Italy: High Finance Incubates Mobsterism

Fred Harrison

THE financial ligaments of the statecraft of greed are most visibly displayed in Italy. The man who symbolises the culture of corruption is Silvio Berlusconi, a convicted tax fraudster and Italy’s longest-serving post-war prime minister. To reassert his power, he has now forced the government to abandon a tax on the flow of income that is at the heart of the depletion of Italian culture.Berlusconi’s appeal against a 4-year gaol sentence was rejected on August 1, 2013. His many other court appearances failed to lead to convictions; in part, because of what the Financial Times described in an editorial (August 3, 2013) as “the tycoon’s shameless tendency to change the law to slow down his trials”. He has declared war on the judicial system (Dinmore 2013). He is appealing against his conviction for paying for sex with an underage prostitute. And his political party now insists that he should be exempt from the law which bans convicts from Parliament.The shameful nature of Italian democracy was cruelly exposed in the February 2013 election. The tragi-comic nature of politics was exhibited by Beppe Grillo, the stand-up comic who created a political party. One of his jokes: he would invite al Qaeda to blow up Parliament. “We’ll give them the co-ordinates,” he said. His party garnered 25% of the vote.But if we wish to understand why Western democracies have lost control of the destiny of their nations, it is important to understand that Berlusconi and Grillo are not aberrations. Italy demonstrates how culture in general itself is responsible for incubating corrupt behaviour. And at the heart of that corruption is the misalignment of national finances.

Corrupt Power

To secure votes in the 2013 election, Berlusconi resorted to the time-honoured method of bribing voters. He promised that if he formed the next government he would abolish the property tax and return €4bn which had been levied on owners’ homes. People voted for him in droves. The government has now decided that, to avoid another political crisis, the property tax would be abolished and the revenue raised, instead, through a local “service tax”. And that, as the Financial Times noted (August 30), would further degrade the fiscal system, for “A property tax is harder to avoid and has the added benefit of not weighing on economic activity”.

Italian politics may resemble a pantomime, but the failure of the Italian state renders people vulnerable to organised criminality. That failure is directly related to the contest for control over the nation’s rents.

Italy is bedevilled by networks of self-serving clients. Those networks include politicians at the federal, provincial and local levels; the judiciary, business and corporate officials; civil servants; and speculators, including get-rich investment operators in the banking, finance and property sectors. Their name: “clientelismo.” Clientelismo is the culture of looking after your friends and family by excluding outsiders. Thus, it is unlikely that an unemployed person can secure a job without the right personal contacts. You need to know politicians or have the support of an amiglia importante (important family).

Generally speaking, Italians believe that no-one and no political party can be trusted to deliver a plan for social justice and sound development. To what may we attribute this tragic state of affairs, and what can be done about it?

The Roots of Violence

People are imbued with a cynicism that allows the elites to behave appallingly. Berlusconi, for example, felt no embarrassment about intervening in the court case against the under-aged girl with whom he was accused of having sex. He requested that the case against her for robbery be dropped. People shrug their shoulders in resignation. Tobias Jones (2005: 32) notes that bad behaviour escapes censure because “It is not that mud does not stick (but) that there is so much of it, that it does not matter if it does”. An Italian proverb states: the law is made and then ways are found to get around it.

Italy is bedevilled by an unrelenting quest for power through the use of money. The appearances of this culture may change over time, but the impact on people’s welfare is ultimately the same.

  • Fascism originated early in the 20th century to address widespread unemployment and discontent, but become the tool for a new kind of tyranny.
  • The attempt to eradicate the Mafia in the inter-war years was nullified when the US Army re-activated the Mafia bosses to help in the fight against the Nazi occupation.

Such episodes flag up the fundamental flaws in the foundations of society, but how deep do the roots of the flaws go? The unification of Italy in the 1860s is cited as the event which saw the emergence of the Mafia, but that diagnosis is based on a superficial understanding of the financial architecture that underpins the statecraft of greed.

