Beppe Grillo and his Five Star Movement have emerged as the single largest party in Italy’s elections held 24-25 February. But what do we know of his policies? Here’s a recent analysis by economist Vladimiro Giacché which originally appeared in Italian at MicroMega.
In dealing with the economic programme of the Five Star Movement we should first clear up in advance possible misunderstandings. One for all: this writer does not belong to the category of those who believe the movement founded by Beppe Grillo is a dangerous subversive movement with which it is pointless to have a dialogue and whose ideas cannot even be taken into account.
I will consider the programme as you do (or should do) with the programme of every party or movement: discussing the merits of the offering. The Five Star Movement has a programme. In fact, it has two.
One, more detailed, is a 15-page document that can be downloaded from the blog of Beppe Grillo. The other, much more concise and consisting of 16 points, was launched (and re-launched by the media) 27 December 2012, in a sort of response to the so-called Agenda Monti. Unfortunately, the two programs do not overlap perfectly (each deals with issues not present in the other), and this complicates things a little.. In any case I will proceed as follows: I will start from the economic programme with 16 points, and then verify the contents in more detail with the help of the programme document itself.
What is Grillo’s economic program?
The 16 points launched December 27, to be honest, doesn’t talk much about the economy. I reproduce verbatim the points of interest in this regard: “citizen’s income” (paragraph 2), “immediate measures for the revival of small and medium enterprises along the French model” (13), “restoration of funds cut from health and public school with cuts to useless infrastructure works such as the TAV” [high speed train project] (14).
There are also economic implications in other parts of the programme – “anti-corruption law” (paragraph 1), abolition of public funding of political parties (3), “immediate abolition of the direct and indirect funding to the newspapers” (4) referendum on the permanence the euro (6), “computerization and simplification of the state” (15), “free access to the network for citizenship” (16).
Energy. Along with health, the only other chapter in which the proposals are set out in an attempt at a logical reasoning… is the theme of energy. In this regard the programme focuses in particular on the issues of energy conservation and renewable energy. It proposes incentives for renewables and biofuels, and demands that (rightly, even if it does not seem to matter to parliament) rules already in place for energy efficiency that are currently disregarded are actually applied. There is also some inconsistencies. For example, first it compares the energy efficiency of existing Enel power plants with the standard of new generation plants, but then it says that Italy shouldn’t build new power plants but rather make existing ones more efficient.
Information. The issue of information, to which the Movement 5 Stars is traditionally very sensitive, has certain implications of an economic nature. Both in terms of savings to the State (through the elimination of grants for the financing of newspapers…: it is also point 4 of the 16 points), both in terms of higher costs: this is the “digital citizenship by birth, access to the network for every Italian citizen” (a clearer articulation of the sixteenth point) and for the “complete coverage of ADSL in terms of the national territory”, so it is, above all, in favour of the “nationalization of the telephone backbone, with its repurchase at cost price by Telecom Italy and the commitment by the State to provide the same services at competitive prices to any telephone operator. “
Economy. The theme is understandably very large. We can group the proposals in accordance with the scope to which they refer.
Finance Many of the proposals relate to the functioning of the financial market: the introduction of class action, the abolition of Chinese boxes on the Stock Exchange, the abolition of multiple responsibilities by directors on the boards of listed companies (this has already in fact occurred through Decree-Law 201 / 2011, which regulates the so-called ‘prohibition of interlocking’, and that is already applied by the joint Consob-Bank of Italy rules of April 2012), introduction of real structures of representation for small shareholders in listed companies, a ceiling on the salaries of managers of listed companies and companies with substantial state participation, ban on the appointment of convicts as directors of State-owned companies or listed on the Stock Exchange (as the case not to repeat the programme cites Paolo Scaroni of Eni), the abolition of the stock option.
Other measures affect more specifically the banking sector: this applies to the prohibition of cross equity between the banking system and the industrial system and the introduction of joint responsibility and liability financial institutions for losses on the financial products they offer to customers.
As for the labour market, we find the proposed abolition of the (so-called) Biagi law and that of a ‘”guaranteed unemployment benefit” (which is a different concept from the “citizen’s income” mentioned in the second of the 16 points mentioned above).
