Monday, March 9, 2020

Florence Hit by the Coronavirus: The Curse of Hyperspecialization


Like the Giant Panda, the economy of Florence is at risk of extinction. 
                                                                    

Florence is like the Chinese Panda: a creature highly specialized in the resources it exploits. The pandas need bamboo, Florence needs tourists. No bamboo, the pandas die. No tourists, well....


These days, walking in downtown Florence reminds me of my childhood, when Florence was not packed full of tourists. It is a ghostly experience: there is almost nobody around. The few Florentines walking in the streets look perplexed, as if asking each other "and now what?" All Italy is like that, frozen: schools and universities are closed, most restaurants have closed and the trains and the buses run nearly empty.

Right now, the number of victims caused by the coronavirus is relatively small. It will not be a new black death. But the epidemics illustrates the fragility of our economic system: it is being disrupted not because people are killed by the virus, but because it lacks resilience. It is subjected to that deadly phenomenon called "enhancing feedback" -- the loss of an element of the network can destroy the whole system.

This fragility is especially visible in some highly specialized economies: the city of Florence is a case in point. I already discussed how Florence evolved over the past two centuries or so from a purely agricultural economy to one centered on tourism. You might see it as a parasitic economy, or maybe a scavenging economy. Modern Florentines have been living on the work of their ancestors, hundreds of years ago, in the form of art masterpieces and spectacular buildings.

The problem is not how you define the Florentine economy. The real problem is another. It was known but carefully ignored: it is that this economy is fragile. Tourism is highly sensitive to economic shocks: in difficult times, the first thing that people stop spending money on are expensive trips abroad. And this is exactly what's happening: with the rampaging coronavirus, people all over the world have canceled their trips and they are staying home. And Florence is empty.

In a way, it was expected: it is what I call the "Seneca Collapse." It is something typical of complex systems. Normally, they can absorb external shocks and adapt. But when they are under stress, it may happen that a small shock unbalances the whole system and causes it to collapse. Here is how the Seneca curve looks like: it is inspired by something that the Roman philosopher Lucius Seneca said: "Growth is sluggish, but ruin is rapid."



It is nothing more than the old story of the straw that broke the camel's back. It was not a fault of the straw, but of the camel having been overloaded. Seen in retrospect, it was not a good idea to overload the Florentine economy with infrastructures that brought more and more tourists to the town and that required more and more tourists to provide the resources needed for their maintenance. More hotels, more restaurants, more shops, more events, more roads, and so on. Even a bigger airport was in the plans but that, fortunately, may never materialize. 

A lot of people in Florence are complaining because they are losing money from their investments in bonds and stocks. But the real problem is with the people whose living directly depends on tourism. The people who clean the rooms of hotels and of airb&b's, who serve in restaurants, who drive taxis, who sell trinkets in the squares, who take tourists on tour in groups, and so on. Right now, they are on the edge of panic. Typically, they have no financial reserves and they are often indebted to the banks. But they have to pay their rent and to buy groceries for their families. And they are running out of money.

There are further stacked layers of people who indirectly benefit from tourism. For instance, a friend of mine makes a living out of giving private English lessons. In turn, people in Florence take English lessons mainly because it is a skill useful to deal with foreign tourists. But the virus has scared her students and, in any case, in this uncertain situation, most of them thought it was better to skip the cost of English lessons, it is one of those luxuries that can be postponed for better times. My friend's income has dwindled to zero in a couple of weeks. And she has to pay the rent for her home and buy food for her family.

Let's see things a little more in perspective. According to Statista,  "In 2019, the contribution of travel and tourism to the Italian gross domestic product amounted to 237.8 billion euros. The industry, which is one of the most important ones for the country’s economy, constituted about 13.3 percent of the Italian GDP."

Can the Italian economy survive the loss of 13% of the GDP? Probably yes, just as you can survive being run over a truck. But that doesn't mean it is a pleasant experience, nor a painless one.

Then, how about Florence? There are no data about such thing as a "Gross Town Product" for Florence, but some rough estimates of mine indicate that the fraction of the Florentine economic machine that runs on tourism could be around 30%, and perhaps even more. Now, imagine that international tourism vanishes for an extended period of time. . .  Ow. . . No more bamboo shoots for those poor pandas.

With a bit of luck, the virus will go away in a month or two, leaving an Italy battered but still there. Italians have shown great resilience in the past, think of when they rebuilt the country after the disaster of the second world war. Can they do that one more time?

In principle, yes. But it would take a serious rethinking on the part of a political class that so far has placed all bets into expanding tourism as much as possible, beyond all reasonable limits, all in the name of growth for the sake of growth. For once, they might learn something from this experience.

