On 26 April 2012 the Financial Times reported that: "Mario Monti, Italy’s prime minister, has added his weight to criticisms of austerity-led reform efforts in the eurozone, saying the policies were shrinking Europe’s economy and could deepen a double-dip recession".
Here, at least, one cannot accuse Monti of hypocrisy or duplicity. The Monti government, as all before him, is steadfastly following an anti-austerity policy where State spending serves to keep people unproductively in work and avoid mass unemployment. Italy entered the current crisis with its public finances as a mirror-image of other European countries. Italy had a massive public debt but a relatively small deficit as a percentage of GDP. Obviously, this was because years previously Italy had reached the point where it’s borrowing could not continue to grow unchecked. Other European countries, however, had much lower starting public debt but as their economies entered recession and their banks needed saving and social welfare costs rose while tax receipts fell their deficits (as a percentage of GDP) exploded and consequently their public debt took off.
Last week the Eurostat statistics regarding the public finances of EU countries for 2011 were published. It was reported that Italian public spending had reached 49.9% of Italy’s GDP and government receipts 46.1% of GDP.
Even though these two numbers are by far the most important for the Italian economy, they received relatively little attention in the Italian press. And yet these two numbers tell us almost all that we need to know about the Italian economy today.
First, a state that spends a sum equal to 50% of its GDP is practising anti-austerity. But more importantly, the question in Italy is: where is the money going? Italy, as you may or may not know, doesn’t have a comprehensive welfare system. Welfare, such as it is, is tied to factory workers or workers for large industrial concerns which are able to park unneeded workers at home for a period of time with a large chunk of the worker’s salary being paid by the State. This is Cassa Integrazione. Employees of small enterprises do not qualify for this support: if there is no work, they just get sent home without pay. In dire straights such people can seek assistance from the local council. But unemployment benefit/insurance as known in most other countries doesn’t exist in Italy. Of course, numerous governments, including Monti’s, have promised to introduce such cover but it is massively too expensive for a country like Italy to sustain. And, of course, this conditions the unions in resisting any diluting of protections that workers currently enjoy as what would follow would certainly, from the worker’s point of view, be worse.
And not only, but Italy spends little, and badly, on infrastructure compared to other developed countries. And, notwithstanding the outrageous costs of modern weapons systems, Italy also spends relatively little on its military. Of course, numerous Italian governments, including Monti’s, have promised to increase infrastructure spending. But the money is not there.
So a country that spends a sum equal to fully one-half of its GDP is unable to provide a comprehensive social welfare net, decent infrastructure and a modern military.
On 19 April 2012 in an Editorial, the Financial Times said: "Italy’s humongous public sector and its overfed political system allow savings that need not affect the quality of frontline services".
Here you see that the Financial Times Editor, and I suspect very many non-Italians, has no concept of the mechanism driving Italy. The "humongous public sector" is what keeps humongous numbers of Italians in work. With the kind of suffocating bureaucratic system Italy operates, the private sector could never absorb these people if the State were - hypothetically - to be down-sized. The Italian public sector is in fact a make-work program for enormous numbers of Italians. Its raison d’etre is its own existence. Moreover, as these people are exercising very real, if ultimately destructive, roles and carrying very real power and responsibilities, they are the frontline services that they, themselves, support. They exist for each other and will resist massively any attempt to change this situation. They hold the whip-hand or the knife-by-the-handle as we say in Italy.
And what about the others? Well here the most important statistic is that government revenues are 46.1% of GDP - that is, the Government spent in 2011 4% more than it took in. And here is the driver of the Monti Government’s anti-tax evasion drive. Unprepared to significantly reduce Government spending - which would be austerity - Monti must make-up the difference by increasing tax receipts (or privatising but times are not propitious for this). There is no other way of achieving a primary surplus as he has pledged to do. But we always get back to the aphorism attributed to Winston Churchill:
"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon."
The question, of course, for Italy is whether the horse is healthy enough to pull the wagon loaded-up with free-riders. And, more importantly whether a horse, hobbled by the very free-riders it is supposed to pull, will make it.
The answer, self-evidently, is no. Exploiting private enterprise and initiative to give a free-ride to others can never be a winning strategy for a nation or a people. Exploitation, by its very nature, involves the application of force as human beings tend to resist being exploited.