Measures relevant to large sectors of the production of goods and services are: “to prevent the dismantling of the food industry and manufacturing focussed largely on the internal market” (also aims to “encourage local production”), abolish the “de facto monopolies”, specifically, Telecom Italia, Highways, Eni, Enel, Mediaset and state railways and implement “disincentives to companies that cause ‘social damage’ ” (e.g. distributors of bottled water). No mention, however, of the “immediate measures for the revival of small and medium enterprises on the French model”, representing the thirteenth of the 16 points. Not knowing what “the French model” Grillo refers to, it is not easy to tell whether this gap in the detailed programme is serious or not.
Finally, with regard to the reduction of the public debt, the programme asserts that it can be achieved “with strong cost-cutting measures applied to the state by cutting waste and the introduction of new technologies to enable the citizen access to information and services without need for intermediaries ” (roughly corresponds to point 15).
Transport. With regard to transport, many of the proposed measures relate to disincentives on car use in urban centres. As for the railways, it proposes the “immediate stop of the TAV [high speed rail project in Val di Susa and against the “development of high speed rail networks” More generally, it proposes a reduction in labour mobility through incentives for telecommuting and, once again, by covering the entire country with broadband.
Health. As on the environment, these points are developed in more detail than other issues.
Here, the programme begins with a correct observation, and one which is very unpleasant for the homegrown right (Berlusconi, Northern League as well as Monti): “Italy is one of the few countries with a public health system with universal access.” This feature is threatened on one side by federalism and the attribution of health to the regions (the text speaks of devolution, but the concept is that), on the other hand to the fact that “we tend to organize health like a ‘ business‘ by focusing on economic determinants for health and free services. The response set out in the programme is the imposition of a progressive system of health charges, proportional to income, on non-essential services and the ability to allocate church funds collected from taxpayers (8 per thousand) to the medical and scientific research.
Education. Finally, education. Calls for the overturning of the Gelmini law, public funding only for public schools (as opposed to the current system of funding to private-church schools) and investment in university research. To finance education (and health) check out the fourteenth of the 16 points – “restoration of funds cut to health and public school by eliminating useless infrastructure works like Tav.” This amount of funding appears insufficient. But the part of the education program that raises the most concern is related to the tools and methods of study: if one can agree with the goal of a “mandatory deployment of the Internet,” in schools, the “gradual abolition of printed school books” is not acceptable. The “public access via the Internet to lectures” does not seem to be a goal supported by the (usually anything but brilliant) results achieved under “distance learning” at university level. Finally, there are two frankly bizarre objectives, if very fashionable: the proposals for compulsory teaching of English from kindergarten and the abolition of the legal value of qualifications.
The Euro. In the 16 points in the programme there is only once reference to the euro and Europe
It does not include an opinion on the pros and cons of the single currency, or the processes that are currently affecting the monetary union (financial balkanization and progressive divergence between the economies of the Eurozone, processes that are both very negative for Italy and potentially catastrophic for the survival of the single currency), nor on the consequences for our country, the so-called fiscal compact and depressive austerity measures agreed at European level (among them the requirement to reduce by 5 per cent per annum debt above 60 percent of GDP, which affects our country particularly seriously ).
Instead, there is a proposal to launch a “referendum on staying in the euro.” It is a goal that speaks directly to the need, felt by a lot of citizens to decide their own fate and role in Europe.
But it is a wrong goal: even the fiercest critics of the euro are in fact quite clear that one of the preconditions for a possible non-catastrophic exit of a country from the euro is to do it quickly and unexpectedly, promptly introducing capital controls (without which there would almost certainly be massive capital outflows and a series of bank failures). For this reason, it is clear that a referendum campaign on the euro would lead Italy to the bankruptcy even before a possible exit from the euro. In any case, it is clear that this single reference to the euro, free from any assessment on the situation in Europe (and on the Italian situation in this context), is very weak and hardly persuasive.
But on closer inspection this is not the only, nor the main shortcoming of the programme of the Five Star Movement. It is rather the lack of detail on the domestic economic situation.
Jobs and employment. As we have seen above, the only proposals concerning labour deal with the abolition of the Biagi law and unemployment benefit. Which is really thin in a country that in the last two years has seen a real dismantling of labour protection established over the previous forty years. The abolition of the right to be reinstatement for workers fired without just cause (Article 18 of the Workers Statute) and the dismantling of national bargaining (through Article 8 of Decree Law 138/2011 and to freedom to impose conditions inferior to the national contract at the enterprise level ) are, quite simply, a regression of almost half a century for the rights of workers. But not only that. They are all part of a model of competitiveness that as well as being unfair is a loser and economically bankrupt. [...]
