SOURCE: The End is Coming (History blog) (7-29-11)
(Jonathan Tremblay is a historian and Breaking News Editor for the History News Network)
With all this talk of the United States possibly defaulting on their international loans and of Greece receiving a second bailout from Germany and the European Union to continue existing, one thing is clear: the global economic recession is far from over.
This week, I specifically turn to a country that has the fourth-largest economy of the European Union, that is part of the G8 most powerful countries on the planet, that has 60 million inhabitants, that holds thousands of years of history and that is generally crumbling in debt: Italy.
We are far from the US’ $14 trillion in debt but Italy’s $2.2 trillion in debt is more than Italians can handle. You see, Italy has key flaws built into their fledgling nation that now, more than ever, prevent it from getting out of trouble and will even compound the problem to an unthinkable national collapse.
For example, tax evasion is rampant (an estimated 100 billion Euros lost per year), annual growth rate has stagnated around 4% since 1988, over a quarter of young Italians aged 15-24 are unemployed, heavy traditional family values has meant thousands of small companies and almost no large publicly-owned companies not to mention just about half of Italian women not participating in the workforce and finally very strong unions and trade guilds make firings almost impossible and therefore companies prefer not to hire and consequently immigration to the country is so low that Italy’s aging population is currently not replacing itself. Oh, and the government is huge. For its population, Italy has the largest government spending on earth (almost 52% of GDP) and the debt of this public sector annually amounts to 120% of GDP. Italy, for all the spending cuts it is trying to implement, is still spending much more than it is bringing in, and that, just for the public sector.
One can see why Italy’s troubles seem unfixable. But it gets worse. Much worse.
150 Years in the Making
When we think of Italy we think of the ancient Etruscans and Romans, the Popes at the Vatican, the cultural explosion of the Renaissance… but that is not Italy. Much like Germany, Italy was not a unified state until later in the XIXth century. Instead, the Italian land was host to kingdoms, duchies, Papal States, republics and the like until three Italian wars of unification brought them all together in 1861 to form the country we know today (give or take).
Created in blood, a unified Italy meant quashing constant regional nationalism not to mention the hegemony of the Austrian then Austro-Hungarian Empire. Italians decided to keep a monarchy, instituting a parliamentary system alongside, modeled on the British. As the north industrialized, the south remained rural (Sicily has been the breadbasket of the region for over 2,500 years). As the parliament legislated for social progress, the king signed secret alliances with Germany. And when the Italians finally joined against Germany during the First World War in exchange for promised territories, the result was the death of 650,000 Italians and the Western powers giving some of the promised land to Yugoslavia.
Thus it was that Italians were disillusioned with a constitutional monarchy that pulled in different directions, that brought them into a devastating war and that, in the end, couldn’t even deliver on their promises. Enter Benito Mussolini in 1922. Marching on Rome in a coup sponsored by the king (Victor Emmanuel II), Mussolini’s National Fascist Party was greeted with great acclaim before ruling over the country with an iron fist for two decades. Despite this return to authoritarian rule, the same pattern emerged. Mussolini’s government pretended to listen to the people while disseminating flattering propaganda but Italy was actually signing treaties with the Vatican (for land and support), with the Nazis (for protection) and with the Japanese (to please Germany) while curtailing all liberties at home.
I spare you the details of the Second World War but half a million dead Italian soldiers and civilians along with a destroyed Italian economy saw a renewed uprising by the Italian people, the summary execution of Mussolini and a referendum to become a republic by June 2, 1946, throwing out the monarchy altogether this time.
Having twice failed at a stable government in a short period, Italians and their government now took timid steps. They accepted the American “Marshall Plan” that gave Western European powers money to rebuild after the war (in exchange for keeping communism at bay), they elected Christian-Democrats at the head of the country (women voted for the first time in 1948) and Italy became a member of NATO, surrounding itself with powerful, democratic and economically sound allies this time. In this period of “step-by-step”, Italy even participated in the creation of the European Economic Community in 1957, the precursor of the European Union.