So it was that a Friulano who reads this blog suggested that I explain the significance in my diary entry of 17 April of the phrase: "putting the private sector in a share-cropper relationship with the state".
I don’t know about other Italians, but any Friulano with any knowledge of modern rural history knows about the "Mezzadria" which was the share-cropping system practised in Friuli until it was finally rendered illegal in 1974. The mezzadria relied on the fact that most peasants were landless and most land was in the hand of landlords and the aristocracy. Under the Mezzadria, the landlord ("concedente") would concede the right to work the land to a peasant ("mezzadro") in return for 50% of the production ("mezzo" meaning "half"). Of course, the land given was in small parcels and the peasant lacked the means to mechanise and the landlord lacked any incentive to provide improved means. It was exploitation of human labour of the worst kind and the period of the mezzadria is remembered here locally as the period of "miseria" or "misery".
In poor times and bad harvests 50% of nothing was still nothing but the mezzadri were held to their obligation to pay the landlord for use of the land. So the landlord used the services of the "Gastardo" whose job it was to control the peasants and ensure that they didn’t secrete or hide produce from the landlord. Keeping-back from the landlord resulted in expulsion from the land. The Italian film "The Tree of Wooden Clogs" (subtitled and available from Amazon.co.uk) is a sad depiction of what happened to mezzadri in Lombardy when, to make a pair of clogs to enable a son to walk kilometres to school, a father cut down a miserable tree beside a waterway. The Gastardo realised this and the family were expelled from the land.
The argument, then, that I am making, is that Monti has rendered us "mezzadri" of modern times. We are expected to work, without benefits and without enjoying the riches of the application of our physical and intellectual labour, to sustain the lifestyle of others. And to ensure this, The Inland Revenue and Finance Police are conducting raids to find entrepreneurs who keep revenue back from the State.
In fact, this Bank Holiday, 1 May, the Italian authorities have announced that Agriturismi are going to be done-over this weekend (my words, not theirs). In a somewhat humorous vein, the Rai24 news site began its report with the following:
"On holiday with the Finance Police. By now, it has become a habit: after the blitz in the Dolomites (Cortina e Courmayeur) and the seaside (Capri e costiera amalfitana), for the Bank Holiday of 1 May it is the turn of the Agriturismi"
Humorous it might seem for those who benefit from our labour. But it is worth recalling, as stated in the Financial Times that:
"[Italy’s] tax burden, [...] is forecast to reach an astonishing 49 per cent of national income by 2013"
No horse, however healthy, can pull a wagon such as this!!
p.s. so far the Finance Police haven’t dropped-by. We are of course waiting for them and this will doubtless form the basis for a subsequent diary entry!
On 17 April 2012, the President of Italy, responding to a wave of popular revulsion and disgust at the legal and moral corruption practised by the Italian Political Parties over an enormous period of time stated:
The Parties are not the kingdom of evil, and of corruption and self interested calculation ....
Woe to bundle them all-together, to demonize the Parties, to reject Politics
On April 18 the New York Times reported that:
The Vatican has appointed an American bishop to rein in the largest and most influential group of Catholic nuns in the United States, saying that an investigation found that the group had “serious doctrinal problems.” ...
The sisters were also reprimanded for making public statements that “disagree with or challenge the bishops, who are the church’s authentic teachers of faith and morals.” ....
Doctrinal issues have been in the forefront during the papacy of Benedict XVI, who was in charge of the Vatican’s doctrinal office before he became pope. American nuns have come under particular scrutiny. Last year, American bishops announced that a book by a popular theologian at Fordham University, Sister Elizabeth A. Johnson, should be removed from all Catholic schools and universities.
Of course, The Vatican is correct. The Roman Catholic Church is a faith, it has it’s beliefs and obviously requires that those who adhere to the faith respect its precepts. It is not required to make those precepts conform to the state of society at any particular time; quite the opposite, it’s objective is to make society bend its will to accept, respect and follow the doctrine of the Church. In modern times, if one doesn’t agree with a particular religious faith one is free not to practise it.
