Monday, January 16, 2012

Flow My Tears, the Minister Said

They call it the government of the technocrats. They say that they take their orders from the market, or from the European Central Bank. Passera, Severini, Terzi, Gnudi, Giarda, Catania, Catricalà, Clini, Profumo, Ornaghi, Fornero. Who had ever heard of these people? They sound like the lineup of a third-division football team, but they are lawyers, economists and academics. They used to work for banks, international regulators, the IMF. They consulted widely and sat on dozens of boards. Then one day in late November they were sworn in as Ministers, at a time when the lack of political affiliation or experience had suddenly become the main qualification for the job of politician.

Italy is not new to these arrangements: Carlo Azeglio Ciampi led such a government in 1993-94, then again Lamberto Dini in 1995-96. It seems that periodically we need people who are able to rise above politics, or possibly crawl under it, and fix things, which generally means getting the nation’s finances in order and stave off the collapse of the public administration ahead of the next election. This is achieved in turn via the time-honoured practice of asking salaried employee and pensioners – the only two categories of citizens who haven’t yet figured out how to hide their money – to give a little more. In times of need, the country always turns to the needy.

Nonetheless, there is an etiquette to these things. We ask of our technocrats that they reassure us that while everybody will have to contribute, those who have more will be asked to give more. This never actually happens, of course. In truth we wouldn’t even know how to ask. A couple of years ago Berlusconi's government, in one of those very ordinary extraordinary measures that Italian politics has developed into an art form, instituted the so called ‘tax shield’, whereby people who had illegally transferred their capital out of the country to avoid taxation were allowed to re-import it, with no questions asked and in exchange for a nominal tax, mainly so our banking system could benefit from the injection of cash. It was a very polite arrangement. Please, Mr. Blood-Sucking Parasite sir, we would just like to take a look at your money. We promise we won’t touch it.

So it goes, and this time was no different, with the exception that the state of our finances had become an international story, which everyone bought. Italy’s current fiscal problem is not the current account – which is in fact reasonably healthy – but rather its debt, which at just under two trillion euro is one of the highest per capita in the world. Servicing such a large debt requires a sufficient pool of creditors who trust in your capacity to keep up with the repayments. If the pool shrinks, the interest rates go up and lo!, suddenly you find that you really can’t pay back the money. Loss of confidence has a way of becoming self-fulfilling like that.

Which is not to say that Italy’s economic problems are all in the mind – for one, the lagging of our productivity relative to the rest of Europe over the last two decades is well-documented – but rather that we lack a political class capable not only of addressing them, but also of questioning the narrative of the crisis. This narrative – which is loosely structured along the lines of the popular fable of the ant and the grasshopper, with the north of Europe in the role of the ant, and the south in that of the grasshopper – has succeeded in persuading us that perhaps we really don’t deserve modern hospitals, or to retire after forty years of strenuous physical work, or to be protected from arbitrary dismissal by our employers, because we just don’t work hard enough to earn these things. They are beyond our means.

Technocrats – these odd, unpolitical creatures – couldn’t reasonably be expected to do anything other than operate in accordance with the dominant narrative, hence with the logic of austerity, just like an accountant must operate according to standard accounting practices. (‘Creativity’ is frowned upon in both, and occasionally leads to criminal charges.) And so we passed yet another emergency budget, and called it – for real, in Parliament, not in the press – ‘decreto Salva-Italia’. We might expect a document so-named, this saviour of the nation, to be inspired by lofty principles or aim to achieve momentous goals, but no: it was the usual collection plate put in front of the usual people, making it that much harder for those on mid to low incomes to make ends meet, and for what? To kick a twenty-four billion pebble off a two trillion mountain. And on top of that, structural reforms, aimed at making older people work five, six, seven years longer (this will create more jobs for young people) and making it easier for employers to fire their employees (this will help more people into work).

You may question the logic, but what is important to understand is that the efficacy of these measures is irrelevant. What matters is that they are what the markets expect of us. Markets – much like mob lynchpins – don’t need to give explicit instructions. Instead, they send coded messages regarding what they consider a desirable outcome, or let you know when they’re displeased with you. They were very displeased with Greece when it threatened to let its citizens vote on the bailout package, weren’t they? Oh my! It’s like there was a horse’s head in Papandreou’s bed that night. But often the signals are more ambiguous than that, which is why it is important to find yourself technocrats who can correctly interpret them. To wit: if interest rates on your debt plummet after you’ve just announced a round of austerity measures, success! The measures worked, and confidence is restored. If they climb back up to where they started within two weeks of your nation-saving efforts, don’t worry! It just means that the measures weren’t harsh enough. You needn’t fear that you impoverished half the population of the country for nothing.

The extent in which Mario Monti’s government has behaved according to these expectations, as if it were colouring-in by the numbers a picture of Italy two, three, five years from now, much poorer but somehow still solvent, has been and continues to be something to behold. Except for one episode, a little unscripted moment, during the press conference in which the first round of measures were introduced, and Social Development and Labour Minister Elsa Fornero tried to say that it was with a heavy heart that the government was about to ask its people to make yet more sacrifices. But instead, this.

The word just wouldn’t come out. Sacrifices. Somebody else had to say it for her. It was a quietly moving little moment in which the technocrat let her feeling show, and demonstrated without the need for words that these highly skilled professionals whom we put in charge of saving us from ourselves aren’t a bunch of automatons after all, they are just ordinary people in charge of making difficult choices, and that it’s a hard task and that it too entails a sacrifice.

Alternatively, you know, fuck her.

Elsa Fornero is one of the foremost world experts on savings and old age pensions, so – had she actually mustered the nerve to do so – it would have been particularly galling to hear her announce that the single best idea that the government had come up with to save Italy was to halve or abolish the indexation of pensions, with the sole exclusion the very lowest level of benefit (under €470 a month). Combined with the reintroduction of the tax on home ownership and the increase of value-added tax and of the duty on petrol, this measure spells hardship for millions of retirees, and yet it was – in number terms – the centrepiece of the decree, being expected to net three times as much money as the very modest one-off taxation (1.5%) of the capitals protected by Berlusconi’s ‘shield’. The symbolism wasn’t lost on the public, who singled it out in opinion polls as the most abhorrent measure introduced by the government, and the clearest indication that the ‘sacrifices with fairness’ promised by Monti upon taking office were going to lean heavily on the former and tiptoe around the latter.

But Fornero didn’t announce any of that, she just couldn’t. What we got instead was an awkward silence and the welling up of tears, until Monti took pity and took over, exhorting her to at least correct him if he should get some detail wrong. It was a telling little moment, and no doubt the Minister was genuinely moved, but I’d rather we had been spared the spectacle. For it read as a thesis on the crude necessity of austerity measures, to which even the just must capitulate, and as such was far too political a gesture for a supposed non-politician.

In any event, Fornero regained enough of her composure in the following days to announce her plans to go after article 18 of the Workers' Statute, the provision that subjects arbitrary dismissals to the scrutiny of a judge, that ‘Italian anomaly’ – in the eyes of the EU and its central bank – that must be corrected in order for our country to regain its competitiveness and start growing again. This is the real battleground for the Monti government and in this campaign, which will unfold in the coming months, Fornero has already given every indication that she’ll be a ruthless strategist, beginning with her refusal to meet with the joint representatives of the unions. That a technical, unelected government should even think of undertaking such profound reforms, whose aims and rationale are quite disconnected from the urgent administrative tasks that supposedly underpin its constitutional legitimacy, is bad enough. The least that they could do is not to put a human face on it.

So please, from here on in: no tears.