Italian elections: Monti vs. Berlusconi and a test of democracy

The upcoming Italian elections Feb. 24-25 are testing whether democracy can correct itself. The elections 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 over the long run.

Mario Monti’s period (beginning November 2011) as an unelected “technocratic” prime minister appointed by President Napolitano, outside of 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 labor market. Taking a sober look at the future, Mr. Monti’s policies sought to respond to a reality all of Europe must face.

Europe has 7 percent of the global population and accounts for 24 percent of global production and 50 percent 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, Mr. Monti has been rewarded by the electorate with plummeting poll numbers. Some polls suggest Monti's coalition would only garner about 13 percent of the vote 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 would agree to a stimulus program or a “bailout” of the debtor countries. In Germany, too, the short-term horizon of voters blocks a long-term solution to Europe’s collective woes.

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 signals – the media, market, and politics – steer behavior toward immediate gratification. Just as people expect sweetness without calories, they seem to want consumption without savings, high standards of living without a competitive economy, and a welfare state without taxes.

Vetocracy is a decayed form of democracy in which special interests – from unions to banks – have staked 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 percent of GDP in Italy soared from 60 percent in 1980 to 120 percent by 1992.

A vote to retain this status quo is not only a vote for the past – because it is a vote for the vested interests of the present – but it is a vote against the future. Former Italian prime minister and current candidate Silvio Berlusconi is in many ways the poster boy for Diet Coke democracy and vetocracy as he revs up the right-wing populist impulse. Beppe Grillo on the populist left has more to offer by rightly expressing the anger and frustration over pervasive corruption. But anger and frustration are not a governing program.

Italians should consider what is at stake. Albeit in a global growth environment, former German chancellor, Gerhard Schroeder, was able to push through the kind of structural reforms Monti has proposed back in 2003 when he was in office. He was rewarded by being kicked out of office in the next election. 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 Mr. Schroeder’s reforms. Will it do the same for Monti’s?

Is Monti a legitimate candidate?

The related issue is whether Mario Monti should have put himself forward directly as a candidate for prime minister again in the election campaign. Because he is already a "senator for life," Monti cannot technically stand for parliamentary election, but he could be re-appointed as prime minister if his coalition makes adequate gains in parliament.

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 would a new government be able to see them through. Critics argue that if Monti doesn’t “earn” a leadership role as a candidate, he won’t be “legitimate.”

I understand this argument but can also see how Monti’s path makes sense. What is important is the “circuit breaker” agenda. It would be useless to elect a “re-politicized government” without a majority to implement reform. Monti is already a member of parliament as a senator-for-life and thus legitimately eligible for a leadership role in Italy’s parliamentary system.

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 his first two years in office, Gov. Brown slashed spending while he sought to obtain supermajority approval – not to raise taxes, but only to get permission from the legislature to put a proposition on the ballot so the voters could decide what to do. That also required a two-thirds vote, which he couldn’t get.

In California’s direct democracy, voters can make laws and change the state 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 law if it passes.

So, failing to get the legislature to allow the public to vote, the governor set up a civil society committee with the teachers’ unions 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.

I must add, however, that the new tax avoided the challenge of the “Diet Coke habits” of the general public since it was targeted for restoration of education cuts, a good thing, but only applied to “others” – the rich making more than $250,000 per year. In a society edging toward plutocracy, this was a necessary precondition of broader reform, but only that.

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.

Mario Monti’s “agenda for reform” being put forward to the voters without a candidacy seems to me very much the same kind of idea. It is an innovation in democratic politics for the tough times we face – a referendum on the future versus the status quo and the past. If that is legitimate in the radical democracy of California, why not in Italy?

Nathan Gardels is editor-in-chief of NPQ and the Global Viewpoint Network of Tribune Media Services. He is co-author with Nicolas Berggruen of “Intelligent Governance for the 21st Century: A Middle Way Between West and East.”

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