The Secular Italian State is itself based on belief and precepts: that the people of the Italian peninsular constitute one-nation, that the ’re-springing’ of Italy was inevitable destiny, that the existence of the post-WWII Italian State was justified by the Partisan Resistance to Nazi-ism and Fascism, that Italy is a representative democracy, that Italian constitutional structures deserve intrinsic respect. This is the religion that it pushed down Italian’s throats at Kindergarten, at School, through the media. In this way the consent of the people to the Italian State is obtained. But it is not informed consent.
The declaration of Napolitano, Italian President, was in response to a popular movement that is gaining traction, guided by the comic Bepe Grillo, and which aims, as a minimum, the over-throw of the political parties as they currently exist and, perhaps, something even more.
I personally think that this is just a protest movement that doesn’t portend anything more. I think that the best of the Italians who could have led a type of ’Italian Spring’ have already emigrated and that Italians are, anyway, too passive to ever mount a serious rebellion. Perhaps more importantly, the current system of clientelism between the State and pensioners and State employees ensures that there is a solid and powerful block with a strong interest in avoiding radical change. This was the real reason that Italy responded to its debt crisis by importing Monti: Italy will do every short-term thing it can - including destroying the productive sector of the economy - to avoid default harbinging consequent economic management by non-Italians that may see State employees losing their jobs and well-off pensioners having their pensions slashed.
No, I think that the real problem lies with those who do not have a clientelistic relationship with the Italian State and Political Parties. We are talking about the private sector, or at least that part of the private sector that lives by producing profit from the application of human and intellectual capital. In past times entrepreneurs would support the Italian State because it provided a stable environment in which to conduct business, bureaucracy was a problem but it could be got-around and, perhaps most importantly, it was possible to earn a portion of income free of tax (through evasion) which enhanced investment in the business and the ’entrepreneurial return’.
For the worker, there was security of not being made redundant, generous holidays, high-purchasing power, 13 or 14 months pay for 12 months work, the prospect of early retirement on a final-salary pension and to top-it-off a generous finishing-work bonus paid at the moment of retirement.
Everyone won under this system. The private sector was happy, public sector employees enjoyed even better terms than those in the private sector, the political parties spent as they wanted and rewarded the politicians lavishly. It was a big party and it went on for decades. The only problem was that the Italian economy didn’t earn enough to pay for the style of life Italians felt they deserved so they stole it off the young and subsequent generations and built-up an enormous public debt that those who enjoyed the benefits of had no intention of repaying.
But now, the compact between State and private sector citizen has changed. It is now clear that the Political Parties, all of them, either legally - because they make the rules - or illegally - because they also break them - have been consistently and over an enormous period of time sacking, pillaging and plundering the Italian nation. It had reached the point where the nation existed fundamentally to sustain the wants and needs of the political parties and politicians. And this problem has not been addressed and it is clear that except in the cases of gross illegality where the law will or has intervened, the problem will not be addressed. It will not be addressed because those in positions of power like Monti and Napolitano will not directly and honestly address that fact that the Italian State is rotten to the core, always has been, and that those running it now intend to proceed, po-faced, modifying a little here-or-there but keeping the existing structures intact.
And, the State is demanding that the private sector should pay for this. The Italian State will not accept entrepreneurs or workers keeping something away from the revenue. The clear intention of the Monti Government (as the Prodi Government before) is to suppress tax evasion at the price of putting the private sector in a share-cropper relationship with the state. And knowing that, as things stand, the private sector will be hard-pushed to bear the burden of the State and Pensioners, the intention of the government was to remove existing rights from workers to increase private sector productivity and reduce costs on employers and businesses.
The problem is that in this way, the State just exists to exploit those stupid enough to have a business and those stupid enough to have chosen private sector employment over employment in the public sector. And this is unsustainable and this is where real problems will arise. The Italian unions are right to fight to protect the privileges of workers, mad and self-defeating as they may seem in a modern economy, because the objective of the changes is not a healthy economy that returns the benefits to those workers in compensation for what they have given up. Rather it is just to render workers less costly for business. And entrepreneurs, whose very capital put at risk renders them unable to resist the depredations of the Italian State, will see that not evading taxes is not to create a better society with lower taxes for all but rather it is to feed the huge appetites of the Italian State and politicians. They won’t work for this and over time the private sector will shrink.
