Italy Against Itself

1.

In late April, Gianni Alemanno, a former neofascist, was elected mayor of Rome, two weeks after Silvio Berlusconi and a right-wing coalition had come back to power with a sizable majority in Italy’s national elections. Following the mayoral contest, the international press made much of the crowds of neofascist youth giving the Roman salute on the steps of the Campidoglio. But perhaps more significant was the parade of Roman taxi drivers triumphantly honking their horns nearby. They were jubilant not so much at the election of a former right-wing bully boy as at the defeat of a center-left administration that had tried to expand the number of taxi licenses. Cabs have become notoriously hard to find in Rome; but the attempt to improve city transportation ran afoul of the lobby of medallion owners, for whom the licenses are a valuable nest egg in an uncertain world.

The taxi drivers’ celebration suggests a country deeply at odds with itself, paralyzed and dysfunctional, angry, fearful, intensely dissatisfied but unwilling to undertake any changes that threaten the fragile privileges of this or that protected group. It is a country that is sick of high taxes but sits by when Berlusconi blocks the sale of the national airline, Alitalia, even though it is hemorrhaging taxpayer money; a country that hates government but expects free education and free health care and takes advantages of the opportunities of a vast government patronage system; a country that clings to its high standard of living and generous welfare state but fantasizes about kicking out millions of foreign workers who now produce close to 10 percent of the gross domestic product and whose presence in the workforce is the only realistic hope for maintaining a national pension system for Italy’s aging population.

That Italians could reelect Silvio Berlusconi, the former prime minister who they rejected as an incumbent only two years ago, is not as surprising as it may seem. When Romano Prodi’s center-left government was elected in 2006, Italy had endured five years of close-to-zero growth. Berlusconi’s endless self-aggrandizement and myriad conflicts of interest in his various roles as Italy’s richest man, largest media owner, most famous criminal defendant, and prime minister had paralyzed the country and many assumed that with Berlusconi out of the way, the economy would get moving again. Instead, the Prodi government, with a tiny one-vote majority in the Italian Senate and a fractious, heterodox coalition, was hardly able to offer better. When Prodi tried to introduce market reforms in Italy’s economy, the Communist members of his coalition threatened to revolt. In response to his attempt to pass a law allowing civil unions for gay (and non-gay) couples, the Catholic party on his right flank mutinied.

One of the few things Prodi managed to pass was an amnesty for criminals that had been pushed heavily by Berlusconi and that was designed quite clearly to keep Berlusconi’s chief corporate lawyer, Cesare Previti, who had been convicted of bribing judges, out of prison. And so, early in Prodi’s tenure, the Italian public watched the unedifying spectacle of 26,000 criminals going free, many of whom returned quickly to stealing, raping, and killing, while a raft of white-collar criminals, like Previti, were left to enjoy their ill-gotten gains.

Similarly, the Prodi government passed another law, again with the enthusiastic help of Berlusconi and the right, to make it illegal for prosecutors to use criminal evidence gathered against members of parliament who turned up on police wiretaps. In others words, if police were tracking a dangerous criminal and he happened to call up his good friend in parliament, investigators were powerless to pursue the politician’s possible criminal wrongdoing or even use the wiretap as evidence against him.

Thus an administration that had promised a clean-government alternative to Berlusconi appeared no more willing than its predecessor to take on corruption or the system of patronage or Mafia infiltration of the state. The mountains of garbage piling up in and around Naples continued to pile up under Prodi as they had under Berlusconi. But most important to Italian voters, the economy continued to stagnate, only with greater political instability.

Disillusioned, many Italian voters concluded that there was little difference between the politicians of the left and the right and that taken together they were simply a corrupt, self-perpetuating “caste”; not only did its members enjoy extraordinary privileges and absurdly high salaries, they appeared to be not merely useless but a significant drain on public resources as well. Capturing this mood was the book La casta (The Caste), which topped the nonfiction best-seller list for much of the past year.^* Why, the book asks, should Italy, with a fifth the population of the United States, have twice as many members of parliament as there are representatives in Congress? And why should they earn more than twice as much, be driven around in chauffeured cars, have free cell phones, free train and air travel, and gain a lucrative pension for life after only two terms in office, particularly when many of them hold outside jobs and don’t actually show up for work?

