30 May 2023

The rest of the world is keen to adopt technological innovations, but Italy seems to be stuck in the past.

Italy’s productivity growth has been stagnating for several decades and has not kept pace with that of its European peers, posing a serious threat to the country’s economic prospects. The country refuses to acknowledge its problems and implement real structural reforms, as was manifested recently in a tragicomic affair.

On April 1^st, 2023, the Italian Data Protection Authority (GPDP) became the architect of the Chat-GPT blockade in the country, making Italy the first Western country to block it. Unfortunately, it was not an April Fool’s joke.

Italy joined countries such as Russia, China, Iran, North Korea, Cuba, and Syria – not exactly model liberal democracies from which to draw inspiration – in blocking the website provided by OpenAI. To add to the concerns, the comment of the president of the GPDP in this regard, that ‘we cannot accept forms of extractive capitalism’ demonstrates a worrying bias towards free-market capitalism’, demonstrates a worrying bias towards free-market capitalism and suggest a lack of understanding of innovation and market dynamics. Moreover, they suggest a troubling trend towards state control over the economy and a distrust of free-market capitalism.

This decision – taken citing privacy concerns – is another example of the country’s institutional anti-market stance. Chat-GPT is a tool designed to increase productivity and efficiency, and the ban is a blow to businesses and individuals who were already relying on this technology.

The EU will have to play a crucial role in this debate. It is essential that policymakers balance the potential benefits of AI, such as improved healthcare and more efficient financial services, against valid concerns about the misuse of this technology; policymakers must also encourage innovation while ensuring that the benefits of AI are accessible to all.

In an interview with Corriere della Sera, the president of the GPDP argued that ‘Italy should seek a middle ground between the accentuated liberalism of the US and the autarkic sovereignty of China’. This has raised concerns about the actual independence of what is supposed to be an ‘independent authority’. It could also have potential economic consequences for Italy as well as a negative impact on its reputation. When an independent authority is allowed to intervene in the economy based on what appears to be the personal opinions of its president, rather than objective criteria, it creates uncertainty and risks by undermining the confidence of investors and entrepreneurs. The GPDP’s decision to ban Chat-GPT risks setting a dangerous precedent for the future – one where regulatory authorities can act with impunity, irrespective of the potential economic consequences.

The criticism from Italy’s deputy prime minister regarding the regulator’s decision the ban Chat-GPT who describes it as ‘excessive’, highlights the ongoing debate about the limits of government power in shaping economic policy. The comments made by the president of the GPDP that ‘sacrificing rights and freedom in the name of the market is incompatible with Italy’s constitution principles’ are overly simplistic and ignore the complex balance between individual freedoms and economic development.

The Chat-GPT affair was finally resolved on the 28th of April 2023, when OpenAI announced that following discussions with the Italian watchdog, the website was finally available to Italian users, who had easily circumvented the blockade during the shutdown by using VPNs (virtual private networks).

Leaving aside the tragicomic nature of the incident, the real impacts of the event are unknown, beyond the fact that it has contributed to negative perceptions of the country.

The economist Joseph Schumpeter once noted that innovation is the only way for economies to grow sustainably. When governments limit innovations, they stifle growth and impede progress. The adoption of AI can help in creating new markets and boosting productivity, it is crucial to encourage the development of new technologies, and Italy, which has witnessed 30 years of economic decline, desperately needs to embrace it.

How significant can the consequences of excessive regulations be in the long run? The premises sadly, do not bode well.