the World War 2 analogy again, one of the best pistol calibre machine guns was an Italian weapon, the Beretta 38A[2].  Good enough to make even today’s professionals smile. Now, when Leningrad was under siege, the Soviet armies needed something that worked, was cheap, and could be swiftly manufactured with few tools or specialized personnel. Enter the Sudayev, or more formally, the PPS-43[3].

During design, emphasis was placed on simplifying production and eliminating most machining operations; most of the weapon’s parts were sheetsteel stamped. These measures reduced the number of machined components to a bare minimum, cutting down machining time by more than half, to 2.7 hours of machining instead of 7.3 hours for the PPSh-41. There were also savings of over 50% in raw steel usage, down to 6.2 kg instead of 13.9 kg, and fewer workers were required to manufacture and assemble the parts. Thanks to the improvements in production efficiency, the Soviet planners estimated that the new gun would have allowed an increase in monthly submachine gun output from 135,000 units to 350,000 weapons “

This is what urgency in crisis does: it does NOT add layers of complexity. It shears all the fat off any and all systems, cruelly and relentlessly. Things lose all the “nice to haves”, since as Stalin is quoted to have said, “Quantity has a quality of its own”.

No, the objective is not a world of simplicity at all costs, but a world where a VERY thorough evaluation of efficiency determines what survives, what is the optimal solution. Then, the things that turn out to be really good tend to be, well , REALLY good and last a long time. Examples of such remain – the Kalashnikov is an immediate post World War 2 design, B52 bombers first flew in 1952, and the A10 Thunderbolt has survived countless attempts by the US Air Force to retire it from service, and yet it remains in service, obviously too good at what it was designed for.

Clearly, policymakers do  not intentionally strategize under a crisis scenario. Best to do so beforehand, planning, adding resources, pondering, discussing and so on. Now, these rational thoughts came to mind during the recent vaccine procurement debacle headed by Sandra Gallina, who has subsequently been defended by many. In all likelihood, her defenders are probably right when they say that she is a good and experienced negotiator. The trouble is, they may be as right as those politicians and generals who designed and built the undoubted defensive marvel, the Maginot line. Furthermore, she had a team of seven specialied negotiators, a carefully chosen group rightly selected according to relevant qualifications for the job in hand. However, as the crisis developed, the procurement process failed dramatically. The ensuing panic to inevitable scapegoating and policy errors, such as establishing export controls over vaccines; the initial invocation of Article 16 of the Northern Ireland Protocol and the ensuing temporary breach of the Good Friday Agreement; an attempt to enforce damage clauses on the pharmaceutical companies AstraZeneca and Pfiser; the belated plansfor alternative vaccine production sites within the EU; and so on.

Meanwhile, from the outset, Brexit Britain picked as head of procurement a venture capitalist with relevant expertise in the pharmaceutical and biotech field. As a result, a  array of different companies went to work immediately, the result of which means that the UK has an adequate supply of the first vaccines, as well as more alternatives coming down the pipeline. Indeed, now work is being done to develop tweaks to deal with the naturally evolving mutations, which are of course being identified by the world-leading genome sequencing laboratories available in the UK.

In a way, Covid is a one of a kind crisis ideally suited to make Brexiteers look good. Common Law,  clear political executive responsibilities, a solid legal framework, all contribute to a very responsive political system. Common law is conducive to Schumpeterian creative destruction – in other words, innovation. It also helps to have a thriving private financial market that specialises in innovation, as you have in the UK. This is in juxtaposition to an overly regulated, fragmented finance sector, wherein the banks are still suffering the consequences of the EU sovereign debt crisis.

It is also interesting that while military thinking about organization, logistics, supply chains, and so on, influence the economic and corporate world, while you rarely see it infuse the thinking of the technocratic domain. For example, many people in the management consultancy industry know about the “OODA Loop[4]”, originally a military theory developed by Colonel John Boyd, which encouraged speed of decision and decentralization…. the polar opposite of what the EU reverts to whenever it is either left alone or threatened.

Now, one year into the Covid crisis, Italy has changed to a governo tecnico led by Mario Draghi. Yes, the level of technical expertise has increased significantly, but what of its competence? True, COVID has priority, and although they may even be the best at what they do, are they the best at what needs doing? There is also a deference in Italy to the authority principle, which I personally do not like – remember that Nobel laureates outside purely scientific fields can be spectacularly wrong, while a bartender might make more sense. After all, is the answer really to follow the Japanese experiment, having seen that Japan has still NOT managed to get out of its economic stagnation since 1989? This would represent an achievement of dubious value, unless you think that every disturbance is per se a bad thing, rather than a lesson reality imparts on the reckless.