2.

The anger of the Italian electorate goes much deeper than disappointment over the Prodi government, which did not fully deserve such harsh public condemnation. Italy’s problems, unfortunately, are much deeper, more structural, and not easy to solve.

From the end of World War II until about 1990, Italy’s economy was one of the more successful in the world, not far behind those of Japan and West Germany. It grew at an average rate of about 5 percent during the 1950s and 1960s, and at a healthy 3 percent in the 1970s and 1980s, spreading prosperity, literacy, and generous state services and benefits to a country used to a long history of hardship and misery. For students of contemporary politics, it offered a fascinating paradox. Italy appeared to have a terrible political system—revolving-door governments, constant scandals and government crises, high levels of corruption, a wasteful and inefficient bureaucracy. And yet, year in, year out, the economy continued to grow. By about 1989, Italy’s GDP was about even with that of Great Britain.

But in the past fifteen years, this precarious combination—corruption, bad government, and high economic growth—broke down. Italy’s GDP grew at an average of 1.1 percent a year between 1996 and 2006 compared to 2.3 percent for the UK, 2.8 percent for Spain, and 1.7 percent for the entire euro area. As a result, Italy’s economy is now 20 percent smaller than that of Great Britain and, according to some recent calculations, has been overtaken by Spain’s. Disposable income has been essentially flat for fifteen years, and income inequality in Italy has become the highest in Western Europe, meaning that the standard of living of many has actually declined.

3.

Two recent books offer radically different diagnoses of what’s gone wrong. The first, La deriva: perché l’Italia rischia il naufragio (Adrift: Why Italy Risks a Shipwreck) by the journalists Gian Antonio Stella and Sergio Rizzo, is a sequel to their best-seller La casta. It is a scathing indictment of the Italian political system and its devastating effects on the country. The second, La paura e la speranza (Fear and Hope), is by Berlusconi’s finance minister, Giulio Tremonti.

More than any other country in Europe, they argue quite persuasively, Italy has an aging, male-dominated elite that smothers initiative and change in order to perpetuate its own power. Some 60 percent of Italy’s politicians and union leaders are over the age of seventy. In France, by contrast, the number is 20 percent; in the Scandinavian countries about 38 percent. Italy also has the lowest levels of female participation in both politics and the workplace among the major European countries. When established politicians fail to win an election, they are recycled into patronage positions in local government or in the national health care system or in the European parliament. The result is a depressing lack of turnover in Italy’s public institutions.

This is not true only in politics. Universities, for example, which should be an essential part of an information economy as centers of innovation, research, and meritocracy, are instead a bastion of privilege and patronage in which hiring decisions are not open and fair but are routinely rigged in favor of the friends, relations, or toadies of the so-called baroni (barons, as they are known).

Stella and Rizzo tell the story of a rigged hiring system at the University of Naples medical school in which the reigning baroni were found to have falsified evidence in order to guarantee that their favored candidates, including the son of the chief barone, won the supposedly open competition. But after being found guilty again and again, during eighteen years of legal wrangling the defendants continued to hold on to the professorships they had won illegally.

Even after the offending professors lost their final appeal, the Education Ministry decided to leave them in their jobs with an edict written in perfect bureaucratese: “Annulling a ministerial act cannot be founded on the necessity alone of restoring legality.” Translated into plain English: just because someone is underqualified and a convicted criminal doesn’t mean he shouldn’t hold a university chair. The decision, made by Antonello Masia, the director general of the ministry, was a fairly predictable response by a member of the caste to protect his own. Masia has served at the ministry for thirty-seven years and enjoys repeating the phrase “Ministers come and go but director generals remain,” the mantra of a permanent bureaucracy that sees itself as immune from political control or public opinion.

In this system, the brightest and most ambitious students, who win fellowships at major universities in the US, the UK, or elsewhere, are often treated as if the years they spent abroad are wasted since they were not back in Italy waiting in line and currying favor with the baroni. The result has been a huge brain drain out of Italy. American, British, and French universities, research laboratories, hospitals, and companies are full of talented young Italian professionals who got fed up with Italy and left.

