26/2/2013: The Real Lesson from Italian Elections

The outcome of the Italian elections is the current core driver of the newsflow. Alas, so far, it is for a very wrong reason. The Italian voters have returned a divided Legislature, prompting the claims that Italy is now at a risk of becoming 'ungovernable'. In reality, such statements are confusing one of the symptoms for the entire disease because the original departing assumption of the analysts arguing such a scenario is that the brief period of technocratic governance under Mario Monti administration was:

1. Effective in enacting / implementing reforms,
2. Involved reforms needed to address the core problems faced by Italy, and
3. A sustainable 'new normal' for Italy.

In fact, none of the above three assumptions are valid.

Firstly, the reforms enacted by Mario Monti administration were shallow, not structural and addressed the issue of deficits (which are not the core problem for Italy). These reforms were successfully resisted on the ground - with exception of few tax measures, which were all regressive to growth and were unlikely to survive intact into the future due to their unpopularity as much as due to the fact that Italians evolve very systemic tax evasion responses over time to virtually all attempts to claw tax out of the real economy. There is also a pesky problem that Italian tax burdens are already very high, creating disincentives to entrepreneurs and highly skilled.

Secondly, the reforms enacted by Monti were not addressing the main two problems faced by Italy: the gargantuan Government debt, and the decades-long period of economic stagnation. Structurally, Monti reforms were like a plaster applied to a shark wound, helping to lower the cost of funding the state, but changing little in terms of what is being funded, why it is being funded, and how it is being funded.

Thirdly, technocratic regime is simply incompatible with democratic institutions, and as such cannot be sustained. The result of the latest election actually show the deep disconnect between professional capability of the state / business managerial elites (Monti) and political leadership (ideas-light, and thus forced into rhetorical campaigns juxtapositions) that is emblematic of the proceduralist, bureaucratised European modus operandi since the 1960s. 

Europe's political elite - thin on ideas, experience of real management and knowledge - is incapable of defining leadership beyond populism. Meanwhile, Europe's professional elite - permanently shielded from reality of life by protectionism and bureaucratic licenses - is incapable of capturing hearts & minds of any electorate, let alone emotive electorate found in the periods of crises. Hence, popular leaders turn out to be incompetent managers, while competent managers turn out to be uninspiring as leaders.

This is not an Italian problem - it is a European problem. And the most likely 'European solution' to it will be that Italians will have to vote again, relatively soon, like the Greeks almost  a year ago, in a hope that forcing electorate to face 'explained' or rather 'better marketed' choices can yield the desired outcome, a la Ireland ca 12 June 2008 through 2 October 2009.