Tuesday, February 26, 2013

The Italian Election: Why it's Actually Good News

So, with all the usual commonplace reactions to the Italian election: 'chaos', 'ungovernable', and so on - it's time for a contrarian view. In a number of ways this is a great outcome.

First, Berlusconi will be happy with the result for sure, because it gives him huge bargaining power - no majority in the Senate is feasible without him. But let's remember that his coalition won only 29% of the vote, down from 47% in 2008, and his party, the PDL, won 21%, down from 37%. So the worst expression of Italian corruption and conservatism took a battering in the polls. Italians are not as forgiving as we feared.

Second, the two parties that represented continuity in sticking to the absurd commitment to austerity - the PD and Monti's Scelta Civica - both performed way below expectations. Monti's result is hard to read as anything but a rejection of European technocracy and its perverse insistence on pain and sacrifice as the way to recovery. Greece and Spain have largely caved, Italy, the biggest and most important Southern economy, and probably the most self-confident despite its problems, has said 'basta'. This has got to be good for Europe - better we accept this now, then have to wait for Golden Dawn to win in Greece.

Third, Italy's venal and reactionary political class is obviously a huge problem, and the amazing performance of Beppe Grillo's Five Stars Movement - at 25% the most voted individual party - shows that many Italians, and especially the young, have had enough of their politicians. Again. Of course, Berlusconi himself emerged out of the ruins of the last exercise in eliticide, back in the early 1990s. He then proceeded to piece together a new regime of rent-seeking and policy paralysis which is responsible for Italy's long-term decline. Grillo may have no policies, but as a protest vote you can't get much better than that. If nothing else, Grillo sends a clear signal to the crooks that a large number of Italians have had enough of the stealing and incompetence.

Now, this does not mean I'm optimistic. But if we add this result to the steady shift in the debate towards the inescapable conclusion that austerity is a disaster (even Olivier Blanchard thinks so now), then perhaps Europe will edge towards some more sensible approach to preserving the euro. Will this solve all our problems? No. But if Merkel wants the euro to survive, she'll have to start listening to Southern European voters as well as her own.

Thursday, February 14, 2013

Why we hate parties

So Mariano Rajoy received dirty money (dinero 'B') from secret accounts controlled by the Partido Popular's Treasurer, accounts filled with kickbacks paid by construction companies in exchange for building permits delivered by PP politicians (read all about it here). Meanwhile, the likely winners of the coming Italian elections, the Partito democratico (PD), seem to have been closely involved in the decisions that have dragged Monte dei Paschi di Siena close to failure. In these circumstances, it's hardly surprising that Spanish and Italian voters view their political parties and elected representatives with mistrust and loathing.

They are not alone. Political parties are increasingly unpopular throughout the advanced democracies, calling into question the ability of elected governments to deal with the political fallout of the crisis. This is not a new phenomenon: political scientists have been discussing party decline for decades. But the evidence keeps mounting that parties are organizationally ever weaker, with fewer members, a smaller and ever less loyal electoral faithful, and less popular leaders. The crisis is brutally exposing the limitations of these parties.

Are voters right to distrust politicians? Yes, but unfortunately democracy makes it inevitable. Parties can please some of the people some of the time, but they can't please all of the people all of the time, and the disappearance of economic growth makes this more and more acute, since benefits can only be redistributed to one group at the clear expense of others. Not surprisingly, voters are dissatisfied with politicians' ability to solve their problems. But how exactly could politicians solve everyone's problems? One voter's problem is another voter's pay check. In the low growth scenario, politics is a zero-sum game.

At the heart of the problem is the increasingly individualistic way in which voters experience electoral politics. Electoral behaviour studies have moved away from the group-based paradigm of the post-war era (reflected in the work of Butler and Stokes or Lipset and Rokkan) towards a more choice-based analysis of voter behaviour, in which voters act as consumers of politics rather than as citizens. The consumer-oriented voter expects to receive what she wants in return for her vote, but is in competition with many other consumers who may want something quite incompatible. There is no way of the political market 'clearing', given there is no price mechanism. Everyone's vote is worth the same. Except...

Some voters count more than others because they can top-up their vote with something politicians badly need: cash. Political parties mostly organize on a national scale, and need to select candidates throughout the electoral territory, provide them with resources and help them campaign for votes. Yet the mainstream parties' turnover is a fraction of that of other nationally organized groups such as trades unions, churches or private companies. They need more money than the paltry state funding provides, and the obvious way to get it is to offer special treatment to well resourced organizations in exchange for cash or services in kind. If you're wondering why the Levesen recommendations are going to be ignored by the current UK government, this logic provides 99% of your answer.

So back to Rajoy. Is it any wonder that an organization which has huge responsibilities and a limited revenue stream should leverage its institutional power to raise a bit of money to help keep the show on the road? Hardly. In some ways the 'costs of politics' (to use a term deployed to spectacular effect by Beppe Grillo in Italy) are extraordinarily low, and we shouldn't be surprised if politicians look for ways to raise more cash. We also shouldn't be too disappointed if the votes that we get for free don't buy us exactly what we want. Democracy can't be 'consumed', it's made with our own engagement and involvement in the political process.

Tuesday, February 5, 2013

Breaking up is hard to do

James Kwak points out that Michael Lewis backs his position that the too-big-to fail financial institutions should be broken up. He also notes that, not only hasn't this happened, it doesn't seem likely to happen. Why not?

This is actually a pretty interesting conundrum for democratic politics. A whole set of factors would suggest that financial reform should happen. First, the consequences of not doing so seem pretty serious - not only has the systemic vulnerability of the financial sector not gone away since the meltdown of 2008, on some readings it has got even worse. Failing institutions were taken over by others that were also failing, but managed to hang on longer, thus becoming even 'bigger to fail'. And new technologies are potentially introducing greater volatility to the markets, opening up the possibility of staggering losses beyond market actors' control.

Second, if politics were at all driven by public opinion, then surely taking the axe to the financial institutions responsible for the crisis would be a huge vote-winner, and politicians would be queuing up to promise ever more swingeing measures to rein in the banks. The various median vote theories out there surely mean political parties would promise to deal with the financial sector, since the majority of  voters demand this, and only a tiny minority oppose it. And yet, as Kwak reports, the US Senate mustered barely a third of votes behind such a proposal.

So what is going on? Well, part of it is the usual story in public policy, that reforms often damage a small number of people disproportionately and immediately, whereas the benefits are spread out amongst many people and over time. The former mobilize, the latter don't. It was ever thus.

But surely we need more to explain this, or no policy measures benefiting the mass of voters would ever have made it through the democratic process. My guess is that politicians and their parties have become so ideologically and organizationally weak that they are now incapable of mobilizing popular opinion behind the production of public goods. To deliver policies that benefit the public, the public needs to be mobilized in such a way as to neutralize the efforts of the affected minorities. The more powerful and rich these minorities, the more parties have to do to convince voters of the need for policy change, and the better organized they need to be to mobilize support and get the vote out.

All of this is what political parties used to do, but no longer bother. Why risk annoying powerful people who can finance your reelection, when you could do nothing and blame someone else for the bad consequences of failing to deliver reforms? Postdemocracy, as Colin Crouch calls it. There will be no way out of the crisis without mobilizing social groups that have an interest in reform. The longer it takes for this to happen, the less likely it is that there will be peaceful outcome to this crisis.