Again and again in Italy one finds that the selfish bureaucracies maintain their power by means of a jungle of ultra-complicated rules and regulations, which make getting things done immensely difficult, time-consuming, and expensive. Opening a business in Italy, on average, costs e5,012 ($6,756) for the necessary government permits, and involves sixty-two days of jumping over sixteen different bureaucratic hurdles. In Great Britain, it’s e381 ($513), four days, and five procedures. In the US, it’s e167 ($231), four days, and four procedures.

Completing a major public works project in Italy (those costing e50 million or more) consumes an average of 2,137 days—slightly less than six years. Spain took only three years to extend the subway of Madrid by fifty-six kilometers with the building of eight transfer stations and twenty-eight ordinary stations. Building high-speed train lines in Italy costs more than four times what it costs in France or Spain, and those that exist are slow. A high-speed train between Madrid and Barcelona takes only two hours and twenty minutes, while traveling between Milan and Rome takes twice as long—even though the distance is slightly shorter.

Stella and Rizzo are right to see this pervasive failure as creating a powerful negative synergy in almost all aspects of Italian life. The paralysis of the judicial system jeopardizes the basic rule of law, one of the pillars of a functioning economic system. The average length of a trial to resolve a dispute over a broken contract is 1,210 days (nearly four years), while in Spain (the second worst) it’s only 515 days; in France it’s 331 days, and in Britain it’s 217 days. In Italy it takes an astronomical ninety months, nearly eight years, to foreclose on someone who has stopped making mortgage payments. In Spain it takes eleven months; in Denmark six months.

A system this slow and cumbersome would seem to be sheer madness, but there is a great deal of method in it. The multiplication of procedures, permits, rules, and bureaucratic bottlenecks creates an extraordinary number of pressure points at which government can control, delay, kill, or push forward a project. Each of these is an opportunity for a bureaucrat or politician to wield power and patronage, to grant and ask for favors. A highway that costs twice as much has its decided advantages—not just for politicians pocketing kickbacks but for all those working on it. It doesn’t work well for the rest of the country that must deal with a second-rate infrastructure—from poorly maintained ports, highways, and railroads to overpriced cell phones and electricity—in addition to high taxes, poor services, and a system of promotion that has become the virtual opposite of a meritocracy. Not surprisingly, Italy has since 2001 slipped from twenty-fourth to forty-sixth place among countries listed in the Global Competitiveness Index.

It is not merely a question of institutionalized corruption. Unfortunately, the problem goes deeper. In one chapter, Stella and Rizzo talk about the tendency of every group in Italian society to form an “order” or guild; loyalty to the group often trumps any sense of the common good. Hence the director general of the Ministry of Education who refuses to fire professors who cheated their way into their university chairs may not be doing so out of personal corruption but because of a kind of guild loyalty: he is refusing to allow another guild, in this case, the magistrates, to interfere with the running of his own group.

Across the ideological spectrum there are pressure groups of all kinds that conspire to make decisive action impossible. Like most European countries, Italy has very few natural energy resources and must import almost all its oil and gas—an increasing drain on the economy. Other European countries have invested seriously in alternative energy. Spain gets 7.5 percent of its energy from wind power, while Italy gets less than 1 percent. Germany uses fifty-seven times more solar energy than Italy even though Italy obviously has more plentiful sunlight. France generates 78 percent of its electricity from nuclear power and Italy close to none. Italy simply has no alternative energy policy.

While Stella and Rizzo provide a devastating and convincing description of the problem, they don’t explain why things have deteriorated. Italy’s political system was hardly a paragon of efficiency and virtue between the end of World War II and the 1980s, during which the country was among the fastest-growing in the world; what changed that made the Italian system the dead weight it appears to have become?

