How Italy’s populists keep power

Before immigration rose in the 1990s, its scapegoat (when it was exclusively a party of the North) was southerners, whom it denounced as lazy welfare recipients; before it was nationalist, the party was federalist and fleetingly secessionist; before it was fervently Catholic, it staged elaborate rituals to honour the river that crosses the peninsula’s northern plain, the Po.

The only constants are the scapegoating and its relentless effort to cast itself as at one with the man in the street.

This serves a strategy whose main pillar is keeping the rule of law weak. Karla Hoff and Joseph Stiglitz defined this notion as “what stops the few from stealing from the many”; the League uses demagogy to distract the many while the few steal from them. And this is the real danger the party poses.

In Italy, average real incomes are roughly at the level they were in 1995 – in France, Germany and Spain they are about 25% higher – and political discontent is intense and widespread. The primary cause of this malaise is not the euro but stagnant productivity growth, which began to decline well before the establishment of the common currency.

Italy’s large public debt is itself a manifestation of that problem. Its roots lie in a politico-economic equilibrium that hinders innovation, competition and creative destruction, which are crucial drivers of productivity growth and prosperity. Low political accountability and a weak rule of law are the main traits; clientelism and illegality its clearest manifestations. Tax evasion is between two and three times higher than in France, Germany, or Spain, for example, and corruption is at levels typical of the Balkans.

Italy is an open democracy, served by an economy – which has Europe’s second largest manufacturing sector – that reliably produces healthy current account surpluses. But its social order is markedly less efficient and fair than its peers’: to protect the country’s elites, it constrains the opportunities of ordinary citizens and firms, raises inequality, and dampens the country’s potential.

In order to shore up this unbalanced system, Italy’s governments acquired the consensus of elements of society by granting them certain political and economic privileges. These particularistic policies accumulated over decades, may have made the social order more inclusive. But they reduced the efficiency of public expenditure and prevented the development of a genuinely universal welfare system, which economies based on competition and innovation require.

This equilibrium and the political establishment that presided over it were shaken in 1992–4, mightily, by a currency crisis and vast corruption investigations. The equilibrium stabilised, thanks to greater budget discipline; but the political establishment collapsed and rapidly dissolved.

The League flourished then, as the fiercest opponent of that establishment – which it described, correctly, as corrupt, collusive, and unaccountable. It gained almost 9% of the vote in 1992, an extraordinary result in Italy’s ossified 1948–92 party system. Yet, in 1991, the party had opposed a referendum that sought precisely to increase political accountability, and a few weeks after its electoral success it approached one of Italy’s largest firms, which was illegally financing the establishment parties, and duly received its own undisclosed contribution.

Its 1992 manifesto – mixing hostility to Rome and the South with threats of tax revolt and secession – was a direct response to the rising tax burden. It argued that the North should keep its own money, and found support among those regions’ professionals, self-employed workers, small entrepreneurs, and their employees. This became the League’s core electorate, and that manifesto barely changed until the 2010s.

In 1994, the League allied with Silvio Berlusconi, who inherited the priorities and electorate of the old establishment. It supported each of his cabinets – 1994, 2001–6, 2008–11 – and each of their worst policies, including repeated amnesties for tax evasion and a long line of laws whose main aim or effect was to increase impunity for corruption.

Italy’s politico-economic equilibrium was to become less stable because the fiscal space for lifting growth through public spending, to compensate stagnating productivity, and for securing consensus, had been severely reduced. Indeed, Berlusconi’s last government was felled by the European sovereign debt crisis (which threatened the survival of the Eurozone).

Mario Monti’s 2011–13 ‘technocratic’ cabinet, which implemented emergency austerity measures, relied on Berlusconi’s and the centre-Left’s support. The League, alone in opposition, benefited from the fact that those harsh policies, which had contributed to avoiding a catastrophe, soon became unpopular. Under a weak and confused leadership, however, crushed by grave corruption scandals, the League suffered a stiff electoral defeat in 2013.

Salvini inherited a party in ruins. But he could capitalise on its opposition to austerity, to recast the party as an anti-establishment one, and nimbly discarded separatism in favour of nationalism, to expand its support beyond the North. The 2013–18 centre-Left governments did little to either raise growth or make it more inclusive, and Five Star and the League won the 2018 elections by promising cultural and economic protection to those left behind by globalisation.

In office, however, the League pushed policies that went directly against their interests. It granted a special pension scheme to certain cohorts of workers; it obtained a tax cut for professionals and small entrepreneurs, and demands a yet more generous one; it won a tax-evasion amnesty, wants another one, and proposes to abolish all limits to the use of cash, which will further ease tax evasion; and it defended tooth and nail two junior ministers accused of corruption and embezzlement.

The League is now the main – though not the sole – guarantor of Italy’s equilibrium. It picked up from Berlusconi the standard of favouring vested interests and tolerance for illegality, and inherited much of his electorate. What changed, compared with the period of Berlusconi’s dominance, is that xenophobia is more readily turning from rhetoric into deeds.

This mix worked remarkably well at the European elections in May. It resembles what happened in Hungary, and in other regimes characterised by the combination of corruption and demagogic nationalism (which could be better described as multi-party kleptocracies than illiberal democracies, as Branko Milanović has argued).

In Italy’s better-governed democracy, however, that combination generates greater tensions, which are a permanent source of instability. It’s why the more predatory the League’s policies are, the louder its rhetoric must be. But the xenophobia is a distraction. That’s why those who wish to oppose the League will be ineffective if they simply decry the xenophobia without mentioning the perversion of the rule of law.

Andrea Lorenzo Capussela is the author of ‘The Political Economy of Italy’s Decline’ (Oxford University Press, 2018)

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Andrea Lorenzo Capussela is the author of The Political Economy of Italy’s Decline and State-Building in Kosovo: Democracy, Corruption, and the EU in the Balkans.

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