Lib-Pop Politics: Italy’s New Government Is More Neoliberal Than Populist

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By Mario Pianta. Professor of Economic Policy at Roma Tre University, and has been a fellow of the Centro Linceo Interdisciplinare of Accademia dei Lincei, the European University Institute and other international universities. He has worked on technology, employment, inequality, economic and industrial policy. Originally published at. The .

new Italian government is in the making, with an unprecedented alliance between the Five Stars Movement (33% of votes in the March 2018 elections; 36% of seats in the House of Deputies) and the Lega (17% of votes; 20% of seats). The view that ‘populist barbarians have conquered Rome’ is a gross misunderstanding. Lega has already governed for nine years in Berlusconi governments supporting every neoliberal policy that has favoured finance, business and the European integration they now criticise.

The Five Stars are ready to compromise on everything with anyone – Washington, Brussels, business, finance, the military – for their turn in power, knowing that their large support is at best temporary. The result – rhetoric aside – is that pro-rich neoliberal policies dominate the new government agenda, tinted with a shade of populism, offering modest pro-poor and harsh anti-immigrant action. Lib-pop politicsis how we might describe Italy’s new political experiment. The Five Stars are ready to compromise on everything with anyone…  knowing that their large support is at best temporary.

Lega’s Rising Political Hegemony

The clear political winner is Lega’s leader, Matteo Salvini, who has turned the Northern ‘separatist’ Lega Nord into a nationwide nationalist, reactionary party, mirroring France’s Front National. He quadrupled Lega’s votes (in 2013 they were 4%); in Northern counties of Lombardy and Veneto Lega reaching 33 to 38% of the votes, with the centre-right coalition well over 50% (an ). He ran in a centre-right coalition where he emerged as the clear leader, with the Lega obtaining more votes than Berlusconi’s Forza Italia (14%) and the post-fascists of Fratelli d’Italia stuck on 4%.

He managed to obtain from his coalition partners a green light for the government alliance with the Five Stars, thus keeping together – in spite of squabbles – a coalition that last March had procured 37% of votes and is close to obtaining in any future election an overall majority of seats (within reach if they obtain about 42% of votes under current electoral rules). His centre-right allies promised mild opposition and parliamentary support for the (many) policies they will like. Salvini is in the unique position of leading from the extreme right a broad centre-right coalition that includes moderates and élite groups; in no other major European country does such an alliance exist.

The political momentum for Salvini grew with the elections in two regions held in April 2018. Lega won in the north-eastern region of Friuli-Venezia Giulia with the centre-right coalition getting 63% of votes, Lega alone obtaining 35% and providing the President of the Region, while the Five Stars slipped to 7%.

In the small Southern Molise region, the centre-right coalition won with a Forza Italia candidate on 49% of votes (Lega had 8%), while the Five Stars list obtained 32%. Current polls reflect this trend of a growing Lega and a stable Five Stars consensus; when Five Stars support weakens – as happened in the peripheries of Rome and Turin, run by weak Five Stars mayors – Salvini is set to grab a large part of their disappointed voters. Thus, the political outlook suggests Salvini as a likely winner of a real majority for the centre-right whenever new elections take place, giving him the upper hand in talks for the new government – the alternatives being an early vote in autumn or in May 2019 when they could be held together with the European elections.

Finally, Lega’s hegemonic power is marked also by its ability to combine power and protest; it was in power throughout all Berlusconi’s governments, but is not perceived as responsible for the current crisis. At the same time, Lega capitalises on widespread protests with its rhetorical challenge to European rules, harsh treatment of migrants and anti-tax, anti-bureaucracy agenda.

Five Stars’ Disorientation

Among the Five Stars of the movement founded by Beppe Grillo, no ‘pole star’ for its political project has been found; the only priority now is to claim power, regardless of type of alliance and programme.

Anti-corruption and bottom-up democracy remain little more than background noise; 94% of Five Star supporters approved the government programme in one afternoon’s electronic voting; top-down decisions on policy priorities far from the Five Stars’ traditional demands have not been challenged by the grassroots; only a left-wing prospective labour minister, Pasquale Tridico, resigned after the programme was announced.