Italy’s economic decline became visible through the 1990s, a period that happened to coincide with the economic unification of Europe, the adoption of the euro, and the dismantling of a tariff regime that protected many Italian goods from outside competition, especially from Asia. Italy was affected more adversely than other European countries by these changes. In an old, heavily protected market, connection to Italy’s political establishment conferred decided advantages: the Italian government would buy Fiat cars or Olivetti computers, subsidize the building of new plants, and keep out Japanese competition. During periods of economic slowdown, the lira would be devalued to make Italian goods cheaper and more competitive abroad. But after 1992, Italians were suddenly competing against the entire world, and the Italian government, in joining Europe’s monetary union, had lost its power to use currency devaluation when the going got rough.

More than other European countries, Italy was also vulnerable to competition from the low-wage economies of Asia. The Italian economy is composed to an extraordinary degree of small family-owned businesses that manufacture things such as textiles, clothing, shoes, and furniture, which generally don’t require large amounts of capital investment and technology and hence are vulnerable to competitors who pay lower wages. Italy is greatly underrepresented in knowledge-based industries—biotechnology, finance, airplane and high-speed train manufacturing, computer software and hardware development—that are less exposed to low-wage economies abroad. Here, the shortsightedness of Italy’s political leaders bears some of the responsibility. The country consistently invests much less than most European countries in research and technology; it has one of the worst records in Europe in numbers of scientific researchers, percentage of university graduates, and patents filed per year.

Corruption and inefficiency appear to have gotten worse. In the 1950s, Stella and Rizzo write, the country managed to build its principal national highway, the so-called Autostrada del Sole (Highway of the Sun), from Milan to Naples in eight years. But just repairing the much shorter highway between Salerno and Reggio Calabria, a project that remains unfinished, has already taken more than twenty years and cost five times more per kilometer than the original construction of the Autostrada del Sole.

Another problem during the postwar period has been the cumulative effects of virtual one-party rule. The uninterrupted dominance of the Christian Democrats and a series of satellite parties from 1946 until 1993 served as a breeding ground for corruption, and those governments took on obligations whose true costs are only now coming due. Despite their dominance, the Christian Democrats were quite responsive throughout these years to the political opposition, especially the Italian Communist Party. As protest movements of the late 1960s and 1970s picked up steam, the Christian Democrats greatly expanded the Italian welfare state in order to blunt social tension, creating many of the systems that have now spun out of control. Other European countries created similar social programs but Italy’s debt is well over twice the European average. Accounting for more than 100 percent of Italy’s GDP, it leaves the government with very little room either to cut taxes or spend usefully on things like education, research, and development.

Some industries instituted what are called “baby pensions,” allowing hundreds of thousands of Italians to retire at close to full pay while still in their thirties and forties. Italy has nearly half a million people who have been retired for more than forty years. The cost of paying for much of this was deferred, creating Italy’s huge debt. It takes about 10 percent of GDP just to service it.

Particularly damaging to Italy was the influence of Socialist Party leader Bettino Craxi, who was determined to use access to money and patronage to expand his small party’s power. “Bring in votes and money,” Craxi told one of his men on appointing him in 1980 to the board of the national electricity company. Anxious to become a major party able to compete on equal terms with the Christian Democrats and the Communists, Craxi and his men codified corruption into a system with a scale and a rapacity that was new.

The result was a kind of arms race of corruption that spun increasingly out of control: the judiciary was slow and inefficient, parliamentarians enjoyed immunity from prosecution, and politicians virtually never went to jail. The politicians that stole the most generally advanced the most quickly. Craxi himself became Italy’s longest-serving prime minister (1983–1987) until Berlusconi, although he fled to Tunisia in 1994, when corruption convictions finally made it appear increasingly likely that he would be sentenced to jail.

The long tenure in power of the same group of parties in Italy meant, more than elsewhere, that the political system was never cleaned out, and the governing parties were able to engineer a system where politicians put their fingers on the key nodal points of the economy. Every project, from the building of a bridge to the opening of a store to the addition of a bathroom, depends on a friend in power.

