Why Can’t Italy’s Economy Get Into Gear? Consider the Taxi Line

Painfully long waits for taxis offer a clue about the country’s 30 years of stagnation

By Eric Sylvers of The WSJ. Excerpts:

"Finding a taxi in Italy’s financial capital when it is raining involves long lines and patience. During trade fairs and fashion shows it is even harder: Demand surges but the number of taxis stays the same.

Even on sunny days, there are lines of suitcase-laden travelers searching forlornly for a taxi at airports and train stations around Italy. Many locals don’t even bother trying."

"A major reason for Italy’s stagnation is the power of vested-interest groups who successfully impede efforts to boost competition, innovation and productivity."

"Italy’s economy is 1.5% smaller than it was in 2007, before the global financial crisis, according to the World Bank. In that time Germany’s economy has grown 17%, France’s by 13% and the U.S.’s by 28%"

"Much of Italy’s stasis can be traced to a lack of meritocracy that permeates the public and private sectors, said Lorenzo Codogno, an economist and consultant"

"An ingrained system that prizes seniority over the skills of individuals is also contributing to Italy’s lack of economic progress. The result is that almost 21% of Italians aged 15 to 34 aren’t employed, studying or in training, the highest in the EU. That compares with 13% in France and 10% in Germany.

For decades, Italy has also struggled to improve a painfully slow civil-justice system that puts off investors, a large underground economy, high national debts, chronic tax evasion and large differences in wealth between the country’s north and south.

Compared with other Western countries, Italy has few internationally successful startups and attracts little venture capital. Italy barely features in the leading rankings of the world’s top 100 universities, and Italian high-school students underperform most other developed countries.

Italian beaches offer another glimpse of the lack of competition and resistance to change. Year after year, the same businesses pay public authorities a small fee for lucrative concessions to rent umbrellas and reclining chairs to beachgoers. The EU has complained about the lack of competitive public tenders and the insignificant revenue the Italian government collects for those privileges.

"The problems at Italy’s beaches and taxi stands show that the country’s woes are related to bad laws, rather than any inherent lack of talent or entrepreneurship in the country, said Carlo Maria Capè, the chief executive of BIP, which advises businesses in Europe and South America on using technology."

Taxi drivers have successfully pushed for laws that keep ride-hailing apps such as Uber heavily restricted. Uber drivers in Italy must be licensed and have a luxury car, which makes the service more expensive than a regular taxi and dulls its appeal for most would-be users. In many Italian cities taxi drivers have blocked the issuing of new taxi licenses for the past two decades, protecting the value of their own license but making it hard to find a ride. But they are losing the nation’s sympathy. 

Taxi drivers’ associations argue they don’t make enough money to survive if their market were opened up. But a taxi driver from Bologna became a cult hero on social media when he challenged that narrative by posting his daily takings on X, formerly Twitter. His popularity only grew this month when his taxi cooperative suspended him for a week for hurting its image. 

Issuing more licenses wouldn’t solve the taxi problem by itself, said Grea. “It’s a prerequisite, but you need a general strategy to improve mobility in Italian cities that incorporates public and private transportation. Solve that and people will see that change is possible.”"