The difficult search for a Prime Minister different from the Five Stars leader Luigi Di Maio reflected the political fragility of a top-down model preventing the emergence of a broader political leadership.

The fundamental weakness of the Five Stars is in their very post-ideological posture. With the political ‘caste’ as their main enemy, and the illusion of moving beyond the left-right divide, they have yet to learn how to use political power to deal with contrasting class interests, and how their policies may sustain or destroy their electoral consensus. Five Stars have yet to learn how to use political power to deal with contrasting class interests, and how their policies may sustain or destroy their electoral consensus.

In contrast, the Lega has strengthened its right-wing ideological roots, providing identities and a worldview for its voters. No surprise then that many working class and poorer Italians, after welcoming the anti-establishment nature of the Five Stars, are now ending up as Lega voters.

The Government Programme

The asymmetry between a Lega with clear priorities – in terms of class and nation – and a Five Stars with its only concern to strike a deal, has produced a government programme that includes some general concerns of the Five Stars – on legality and minimum income – and most practical measures designed by the Lega – on taxes and migrants.

Demands for renegotiating European treaties and restoring national sovereignty in some areas are enough to open up a rhetorical confrontation with Brussels – and much attention from the media. But they have little concrete content.

The most important specific policy that will be introduced by the new government is the Italian version of the ‘flat tax’; firms and individuals will pay either 15 or 20% of income taxes, as opposed to the current 43% for the top income bracket.

It is clearly stated that no wealth tax will be introduced (Italy has often been criticized by the EU for having cancelled real estate taxes on home-owners). Tax controls on Italy’s large number of small firms and self-employed will be scaled down, basically legalising tax evasion for a large number of right-wing, medium and high-income voters.

For financial firms and banks no control or limit on their activities will be introduced. This will make Italy a neoliberal business paradise, competing with Ireland in the race to the bottom of business taxes in Europe, offering some room for the survival of Italy’s small businesses dramatically hit by a decade of crisis.

In this way, the transfer of income to the richest 20% of Italians will be huge, with the very rich benefiting the most. Berlusconi would have never been able with his past majorities to introduce such a pro-rich agenda.

Such measures are the easiest to implement, as they simply scale back state redistribution, leaving unequal outcomes of market processes untouched. More difficult is the implementation of the only ‘pro-poor’ measure long championed by the Five Stars: the so-called ‘citizen income’. In the programme this is reduced to an income support of €780 a month for a maximum of two years for unemployed Italians (no residents with foreign citizenship will obtain it) ready to accept any job offer; no figure for potential recipients or funding for implementing it is mentioned.

But the darkest success of the Lega in the government programme is the chapter on migrants, envisaging a stop to the flows of refugees, changes in European rules on asylum and free movement, and proposing the repatriation of the 500,000 immigrants with irregular status now present in Italy.

Combined with harsh measures on law and order, this policy caters to the ‘fear effect’ that is behind the growth of Lega’s support. In parallel the rise of the Five Stars was based on a ‘poverty effect’ – especially in the South (see ). The tragedy is that the poorest Italians have overwhelmingly voted for two political forces that are now creating the most pro-rich, pro-business government in Italy’s history. Even worse, Lib-pop politicscould be just the starter for an outright far-right political future.

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27 comments

  1. ChrisAtRU

    Out.Standing.

    A not-so-gentle reminder of how easily erstwhile “grassroots movements” get co-opted when those supporting said movements don’t get beyond the “bluster” and the “optics”.

    That flat tax … wow. I look forward to future charts on Italian income inequality.

  2. Disturbed Voter

    Italians need to find a way to avoid unwanted immigrants. But the usual Italian corruption gets in the way, and EU policy. Even China is taking a bite …. see the town of Prato.

    However as a nationalist party, Lega doesn’t seem to be good news for the EU either.

    1. AlexHache

      I live in Prato, and I’m an ‘immigrant’! Not Chinese though, but my neighbours are.

