The second error to avoid is to tackle the effects deriving from a supply shock, like that connected to the increase in the oil price, with policies to stimulate demand. If the increase in oil price and other commodities is protracted, anticyclical policies simply postpone the adjustment by several months, making it more expensive. From the first oil shock – in the mid-1970s – it is possible to gain very clear insights that ought not to be forgotten. The comparison between the experience of Germany, which avoided using monetary and fiscal policy to compensate for the loss in purchasing power caused by the increase in oil price, and that of Italy, which instead sought to stimulate domestic demand is illuminating. The German economy and that of other countries which followed the same path emerged stronger from that difficult phase of adjustment than countries like Italy which followed the illusions of Keynesianism and only engineered a higher inflation rate. 1 The depreciation of the exchange rate did not allow to increase market share on a sustainable basis. Italy is still paying for that error, with a public debt above 100% of GDP and a debt burden that weighs heavily on taxpayers. The third error that history invites us not to repeat is to put up protectionist barriers to stop or impede the economic and financial integration under way at global level. Experience shows that such measures damage economic growth and tend to worsen crises. The 1929 crisis  1  See Figures 1-4 in the Annex.
Firms, including Italian ones, which have restructured and are exposed to international competition have become more productive, have started to regain market share, have improved their productivity and started to pay their employees higher wages. By contrast, firms which are protected from competition and benefit from having a monopoly or from national or local restrictions on trade, and perhaps even benefit from state aid tend to pass their higher costs onto consumers. I don’t need to tell you that there are some Italian firms which are flourishing without state aid, while others don’t have real growth opportunities and continue to be a burden on taxpayers because they receive support from the public sector. Finally, protection from international competition means higher prices, as quotas and tariffs are a form of taxation. This weakens consumers’ purchasing power, and particular affects the poor. There is really no need to favour price increases in these times of higher inflationary pressures. The fourth mistake that needs to be avoided is to intervene in financial markets without considering the perverse incentives that may result from these actions. Whatever measure aimed at supporting financial institutions in distress due to market turbulence should not allow those who have made mistakes to avoid paying the price for them. Should this happen, they would be tempted to do the same thing again. The measures taken in recent months by central banks, including the ECB, aimed at supporting market liquidity but, at the same time, not to relieve investors from solvency risks, go in this direction.