Italian elections: A test of democracy

For all his willingness to face the facts, Monti has been rewarded by the electorate with plummeting poll numbers

The upcoming Italian elections will test whether democracy can correct itself. The polls are a contest between the populism of short- term fixes and the long- term reforms necessary to make Italy’s economy solvent, competitive and sustainable. Mario Monti’s period as an unelected “technocratic” Prime Minister outside politics was a “circuit breaker”. It aimed at shifting Italy’s unsustainable course by making reforms on a range of issues from pensions to taxes to flexibility in the labour market. Taking a sober look at the future, Monti’s policies sought to respond to a reality that all of Europe must face. Europe has 7 per cent of the global population, accounts for 24 per cent of global production and 50 per cent of social spending. As the emerging economies from China to Brazil to Turkey level the playing field and erode Europe’s share of production, Europeans will have to become more competitive and productive to be able to finance the same level of social spending. Or, the level of benefits people have become used to must be cut.

For all his willingness to face the facts, Monti has been rewarded by the electorate with plummeting poll numbers. Polls suggest he will only garner about 13 per cent of the votes in an election. To be sure, austerity alone cannot enable Italy to escape its debt trap, but debtor countries like Italy have little fiscal room for stimulus. That has to come from the creditors in Europe, namely Germany. Yet, there too, Chancellor Angela Merkel risks political failure in German elections next fall if she agrees to a stimulus programme or a “bailout” of the debtor countries.

Monti’s “circuit breaker” policies are a battle against two forces: The “Diet Coke culture” of consumer democracy and the “vetocracy”. In a consumer democracy, all the feedback — from media, market and politics — steer behaviour towards immediate gratification. Just as people expect sweetness without calories, they seem to want consumption without savings and a welfare state without taxes. Vetocracy is a decayed form of democracy in which special interests — from unions to banks — stake a claim on the state and seek to block any reform that threatens their spoils. In Italy, such special interests even have so- called “acquired rights”. To satisfy such appetites, debt as a percentage of GDP in Italy soared from 60 per cent in 1980 to 120 per cent by 1992.

Italians should consider what is at stake. Albeit in a global growth environment, Gerhard Schroeder was able to push through the kind of structural reforms Monti had proposed back in 2003 when he was German chancellor. He was rewarded by being kicked out of office in the next elections. Yet, a decade later, Germany is the strongest and most competitive economy in Europe as a result of those reforms.

Reforms take many years to manifest their benefits and are always unpopular at the outset. Clearly, democracy mispriced the value of Schroeder’s reforms. Will it do the same for Monti’s?

The related issue is whether Monti should have put himself forward as a candidate for prime minister again.

In an effort to retain his elevated, “above the fray” impartiality, Monti instead has agreed to serve again in government only if the reform agenda he proposes to continue his structural reforms gains enough support from the various parties contending for seats to win a sufficient majority. Only then will a new government be able to see them through. Critics argue that if Monti does not “earn” a leadership role as a candidate, he will not be “legitimate”.

I understand this argument, but can also see how Monti’s choice makes sense. What is important is the “circuit breaker” agenda. It will be useless to elect a “re- politicised government” without a majority to implement reforms. Also, what Monti is attempting is not so strange in other democracies. When Jerry Brown successfully campaigned for governor of California in 2010, he pledged he would not raise taxes without “asking the people”. One reason he did this is that bipartisan gridlock in the California legislature — where a supermajority two- thirds vote is required to raise taxes — blocked his ability to raise taxes through the legislature. In California’s direct democracy, voters can make laws and change the constitution without going through the legislature. To do so, they must gather the requisite signatures from the public ( around 1 million). Once a measure qualifies for the ballot, it becomes a law if it passes.

So, failing to get the legislature to allow the public to vote, the governor set up a civil society committee to propose raising the sales and income tax for a direct vote of the public. Even though he was the governor, his committee had to gather the requisite signatures to qualify the proposition. In November, that tax plan passed, giving California a temporary reprieve from budget bleeding. The “candidate” in this case was not governor Brown. The candidate was a tax policy put forward by a civil society group that included the governor.

Monti’s “agenda for reform” being put forward to the voters without a candidacy seems to me very much the same kind of idea. If that is legitimate in the radical democracy of California, why not in Italy?

NPQ and the Global Viewpoint Network of Tribune Media Services.