Taxes. The issue of taxation is completely neglected. And yet this is one of the key issues for the Italian public finances. And therefore from the point of view of finding the resources needed to carry out various points in the program by Beppe Grillo. You cannot reasonably expect that the reduction of the public debt can be achieved – as stated in the program of the Movement 5 Stars – only “with strong cost-cutting in the state, by cutting waste and the introduction of new technologies” (the latter, indeed, require substantial investment that can be only be recouped over the longer time).
Some of his public statements intervention in recent months suggest Beppe Grillo has chosen the easy way out on the issues of taxation: attacking [tax collection agency] Equitalia ( a convenient scapegoat of the wrong laws in recent years), rather than demanding tax fairness and respect for the law by all citizens, starting with those who always burden others (especially employees), with paying taxes. [...]
Industrial policy. The particulars of the programme of the Five Star Movement about the economy, as we have seen, are very focused on the financial markets, and clearly express the interests of small investors. Significant in this regard is the proposal to introduce a true class action and the suggestive idea (unfortunately unspecified) to introduce the “structures of real representation of small shareholders in listed companies.”
The problem arises when you switch to proposals for economic policy more generally. The prohibition of cross equity holdings between banks and industry, for example, in a situation of crisis like the present once will exacerbate the crisis (by preventing the conversion of bad bank loans – and there’s a lot of them at the moment – in shareholdings in debtor companies ).
The abolition of the “monopolies” for some sectors is meaningless: when it comes to natural monopolies (such as motorways) the abolition of the state monopoly is, in fact, impossible. What instead is worth considering is whether it would be worthwhile to think, and seriously, about whether these monopolies – because of they cannot be anything other than a monopoly – are not to be brought back under public control: it is only in this way, in fact, that the associated monopoly rent may be shared socially (instead pocketed by private shareholders).
But it is clear that the issue of public ownership of companies of strategic interest, for Grillo, as for the vast majority of parties in these elections, is taboo. The only exception is the telephony backbone network, which Grillo proposes to be repurchased by the State “at cost.”
Also ignored is the need for the state industrial policies: ie develop strategic development plans for the main sectors of the economy, with clear political incentives and disincentives. The only mention of such policies in the programme concerns’ disincentives to companies that generate social damage “pretty weak compared to what we find in our Constitution, which in Article 41 states that the private economic initiative cannot be ‘carried out against the common good or in such a manner that could damage safety, liberty and human dignity.” and Article 43 states that:
For the purposes of the common good, the law may establish that an enterprise or a category thereof be, through a pre-emptive decision or compulsory purchase authority with provision of compensation, reserved to the Government, a public agency, a workers’ or users’ association, provided that such enterprise operates in the field of essential public services, energy sources or monopolies and are of general public interest.”
The law shall provide for appropriate programmes and controls so that public and private-sector economic activity may be oriented and co-ordinated for social purposes. The issue raised here is crucial.
Indeed, it is very difficult to think that Italy can emerge from the current crisis by further expanding at the expense of the state the weight of the private economy or, as they say, the “market”. Public intervention is needed today and from a strategic point of view, most immediately to address and resolve the numerous corporate crises now open in Italy. Without this intervention, Italy is bound to lose significant parts of its industrial apparatus, destroying forever an incalculable number of jobs. We need government intervention, and it must be coordinated and not confused with a decentralized “federalist” model, which is as economically unsustainable and inequitable as it is a source of corruption.
The Grillo programme touches on this problem, when, in relation to health, it identifies a source of danger in federalism in recent years. But it is a judgment that should be investigated and above all generalized: think of the public policy incentives for businesses that federalism has lost in a thousand streams and rendered ineffective, preventing any meaningful planning at national level. It is no coincidence that even today [employers organization] Confindustria seems to come — a bit late – to the conclusion that it is necessary to reform Chapter V of the Constitution that has been distorted with federalism.
A State which is not a passive spectator of what is going on in the economy, and that does not limit itself to the socialization of the losses of individuals. A truly fair taxation system that rewards those who have always paid and who can and should pay . A policy for competitiveness based on quality public education (not strangled by cuts) and increased investment (public and private) in research and technological development, instead of continuing to cut the cost of labor. An Italy able to make its voices heard in Europe, and to refuse the noose of fiscal compact. These are the priorities of economic policy that can restore hope to this country and those who live here. Unfortunately, none of these points feature in Grillo’s programme.
This translation first appeared at Revolting Europe.