With confidence restored, despite an admittedly less than stellar track record after its centennial celebrations, Italy fell into some old habit in the 1960s and 70s. International economic downturns, such as the 1973 oil crisis, hit the country very hard and in times of hardships, especially economical, Italians once again wanted to change their form of government. Rome did not become fascist or communist this time but those two extremes of the political spectrum gained a large following and frequent clashes between them, and against the democratic republic, led to extensive terrorism and assassinations (notably of Aldo Moro in 1978, the Christian-Democrat leader).
Corruption and the acceleration of downfall
With the 1980s now came a savior, leader of the Socialist party and prime minister from 1983-87, Bettino Craxi. With Craxi came the rebounding of the Italian economy to the point of joining the G8 (G7 at the time) and he did this by increasing spending. A lot. In his short years, national debt skyrocketed past 100% of Italian GDP. This is also where began the proliferation of political corruption qualified as tagentopoli (Bribesville). Reaching the 1990s, it was getting more and more obvious that major private companies were bribing officials in return for preference and contracts and thus a group of judges asked for the creation of the Mani Pulite (Clean Hands) investigation. At first some mid-level officials were found guilty. Then, people started denouncing others. Then, accusations, convictions and confessions spread like a brushfire across Italian government from the municipal level all the way to the prime minister’s office. What followed was almost a collapse of Italy there and then. By 1992, the four major parties of Italy were implicated and politicians were falling left and right (to imprisonment but also extensively to suicide). The Christian-Democrats, in power for almost 50 years, crumbled and disbanded and the other three parties of Italy followed suit. Craxi himself was found guilty and sentenced to prison despite his defense of “everyone else was doing it” (Craxi fled the country and died in a luxurious Tunisian villa in 2000).
The Italians overthrew this third attempt at a responsible and stable government and in 1994 elected someone that actually saw the Mani Pulite as an opportunity. Media magnate Silvio Berlusconi was a millionaire that almost certainly owned companies that had participated in bribing officials (everyone was doing it remember?). He quickly changed the law to eliminate prison terms from corruption convictions and when his own brother was found guilty by the investigation, pardoned him (for the first of several times). High on the transparency trend, Italians campaigned to indict Berlusconi and he resigned his government at the end of 1994.
Silvio Berlusconi was actually reelected in 2001, allegedly bribing his way to the top again. With the Mani Pulite long gone, he actually manipulated Italian media (most of which he personally owns) into demonizing the Mani Pulite judges and anyone involved in prosecuting politicians. Furthermore, he surrounded himself with an expert legal team that exploited the notoriously loophole-y Italian judicial system into letting accusations expire against the prime minister. He lost in 2006 but once again (!) Italians elected him in 2008 and he remains prime minister to this day. Still on trial, Berlusconi is accused of corruption and bribery (for almost two decades now without conviction), especially concerning the bribery of politicians in the 2006-2008 government.
Italy has become so used to politicians conducting themselves in this manner that it accepts and continuously reelects a man that is openly known to conduct criminal business and that is openly suspected to have bribed his way into office several times. Considering the track record that we’ve just gone through, I guess he is the most democratic of a long-line of corrupt and authoritarian leaders. Berlusconi’s misdeeds are so unsubtle that Italians may simply prefer the devil they know… Now however, Italians must realize that their trial-and-error history of democracy has brought them to a financial precipice.
A bad mixture of tradition and corruption has maintained Italy on the path to economic and national catastrophe and, despite punctual periods of prosperity, leaves Italy not far from where they were in 1861, 1922, 1946 and 1992. They tried something and failed dramatically and now must reevaluate their options. I have no reason to believe that Italians will do better next time but I do suspect that they are not afraid to try drastically new things, and that, is a scary prospect.
The Americans will cut social programs and raise taxes, the Greeks have cut government spending with a scythe but Italy needs more. No reform will fix the fundamental flaws in the Italian nation (in its 2011 incarnation). They need to go back to the drawing board once again. So now we wait. Berlusconi is still prime minister, still a media magnate and still manipulating courtrooms (in cases that now include an underage affair), the Italian debt is still escalating and the Italian of 2011 is at home thinking.