So it is that many Italians see the doctrines of nation and state that we, Italians in Italy live by, to be lies, out and out lies. The State has, for many, lost its justification. Of course, in many nations there are those who don’t recognise the rights of the State to exercise authority over them. But when a nation abhors those who produce for it and tries to reduce them to servitude it shows, in that act, that it has no legitimacy: it is an organisation based on exploitation. There are many nations like this in the world. And it may come to you as a surprise to realise that Italy is one of them.
Napolitano, President of Italy, may try to justify the unjustifiable. But unlike the Roman Catholic Church, from which Italian culture springs, the ameliorating hand of God is not available to put to rights that which man destroys. It all, in the end, comes back to Martin Luther. A man, or nation, that lives by doctrine will, inevitably, live a lie when the doctrine exists to justify something ex-post-facto (after the event). A man, and a society, must always look into its own conscience and confront the truth. Humans know right from wrong. They don’t need the Pope in Rome to tell them.
Italy is a Roman Catholic society and it is a construct based on faith. But in a modern society, globally connected, facts upon which a judgement can be made are possible to independently ascertain. So the President of Italy is mendacious. It is quite untrue what he said: the facts clearly show that the Italian political parties are the kingdom of evil, and of corruption and self interested calculation ....
And it is right to bundle them all-together, to demonize them, and to reject Politics as it is practised in Italy.
Until this is done re-birth is not possible. Napolitano himself could have nailed some theses to the door of the Italian Parliament. If he had done this he could have helped spark the reformation that Italy must undergo if it is to remain a viable State in the modern world.
Diary Entries will inevitably become more sporadic as the Agriturismo and Winery require significant investments of time right now - not least to pay the increased taxes ... Grrrr.....
Easter has passed. The beautiful warm and dry times of March have given way to unsettled days with rain, sun, cold and hot, more or less in one day!
The Agriturismo is open. The Easter times were good notwithstanding the weather, but every day that we have guests and the sky is not perfectly blue and the sun not shining is a small Calvary for us!
We are out of Red wine so I must bottle in the next weeks. Spring is a time of re-birth but like all births it’s a bit of a challenge and perhaps more enjoyed in the warm glow after than at the time!
At this time, Italy itself should be going through a period of re-birth. After Monti was substituted for Berlusconi some of us hoped to believe that the liberalisation Monti promised was about to be realized under the duress of international bond markets and the obligation to keep a country’s word to the leaders of Germany and France. It seemed inconceivable, at a time of such great national emergency, that one should step-in to govern based on nothing more than mendacity. And yet, this is what has happened.
You might think that this would be enough to disqualify the man and his government from the captainage of the country. But, you would, it seems, be wrong.
Today the Financial Times reported something that has widely been reported in the national press. That is that all of the Italian political "parties had received €2.25bn since 1994 for reimbursement of election costs but spent only €579m on their campaigns." This is graft on an epic scale and po-faced, the parties of the left and right, intend to ride this one out. At the moment it seems that this was not illegal under Italian law, shocking though that might seem. Obviously the Italian political parties exist to sack and plunder the nation’s wealth. In this case wealth that was borrowed and formed a part, albeit inchoate, of the national debt which is 120% of GDP and climbing.
However, and astonishingly, this graft is only a part of the story. Graft, of the illegal kind, has been flourishing in all parties, both of the left and the right, during the Berlusconi years. And we are not talking about stealing pens from the stationary cabinet. We are talking about individuals stealing and misusing millions of Euros.
Now, confronted with a breach of national trust so shocking and reprehensible, and a complete unwillingness on the part of the Political Parties to pay any price for this except where they have been collared by the law, the national economic emergency seems but a footnote to the drama playing out in Italy today. And even if Mario Monti has proved not to be a man of his word, it seems that he is, at least, not worse than those politicians currently charged with governing the country but who have sub-contracted, anyway, the actual job to him. So it is that some ’respected [Italian] commentators’ have started to argue that Monti should enter into politics in his own right as this is that only alternative to allowing discredited and untrusted and untrustworthy politicians to take again the reigns of government.
But holding executive power in a democracy is a serious thing. It’s the real deal and, in a country with such a recent history of total dictatorship, the holding of executive power by the unelected is, frankly, breath-taking. And the only justification for entrusting Mario Monti with this power was that he would liberalise Italy in a way that no political party could. And, this was Mario Monti’s promise, to Italy and to the world.