The Mafia as Rent-seekers

With the collapse of the Roman Empire, people fled the cities to work on the land and seek the protection of local Strong Men. Plantation owners hired stewards to look after their estates. Some poorly paid stewards helped themselves to part of the rents that they were supposed to collect and deliver to the feudal lords of the land. Those rents supplemented the wages of family members. The “mafia” family was born. It survived through the centuries as a domestic network that coalesced around the household economy. The self-help ethos eventually mutated into organised criminal networks that retained the language and ethos of the family. The way to secure protection and preferment was to be a member of such a family. Today, those families prey on the rents of society either directly, or by capturing contracts from the public sector on privileged terms.

The important point is this: criminality flourishes when society fails to ring-fence its rents for the benefit of the common good. When rents are privatised, they are fair game for whoever can apply the fiercest force (Harrison 2010). The privatisation of socially-created rents occurs through the legalised ownership of land, through corporate rent-seeking in its many forms and the activities of extra-state fraternities that extract rents by “offering” protection services (and charging pizzo).

Thus, privatised rents are the root incentive for socially significant forms of pathological behaviour. Individuals or firms (or “families”) that seek privileged access to power and money do so by seeking a share of rents, either directly (land owners) or indirectly (politicians, bureaucrats, corporate executives, and so on). The objective is to create links to people with decision-making powers over society’s net income – rent.

The Pathology of Cheating

Can a corruption-free society be constructed? What would such a society look like? It is easy to list features of such an ideal system:

  1. Political elites must be transformed into public servants.
  2. The state must be disciplined by an authentic democracy.
  3. The integrity of communal life must be restored.

But such a list is so much verbiage, if the pre-condition for a justice-based system is not enforced.

The pathologies that afflict modern society are the consequence of legalised and institutionalised “cheating”. That cheating is driven by a misaligned financial system that socialises people’s private incomes (through taxation) and privatises people’s social income (through the failure of governance to fund public services out of rents).

The breakthrough to systemic transformation is contingent on people drawing – and enforcing – the distinction between what is mine, what is yours, and what is ours.

So in economics, if Italians want full employment they would need to enforce the principle in the public sector which they abide by in the private sector: “paying for benefits received”. Enforcing this principle would automatically result in socially-created rents being paid into the public purse. Rent generated by the services of nature and society would be democratised. This would have a transformational effect on social psychology, for the payment of rent would be recognised as
(a) voluntary: not fixed by politicians or civil servants, but freely negotiated by the prospective users of the services provided by nature and society; and
(b) transparent: all transactions would be logged on cadastral records that were accessible to citizens. This results in accountability over how the revenue is collected and spent.

Once the rents were measured and tracked through the budgetary system, Italy’s clientelismo culture would atrophy. Corruption would wither. Thus, the precondition for reforming (for example) the corrupt banking sector is not ever-more complex regulations and bureaucratic enforcement agencies, but the democratisation of the public’s finances. The integrity of public institutions would be automatically enhanced, as the structural violence (Gilligan 2000) ebbed away.
Outcomes would be both moral and sociological.

  • Ethical sensibilities reawakened: people empowered through access to resources which hitherto funded narcissistic lifestyles of the elites.
  • Politics responds to people’s needs. Funding, tailored to the preferences of people who paid rent (that’s everyone), would discipline politicians to serve the common good.
  • Institutions adapt to people-centred preferences, rather than the logic of the predator culture.

This is a pragmatic scenario that requires the renegotiation of the social contract. Marx misplaced his faith in the “dictatorship of the proletariat”. We actually need an inclusive democracy that embraces everyone. This can only be achieved by terminating the legalised cheating that blights people’s lives.

References:

Dinmore, Guy (2013), “Berlusconi appeal thrown out”, Financial Times, August 2.

Gilligan, James (2000), Violence: Reflections on Our Deadliest Epidemic, London: Jessica Kingsley Publishers.

Harrison, Fred (2010), The Predator Culture: The Roots and Intent of Organised Violence, London: Shepheard-Walwyn.
Jones, Tobias (2005), The Dark Heart of Italy, London: Faber & Faber.

Mit freundlicher Erlaubnis von Fred Harrison (see: http://fredharrison.com/articles/italy-high-finance-incubates-mobsterism/)

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