    2. pietro gori

      Come on, DV! Corruption??

      Are you a self-hating Italian, by any chance? Because there are quite a bit of them around the country
      Self-deprecation and indiscriminate love for everything foreigner are a national sport in Italy, as you very
      well know..

      But corruption! What is corruption? Whose corruption are we talking about?

      Are you talking about the link between corruption (?) and economic performance?

      I am unaware of a single scientific study (peer reviewed) that links corruption – however defined – to economic performance. Could you please help me out?

      Is Italy more corrupt than, say, Germany, being the Teutons a habitual paragon of rectitude and lawfulness?

      Is Siemens corrupt? ( see kickbacks connected to the sales of submarines to Greece)
      Is VW corrupt? (see Diesel emission scandal)
      Is ThyssenKrupp corrupt?( his managers convicted of manslaughter are still at large, having found sanctuary in Germany, seven workers “went up in smoke” at a Turin TK plan in 2007)

      1. Yves Smith Post author

        There are no peer reviewed studies in economics and your comment suggests you are not knowledgeable about economic research. If you Google corruption + “economic performance,” you will find quite a few papers.

        1. Synoia

          There are no peer reviewed studies in economics

          I’m not disagreeing with your statement, I’m just amazed.

          I’m very confused by this, and seek clarity, as I believed peer review was a cornerstone of academic papers published.

          Economics: no peer review and no application of the scientific method?

          Consequently: Economists = Witch Doctors?

          1. Oregoncharles

            Economics is political ideology lightly disguised as science or math.

            Political “science” doubtless is, too, but I’m less familiar. The lefties generally call themselves “political philosophers,” which is more candid.

        2. pietro gori

          I am no professional economist and by writing “scientific studies” I meant academic papers which, as far as I know, do get peer reviewed before publication

          Be that as it may, my point was that corruption makes for a very difficult concept to pinpoint,
          and its explanatory power, when used in empirical analysis, may not be satisfactory, if warranted at all

          Talk of corruption crops up all the time in discussions about pushing market-driven economic reforms in developing countries. Likewise in PIIGS EU countries, as they lack control of their monetary policy borrowing in a currency they cannot “print”

          In my post I made a few examples, but corruption is mostly linked to governance

          A direct relationship of a particular measurement of the variable corruption to public debt/GDP ratio is always posited

          Now take the Worldwide Governance Indicators Control of Corruption and the data on Public Debt/GDP ratio provided by the World Economic Outlook and run them. You will get a scatterplot that displays no correlation between the two variables! At least that is what I got when I did the exercise…

          So what are we talking about when we talk about corruption?

          1. economicator

            Also, I think it’s been written in many places that there is a view on the Russian economy, for example, that says that it would fall apart if it weren’t for the corruption channels that distribute economic opportunity and rewards – unfairly, if you will – but in the process deliver the outcomes a resource-oriented economy is capable of.

            Something like a perverted invisible hand, just not codified and not readily available for examination and public influence.

            There probably needs to be a distinction made between macro-corruption and banal, daily, corruption particularly of institutions serving the mundane needs of public. I guess the banal daily kind of corruption is the real performance killer.

      2. Disturbed Voter

        I love Italians, married an Italian American in fact. But we were talking about Italy, not Germany. Of course Germany has problems. Feel free to exposit on them in a string about Germany.

        It is undeniable that Italian politics since 1945 is at least entertaining.

        Economic performance may be enhanced by corruption. Didn’t it work that way during the Roman Republic?

        1. lou strong

          In a very few words , post WWII Italian politics have been marked by the concept of limited sovereignty, which meant to follow the US in cold war both in foreign affairs and in the internal affairs ( US veto to the PCI etc etc ) . Then ,since the nineties , in the so called second republic, thanks to the center-left neolibs,it’s been added to the the above boundary , still existing by the way, the more economically/social oriented boundary or limited sovereignty ( if you prefer ) of the EU/euro rules.
          Beyond the surface of the petty theater of the ever-changing actors, it’s not so entertaining, after all.