Moreover, the power of organized crime in Italy is much greater than in the other major European countries, accounting for about 7 percent of the gross domestic product, which makes it, by some measures, one of the largest single business sectors in the nation. In southern Italy, where it is most deeply rooted, organized crime siphons off public works contracts, slowing down projects in order to milk as much from them as possible and scaring away legitimate businesses—and foreign investors—who do not want to be subject to extortion. In eight of Italy’s twenty regions—the whole of southern Italy including Sicily and Sardinia—there is virtually no foreign investment at all.

It is thus no accident that the biggest winner in Italy’s recent elections was the Northern League, a right-wing party that has directed much of its anger at the patronage system in southern Italy and the corrupt, centralized state that supports it. The league’s chief demand is for a system of fiscal federalism that would allow local communities to keep a significant share of the revenue they raise and greatly limit the flow of money from north to south. The party doubled its share of the national vote (from 4 to 8.2 percent), winning more than 21 percent of the vote in Lombardy and more than 27 percent in the Veneto, large percentages in a proportional electoral system with multiple parties. An angry Italian electorate chose Italy’s angriest party.

At the same time, the April elections eliminated many of the country’s smaller parties. The voters seemed determined to punish them for gumming up the works. Gone for the first time since World War II is every Communist party as well as other smaller parties of the far left. They were seen with some accuracy as “the parties of no,” determined to block almost every initiative at structural reform of the Italian system in recent years.

Will the Italians fare better with the new Berlusconi government? There is a deep contradiction in its coalition, which includes the Northern League and Berlusconi’s Popolo della Libertà (People of Freedom)—itself a fusion of his old party, Forza Italia, and a formerly right-wing party, the National Alliance. Coalition supporters come from two very different regions, the north and the south, and are weak only in the former “red belt” in the center, which has traditionally voted left. But in the north, where the Northern League is strong, voters distrust the central state and its dependence on corruption and a Mafia-riddled patronage system; while in the south, Berlusconi’s power base comes precisely from this same patronage system with all its corruption and ties to organized crime.

One of the funniest and most successful election books of this year— Se li conosci li eviti by Peter Gomez and Marco Travaglio, meaning “if you know them, you avoid them”—is a kind of almanac of the worst candidates put up for election last April, including the often long criminal records of many of them. In the case of Berlusconi’s Popolo della Libertà, it takes the authors literally hundreds of pages to document the number of candidates who have been arrested or investigated on charges ranging from collusion with the Mafia to extortion and fraud. That these people are going to restore the rule of law and eliminate a system of patronage, corruption, and the infiltration of organized crime into the state stretches credulity. Berlusconi is the principal political heir to his good friend Bettino Craxi, and almost single-handedly short-circuited the anticorruption campaign known as Operation Clean Hands—which convicted Craxi of corruption—because of the threat it posed to himself and his various companies. More than any Italian, he is responsible for why the Italian justice system has ground to a halt.

A revealing look at what we might expect from the new Berlusconi government is Giulio Tremonti’s La paura e la speranza (Fear and Hope), which became a surprise best-seller. A former leftist who has found fame and fortune on the right, Tremonti is Berlusconi’s present (and former) finance minister. His book reads more like an antiglobalization polemic by Naomi Klein than what you would expect from the finance minister of a conservative government. Tremonti attacks what he calls “marketism”—the fetishization of the marketplace, the reduction of all human values to dollars and cents—and denounces the opening of European markets to Asian competition, which he says has been catastrophic for Italian manufacturers. He calls instead for a politics of “identity,” by which he means some form of industrial policy designed to strengthen local Italian institutions and values.

This is an appealing message to Italians who would like to blame their problems on some external threat such as foreign competition or foreign immigrants. What identity politics means for the management of the economy, however, may be evident in the defense at all cost of the national airline, Alitalia—even though it could easily serve as Exhibit A for what’s wrong with Italy today. The airline loses hundreds of millions of dollars a year, is on the brink of bankruptcy, and is kept afloat only at taxpayer expense.

Alitalia has higher costs and lower efficiency than its principal European competitors and its propping up by the Italian government is in direct violation of EU regulations to prevent unfair competition. And so early this year, Prodi’s government, despite opposition from some of its union supporters, arranged to sell off Alitalia to Air France, on surprisingly advantageous terms. But Berlusconi, the supposed free marketeer, objected, claiming that Alitalia must remain Italian. He hinted that his own children, who run his business while he runs the country, might help buy the national airline and then suggested that a group of Italian businessmen, if they knew what was good for them, would help.

