Italy’s protest election

This is my Perspective column from this week’s Fund Strategy magazine.

Much of the discussion of the results of last month’s Italian general election has had a decidedly elitist tone.

The pedigree of some of the successful candidates made it easy for the critics. The party of Silvio Berlusconi, who could charitably be called a “colourful” figure, came second and the Five Star Movement (M5S) of Beppe Grillo, a well-known comedian and political activist, came third.

Comments along the lines of “send in the clowns” were predictable. Only slightly less disdainful was the description of the two parties as “populist”.

When pushed to explain why these two parties did well there were broadly two theories. The most obvious was that the Italian people were reacting against austerity. This was the line favoured by Joseph Stiglitz, a Nobel-prize winning economist, and the Guardian newspaper.

There is probably a little truth to this explanation. According to the Organisation for Economic Cooperation and Development, a rich country think tank, real household disposable incomes started falling as far back as 2008.

However, this is far from the whole story. It certainly does not explain why the reaction to austerity should take such an apparently eccentric form.

The centre-left Democratic Party also did relatively badly in the election even though it won more votes than any others. The Partito Democratico (PD) gained 8.6m popular votes compared with 11.9m in the 2006 election.

A more serious explanation it that it is at least partly a reaction against a dysfunctional political system and corruption. M5S in particular has pitched itself as a “clean” organisation. For instance, it refuses to take any political funding from the state.

No doubt there is a strong sense among ordinary Italians that their country’s politics is corrupt. But again this is an insufficient explanation. For instance, it struggles to account for why Berlusconi, who to many is closely associated with Italy’s political failings, did relatively well.

The inadequacy of these explanations helps account for the exasperation of the commentariat. They are reluctant to say so explicitly but they blame ordinary Italians for the success of the populists.

In the eyes of many commentators the electorate is simply not sophisticated enough to understand modern politics. From this elitist perspective the obvious solution is to put clever technocrats in charge where possible.

The problems with the technocratic view are seldom recognised by politicians or in the media. Those with an affinity for this perspective are remarkably unaware of their own side’s failings.

In particular the electoral success of Berlusconi and Grillo can best be understood as an anti-political reaction against technocratic rule. Many voters were apparently keen to support anyone whose presence was likely to annoy aloof politicians and technocrats. In this respect Grillo’s comedic past and Berlusconi’s well-known antics were electoral assets rather than liabilities.

In Italy technocratic rule had gone as far as an unelected national government led by Mario Monti, an economist and former European Union commissioner. When Monti finally stood as a candidate in the recent election his party only received about 10 per cent of the popular vote. It is hardly surprising that many Italians were disdainful of their former unelected leader.

More broadly the eurozone itself can be seen as a technocratic project. Experts decided to tie the region into a monetary bloc without securing political consent or fiscal union. Under various treaties member countries are forced to follow rules that are imposed from outside.

In many respects the eurozone’s rigid structure is itself the cause of the region’s instability. Tying such economically diverse countries together inevitably created severe imbalances. The flow of relatively cheap credit to southern Europe and the subsequent bursting of the bubble was not an accident.

Yet rather than accepting blame for the mess their favoured scheme created the technocrats congratulate themselves for avoiding a total meltdown. Their hubris is staggering.

Italy may be an extreme case but it is not unique. In Britain the United Kingdom Independence Party (Ukip) is probably the greatest beneficiary of this reaction to the aloofness of mainstream politics. British voters have not yet had to suffer the indignity of an entirely unelected government but the political class is widely seen as divorced from people’s real concerns.

No doubt many core Ukip supporters are disgruntled Conservatives who feel particularly strongly about the EU. But in recent by-elections it has also gained protest voters from all the main political parties. For them Ukip was a vehicle to express their disgruntlement with mainstream politics.

Indeed there are many parties across Europe that could be defined as populist. These include the Golden Dawn and Syriza in Greece, the Danish People’s Party and the Swedish Democrats. Although these organisations are far from identical, there are important differences between them, they all represent disaffection with the mainstream.

Perhaps the most interesting development  is the imminent creation of a eurosceptic party in Germany under the name of “Alternative for Germany”. It is expected that the party will argue that Germany should no longer guarantee the debts of other member states and the euro should be abandoned.

If the party receives a lot of protest votes in the federal elections in September, it could shake things up across Europe.