Tuesday, March 24, 2009

Andate a lavorare!

Italian Prime Minister Berlusconi opened the high speed rail link between Bologna and Florence today (see picture). The original project dates back to 1973 - 21 years before he entered politics - so Silvio's claim of paternity for this useful bit of infrastructure is open to doubt. He did, however, offer words of encouragement to Italians seeking a way out of the recession: 'work harder'! (Maybe someone should tell him about 'aggregate demand').

Anyway, that set me thinking about the puzzle Berlusconi poses to political science. On the face of it, his involvement in politics does not seem to have brought good times to Italy - growth has been sluggish, promised institutional and administrative reforms have failed to materialize, corruption and misuse of public office seem as bad as ever (as documented by La Casta, a recent journalistic exposé of politicians' high living). His outrageous behaviour on the international stage (for example, his joke about concentration camps to the European Parliament) has heaped ridicule on his country and irritated powerful opinion makers (most notably the Economist - well, maybe he's not all bad).

Even worse than this, Berlusconi himself has gained very obvious private advantages out of his political adventure: laws have been passed to prevent him being convicted of various offences, his media empire has gone from strength to strength thanks to carefully designed laws and manipulation of the state television company (his only real competitor) by his government ministers. His sole response to Great Depression #2 has been to propose a deregulation of house building in Italy, an area in which he and his allies have big financial stakes. In short, he is doing well without doing much good.

Yet he remains stubbornly popular amongst a majority of Italians. Why? Isn't the electoral process, if nothing else, a neat mechanism for 'voting the rascals out'? How can a politician who is clearly extracting private rents from his control of the institutions, and shows no signs of having any solutions to the country's problems, keep getting elected?

One popular view, especially on the left, is that Berlusconi's control of the media allows him to brainwash the Italian public with propaganda, creating a false consciousness that lulls lower class voters into betraying their class interest.

There is some evidence for this: those who tune into Berlusconi's channels are disproportionately likely to vote for him. But there is, of course, an endogeneity problem there. And in any case, it takes more than the perma-tanned Emilio Fede to convince Italians that there has been any real economic or political progress in the last 15 years - you can fool some of the people some of the time.... Moreover, the mainstream press is rather less enthusiastic, so it's not as if there are no sources of critical news coverage.

Instead, we must reluctantly conclude that Berlusconi is giving a large chunk of the Italian electorate what they want: conservative economics (with a very small 'c'), lip service to Catholic values (of the kind only a hyper-rich divorcee with legal issues can offer), and enough money to convince the other right-wing parties - the Northern League and (now dissolved, in theory) National Alliance - to support him in parliament.

But hang on a minute: 'conservative' economics is one thing, but how do you get the votes of middle class Italians when the economy is stagnating?

By 'conservative' I mean precisely that - conserving the privileged positions enjoyed by a myriad of economic interests in Italy: taxi drivers keen to avoid an expansion of licences, small shopkeepers wanting to avert retail liberalization (small bookshops and media outlets excluded since Berlusconi owns the Mondadori chain), small businesses and self-employed professionals hoping for a light touch from the tax inspectors, banks seeking protection from foreign buyouts, property speculators anxious their corrupt deals will not be disturbed by the judiciary... and so on. Berlusconi protects these people from change, and ensures that the real costs of stagnation are heaped onto the salaried working and clerical class. Indeed, in a sense the stagnation is precisely a symptom of how successfully he has defended these groups (Olson's 'Rise and Decline of Nations' dixit)

So, Berlusconi defends broad social interests, like any other democratic politician. But just one part of the puzzle remains: why do these social interests tolerate Berlusconi's self-dealing, which has costs for everyone?

Because these costs are diffuse, rather than concentrated. All Italians have to put up with the poor quality and endless advertising breaks of Italian TV, but these costs are easy to bear (at least if you've never watched the BBC). And in the judicial sphere, Berlusconi has been pursued for largely 'victimless' crimes: again the costs of loosening the penal consequences of accounting fraud and tax evasion are mostly diffuse, whilst the benefits accrue to Berlusconi and his electorate in a fairly concentrated fashion.

In short, Berlusconi sells a product - the defence of conservative interests - at a price most conservative Italians think they can afford - a few favours for Berlusconi and his friends and family.

So the real puzzle is: why isn't politics like that everywhere? I'll save that one for another post...