Interestingly, the Northern League leaders protested the sale, acting as if it would be the modern equivalent of Frederick Barbarossa’s invasion of northern Italy in the Middle Ages. They were especially worried that the first thing Air France would do would be to eliminate the Milan airport of Malpensa as its principal hub, a huge source of annual losses, showing that they are as unwilling as anyone to wean themselves from the Italian patronage system.

Now that Alitalia is on the brink of bankruptcy, Berlusconi has arranged to sell the airline to an Italian consortium, all eager to earn government goodwill and contracts, and the final deal will cost Italian taxpayers far more than the Air France buyout would have and lead to many employees being let go. (And even this deal is now in danger of falling apart.) Hardly what you would expect for a prime minister who has claimed that he keeps a portrait of Margaret Thatcher on his dressing table.

As with his two previous incarnations as prime minister in 1994 and 2001, Berlusconi has again failed to show that he can deal effectively with Italy’s knottiest problems and hardest choices. Instead, he has passed a law that would allow one of his TV networks to keep a broadcasting frequency: it was supposed to give it up—by both Italian law and a European Union ruling—to a competitor station and transmit via satellite instead. He has also proposed a law that would bar police wiretapping in all cases except those involving terrorism or organized crime—no wiretaps for bribery, corruption, fraud—and would include prison sentences of up to five years for journalists publishing wiretaps in violation of the law.

Moreover, the new coalition, in particular the Northern League, has been exploiting anxiety about foreign immigration into Italy. One of the league’s leaders, now a government minister, called for a Pork Day in Bologna as the city was preparing to build a mosque for its Muslim residents. The idea was to pollute the area with pigs and prosciutto in order to make it unsuitable for a mosque.

One of the league’s campaign posters featured a picture of an American Indian with a tear running down his cheek and the slogan “they put up with immigration and now they live in reservations.” The new government has boosted its popularity by undertaking dragnets of illegal immigrants and by fingerprinting gypsy children. Immigrants do account for a disproportionate percentage of crime, but crime is very low among those with legal immigration papers. And the simple reality is that immigrants have become a pillar of the Italian economy. Though immigrants are thought to make up about 6 percent of the country’s population, they produce 10 percent of Italy’s GDP. They are generally productive people of working age, while Italy as a whole has an aging population in which one in five are retired. Foreign workers represent something like 20 percent of the labor force in industries such as construction and agriculture as well as in the overall workforce of Lombardy, the center of Northern League anti-immigrant sentiment. Tough rhetoric about immigration makes for good propaganda but flies in the face of Italy’s economic and demographic reality.

There are reasons to imagine that Berlusconi’s third government might accomplish more than his previous two. He entered power with a huge majority in parliament and a tighter coalition with fewer partners with whom to share power. Many Italian governments, like the recent Prodi government, have been weakened by endless bargaining with coalition partners that made decisive, clear policy almost impossible. At the age of seventy-one, with two unsuccessful administrations to his credit, Berlusconi is thinking of his legacy and would love to deliver on his promise of being the man who rescued Italy from its troubles. Moreover, the Northern League has staked everything on the idea of “fiscal federalism” and what it calls “devolution,” a major increase of regional and local autonomy. The details of this policy are still being worked out; but if it is done intelligently, it might shake up the country in a healthy fashion. If it is done badly, it could destabilize Italy’s system, and make the present crisis worse. But in view of the deep paralysis of the country—and absent any better ideas—it might be worth trying.

Still, fiscal federalism would meet with stiff opposition from the southern patronage system from which Berlusconi derives much of his support. And Berlusconi has shown little stomach for risking unpopularity over matters of policy. He recently withdrew a proposed education reform which met with protests in the streets. The reform was of dubious value—much of it simply involved budget cuts—but it also involved taking on entrenched interests, for example, by closing down underused facilities in isolated areas. This does not bode well for Berlusconi’s willingness to change the Italian system.

—November 6, 2008