And it is a promise that he has not kept and, when one considers his mendacity, the unavoidable conclusion is that he never intended to keep. Here, it is necessary to understand that we are not talking about reforms watered down by the political parties charged with confirming them into law. We are talking about reforms cynically not made. Privileges retained. Maybe, you don’t believe me?
How about this: at the time that the government was considering the form its labour reforms would take the issue arose as to whether Italian firms should be able to make employees redundant. Currently workers cannot be made redundant by law and managers can only be made redundant by payment of swinging indemnities which renders them effectively unsackable except in the cases of most egregious wrongdoing.
Of course, during the public debate the issue arose as to why the government should consider redundancy as a possibility for private sector workers while guaranteeing public sector workers a job for life.
The Minister of "Public Functions" Patroni Grilli ruled-out absolutely making public sector workers subject to redundancy. He said "one cannot make cuts in the public sector as in the private sector." "The public administration is a public good", "one needs to understand where the public and private sectors must necessarily diverge, so to use the appropriate tools for these differences, and where to intervene to ensure uniformity of discipline". "For this it is necessary to protect the public worker" etc.
So, the Italian public worker must never face the chill winds of economic difficulty as the private sector worker. And not only. The Minister went on to say:
"the question of the article 18 [redundancy for economic reasons] and its applicability to the State has developed into a debate at times incomprehensible, if not indecipherable. A piece of Italy is asking [the Government] to strike public workers as if there were some scores to settle."
So there you have it. One thing that Italians and non-Italians agree on is the poor quality of the Italian public administration and the stifling nature of the bureaucracy designed and applied by these very public workers. Many ascribe a significant part of Italy’s economic problems to the incompetence, malice, arrogance, and miserable productivity coupled with overweening power of the Italian public administration. It is true, as the Minister said, that many Italians have accounts to settle with bureaucrats even though a settling-up will never be possible. However, notwithstanding this, according to the Monti ’liberalizing’ government, the public bureaucracy merits special protection. Of course, the minister went on to say that public sector workers would be controlled for absenteeism and malfeasance and they could be reassigned other jobs but the State is a monolithic block; the private sector must respond to the economic environment but the State has no need to. This is, of course, economic illiteracy because State jobs can become redundant just as private jobs can. And as an economy changes so the State, which is a part of that economy, must change too.
Of course, the gross unfairness of this undermined the ability of the Monti Government to insist on changes to employment law in the private sector. And the reform, such as it is, not passed, satisfies no-one and cannot be described as the liberalisation that Italy needed to assist its private firms.
Perhaps ascribing mendacity to Monti may seem extreme. I should like to give but two examples of absolute falsehood promulgated by Monti personally. Monti claimed, when restructuring the pensions law, that he was doing it for the young. In fact he did it for the old. The old kept their pensions, virtually untouched. The young will have starvation pensions as they will either not have sufficient years of payments into the national pension fund to receive something decent back or, to keep the pension fund liquid, i.e. to reduce the payments made in the future, the ’notional interest rate’ applied to their contributions will be unrealistically low. This must be the case as the current contributions are being used to pay the pensions of today’s pensioners - what the young pay today is not being put aside for their tomorrow. This is theft. The pensions problem of Italy was that it was so generous that it was beginning to eat-up the national income. This has been capped and so weighs less on the overall economy. But at the expense of leaving nothing for today’s young when they retire.
Of course, the true response would have been to allow the young to opt-out of the State pension system and go completely private on a tax-efficient basis. But this would have left today’s pensioners without money. Monti’s lie is despicable in its cynicism.
The other lie of Monti is that he had come to liberalise. He had come to do no such thing. In Italy, many sectors have protection from competition because the law allows bureaucrats or local governments or professional bodies to set limits on the practice of a profession or craft or skill or activity. Often the numbers who may practice this profession or activity depend on a notional population density. For example, 1 notary for every 1,000 people. In many cases it is the professional body of the profession itself that manages the limits. So, for example, the notaries had over time allowed a deficit to develop of more than 1,000 notaries even according to the population parameters in force. In the Italian system this is fine because it is protectionist and in a corporatist State it is a key element of economic organisation.