Unfortunately, right now, the first impression is not good, with noises recently heard from the government about the need to provide economic stimuli for people to buy new cars in order to "restart growth." People never change their minds, just like pandas never change their diet. And, as usual, we march into the future while looking backward.







16 comments:

  1. Same here in this country formerly known as Spain, Ugo.
    Thanks for your reflections.

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  2. Well you nailed it all those months ago.

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  3. I studied in Florence many years ago. I distinctly remember having a crush of my young Italian teacher. I was surprised to learn she had an advanced degree in microbiology or something similar. Yet she was teaching a bunch of ungrateful American kids... "Dov'è il

    Well, now I live in San Francisco so now I know :) Seriously though people here are complacent. We're about a week behind Italy. I guess we'll find out if Big Tech will save us. Godspeed.

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  4. It is actually very refreshing to read this post, despite the economic troubles, because it comes from an ordinary person in Italy instead of a doctor, whose stories are terrifying. Please do write more.

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  5. Thank you for these sad reflections about the suffering of the magical Firenze, but just as a pleasant autumn turns to winter ( an exceptionally harsh one it’s true) Primavera will arrive again in Florence after this calamitous period. Neither the Medicis nor the Roman empire can be returned to reverse the course of history for Florence or Italy but luckily what they left behind has and will endure this these tragic times and will eventually inspire and give pleasure and inspiration to millions of visitors again.

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  6. Stay strong Italy tourism will be right back with visiting n spending as soon as the virus is gone, hopefully in 2 months. Did we want to cancel our trip? No way. But health comes before pleasure. HOLD TIGHT🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏

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  7. hopefully for the pandas, forests and other priceless natural wonders on earth being rapidly wiped out by the remorseless spread of a countless number of stinking florences around the planet, i pray the whole lot of them will soon be infected, and decend into a far worse state than florence in italy. i pray all of the human colonies get a fever, collapse and NEVER recover.

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  8. Ugo, did you get my email?

    Coronavirus is THE major story of Collapse thusfar in my Decade of covering the Collapse of Industrial Civilization on the internet. Here is the first in a series of Videos that will be published on the Doomstead Diner and on our Collapse Cafe.com YouTube Channel.

    https://youtu.be/2uF9Ikg1I8g

    RE

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    1. Ah, sorry RE. I got your message, but it is a bit of a hectic time, here. I have been organizing videocasts for my students, all teaching is now on line. My students have become Schroedinger's students, I don't know if they are there or not!

      What was the message about?

      Delete
    2. Setting up a Collapse Cafe to discuss Coronavirus.

      RE

      Delete
    3. PREPPING FOR CORONAVIRUS

      Latest from the Diner on how to Dress for Success in the battle against COV-19.

      http://www.doomsteaddiner.net/blog/2020/03/11/prepping-for-coronavirus/

      RE

      Delete
  9. The tech sector is currently feeling the impact of the coronavirus, with various smartphones, VR headsets, cars, and other tech accessories shortages. The companies have suppress its markets.Check out the full impact of coronovirues on gadgets industries

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  10. As a foundation for interpreting economic impacts, I can't recommend David Korowicz writings enough. He analyses global economy in terms of Complex Adaptive Systems (as was Limits to Growth).

    This one is especially relevant in the present situation:

    https://www.feasta.org/2013/07/19/catastrophic-shocks-in-complex-socio-economic-systems-a-pandemic-perspective/

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  11. I remember travelling around the ex-soviet republic of Georgia and seeing many abandoned industrial plants rotting in the countryside. When I asked my local friends, they explained that in soviet times the industrial production was specialized by geographic areas, and Georgia was allocated only certain industrial sectors. Under the central planning system any losses of these industries could be covered by the central authorities. With independence these industries were not financially viable and collapsed.

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  12. I'm late to this party, but oh, well...
    I became aware of The Limits To Growth in 1974, 10th grade, so we are entering the world I expected.
    I am not gloating. I am able to navigate this world. I know this world.
    I am able to help my clinic and serve my patients, my family, and perhaps, you.
    The treatment of this virus is straightforward now. Hydroxychloroquine and azithromycin for a week. Regular, cheap, generic drugs, both common. People are dying from lack of testing and bureaucratic inertia, not because this is terribly deadly. If testing and access to treatments ramp up fast enough (big IF) then this will cease being a threat to life. I think the post WW-2 economy, which morphed into neoliberalism, is over. The big threat going forward is continued rule by selfish nd uncaring elites.
    I keep this blog up as an informational public service: www.johndayblog.com

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  13. As a tourist who was subjected in Europe to snooty waiters, condescending maître d's and disdainful, resentful natives, I ask: do you miss us now?

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Who

Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)