  3. AlexHache

    I can’t stand the Lega Nord and I’m against a flat-tax, but thinking I might pay 20% less taxes… Well, I can’t help looking forward to it.

    It’s a bit like a big inheritance: you didn’t want your great-uncle to die, you certainly wouldn’t have killed him yourself, but gosh, it feels good to get the money knowing that you didn’t do anything bad.

  4. pietro gori

    MSM rabid dogs have been unleashed in pursuit of the new Government. Does this mean that, pace Mr. Pianta, it is going to do some good things?

    1. lou strong

      The facts you quote are not reciprocally related. The fact that you are quite right about MSM pursuit, and at the same time MSM seemed to endorse the constitutionally disgusting statements and behaviour of Pres. Mattarella against the supposed anti-euro and/or “anti-German hegemony” candidates , doesn’t imply that the new Gov will be good. Mr.Pianta’s overview is not so unfair .

      1. pietro gori

        yes, you are absolutely right, lou strong, my statement implies a non sequitur!

        Just expressing some kind of irrational, gut feeling, is all there was to it

  5. Daniel A Lynch

    Sad but not surprising.

    There are a lot of lessons to be learned in this story. But mostly, this is how capitalism works. Social democracy has always had to swim against the current in capitalist societies. In the long run, the current will usually prevail.

  6. Ignacio

    This looks pretty much like the bear hug, I’m afraid. I predict that it will be fatal for M5S and very negative for any left leaning party to be again and again disappointing many of their voters. I personally distrust parties like M5S or Podemos in Spain for reasons that have been largely confirmed after reading this article. It seems to me that when you mix left-leaning views with populist-nationalist desires nothing good comes out. Or is it that M5S was never leftist?

      1. OpenThePodBayDoorsHAL

        Reminds me of Obama, did people really think a one-term State senator would be allowed to change much of anything?

        So they’ll sit down with the Five Star “leader” and say “listen, son, here’s how it’s going to go”.

        Fig leaf for the popoli and the full 1% agenda can continue to roll along undisturbed. Nobody will end up suspended by their thumbs, that’s for sure.

    1. Rinaldo

      The socialists will never admit that it is their socialist policies that has people impoverished the most, latest success story Venezuela. The also prefer to ignore the fact that the socialists / communists killed approx. 1 million people per year in the last 100 years.
      What is particular obvious today is that Europe will become a Muslim state, since the immigrants multiply like rabbits and Europeans and particularly Italians, dont. Belgium and the Netherlands have already political parties that want Sharia law, but the author`s biggest worry is that this new Gov. might be far-right and repatriate 500.000 immigrants. No need to worry Professor, there are another 500 million coming soon. I assume he got his title the same way as this former SED member from East Germany did, i.e. being a political party member.

  7. Synoia

    Form my limited reading it appears the new Italian Government expects the ECB to fund their budget deficit.

    That is, transfer the potential defect from the ECB to the Italian (and European) wealthy.

    Is that correct?

  8. Oregoncharles

    “The Five Stars are ready to compromise on everything with anyone… knowing that their large support is at best temporary.”

    So nice, he said it twice. This is somebody who really doesn’t like the 5 Stars; it might help to have a countervailing point of view – maybe in the comments, which I haven’t read much of yet. He essentially depicts the Lega as in control, even though they have half the votes the 5 Stars do. Maybe, but not highly plausible.

    Other sources depict the new government as a serious threat to EU and Eurozone stability, which might have explanatory power.

    Perhaps fortunately, this type of coalition is unlikely to last long.

    1. Yves Smith Post author

      No, there has been quite a lot of commentary on Five Star selling out on its campaign promises. The observation is not factually controversial.

      1. Oregoncharles

        OK, hadn’t seen that.

        In general, this is the problem with coalitions, especially wide ones like Italy’s.

  9. Steven B Smith

    It was over when they teamed up with the Socialists, and their debt and invasion policies, Italy may be too occupied to vote their way out their economic woes, they too are a George Soros art project.

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