Monti, of course, has not changed this system. For example, the notaries, a profession that is utterly parasitic on private enterprise, announced that they would bring-up the number of notaries voluntarily. The political parties have no difficulty with Monti’s ’liberalisation’ because it isn’t. Any changes that he has made are wholly superficial (I can’t actually think of what they might be apart from pension reform) and he has left the entire structure intact and unmodified.
So, Italy is a country that for decades has been run by crooks and mafiosi. The latest batch of politicians have outdone themselves in sacking and pillaging the nation but are determined enough not to pay the price: they are carrying on anyway.
The executive government is formed from unelected persons who have proved to be nothing more than seat-warmers and time-servers. But this has proved OK with the political parties because the Italian ’elite’ such as it is, had no intention of changing anything radically. To convince the Germans and the markets they knew they had to talk-the-talk but they knew already then that they were never going to walk-the-walk.
But this situation raises a number of important questions:
(1) Do the politicians and their political parties and the unelected executive of Mario Monti reflect the Italians?
(2) What sense has Italy as a nation if it exists only as a body corporate to be plundered by those in a position to do so?
Italians are very sensitive as to how they are viewed by others in the world (but not Romanians, or Albanians or Chinese or ’other foreigners of that type’). They know that swirling around the national Italian stereotype are some unsavoury connotations: that they are dishonest, untrustworthy, lazy. That sort of thing. And they don’t like it because they know that they are the descendants of the Roman Empire, one of the greatest, if not the greatest empire in the history of the world and they are just not like that. They are as good, if not better, than the rest of humanity!
I wrote previously about the Northern League President of the Province of Udine who said that gay people were not real Friulani’. There was a bit of an outcry so he explained what he meant:
"I don’t want our [Friulano] image to the outside world to be associated with homosexuality. "Typically Friulano" is linked to gastronomic products. We are famous because we produce prosciutto, cheese and wine and this brand identifies us with these products .... [Friulano] gay publicity gives an image of Friuli that is not ours, it seems that Friuli is full of gays and it favours the idea that to be Friulano is to be gay"
How jolly. The Friulani of legend and of their own stereotype are a taciturn, closed, hard-working and honest people who for all of history have lived on the margin where northern people have entered the Italian peninsular in search of sustenance, food, sun and space. Every great invasion of Italy was washed through the Friulani. They were oppressed, exploited and lived in constant uncertainty. Great wars have been fought on their territory. The life of the average Friulano for most of history was hard-graft, religion and drink.
So the explanation does seem a bit unlikely. But it is worth mentioning that the political party - the Northern League - to which the Provincial President belongs, and which justifies itself as clean counter-point to "Roman" (i.e. Southern Italian) corruption, has hit the international press in its own right but associated with theft, corruption and misuse of State funds on an egregious scale. Investigations show that the Northern League has been plundering Italian public funds and illegally investing them in ventures over the world. Not only, but the leader of the Northern League, Umberto Bossi and his son, treated the party as their own private piggy-bank and there are some nice intercepts and videos to show it. The Northern League has been caught cold and, just today, a big-wig in the Friuli Party was sentenced to 1 1/2 years in prison for misuse of his official car and driver. Only now has he announced that he will resign.
No, the real question that every Italian needs to ask is what do they do that creates a society such as well all know Italy is. No Italian today, no matter how proud to be so, can avoid affronting, and reflecting upon, the daily revelations of corruption, theft, exploitation, mendacity and bad-dealing that permeate the society like foul smoke wafts through the air. No Italian can negate the fact that the sum total is completely rotten and that we, as citizens, have been manipulated, lied to and ripped-off without pity by those very Italians that are our co-nationals. I often use this analogy to explain what I mean when I have to encourage some Italian person that I am dealing with to go that bit further and treat our business relationship with respect and decency instead of trying to gain only advantage from it: if a house is built from distorted bricks, in the end, the house too will be distorted. If a house is built of regular and square bricks it too will be regular and square. Every single Italian today, living in this national emergency that we call Italy, must decide whether they are a square or twisted brick. It’s not such a little challenge but change can only come to this society if enough ’just’ Italians can make the difference. If not, the game is up, without any doubt, for Italy and the Italians.