Friday, October 24, 2014
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Mario Monti’s Nordic Dream

ROME – Mario Monti, Italy’s prime minister, is a self-styled German among Italian economists. As the European Union’s top competition official a decade ago, he was regarded as a very Anglo-Saxon regulator. Today, he is the most Nordic prime minister that Italy has ever had.

At the outset of his premiership six months ago, Monti declared himself to be an admirer of all things Danish – the country’s “society, economy, and civility.” The measures that he has introduced since coming to power – from pension reform to combating tax evasion – have displayed the rigor and transparency that one associates with northern European countries.

Likewise, Monti has repeatedly said that he is inspired by Scandinavia’s labor-market and social-protection arrangements. The Swedish home-furniture giant Ikea’s recent announcement that it will open two new plants in northwest Italy suggests that Scandinavians are taking note of Monti’s Nordic tastes.

But Monti would readily agree that Italy is not a northern European society. Sounding the alarm on inequality, the Bank of Italy calculates that the combined wealth of the ten richest Italians equals that of three million of their poorest countrymen. Moreover, a wave of corruption allegations is shaking Italy to an extent not seen since the Mani Pulite (“Clean Hands”) inquiry that swept away the country’s political establishment two decades ago. A dysfunctional justice system and a jungle of red tape are a perennial curse for investors. As the leading daily newspaper La Repubblica recently put it, “Transplanting the Danish model to Italy does not seem easy at all.”

This applies particularly to reform of the country’s calcified labor-market rules. The ongoing negotiations over reform confirm that Italy remains a prisoner of political polarization. Business leaders believe that the government’s proposals for easing redundancy rules are not bold enough, while trade unions view the reforms as being underfunded. Given this dissonance, the financial markets are responding with renewed upward pressure on Italian borrowing costs.

Admittedly, Italy does not possess the consensus culture that characterizes Europe’s north. But a key northern European quality speaks to one of Monti’s principal concerns: trust. The wild swings of Silvio Berlusconi’s tenure only worsened Italy’s longstanding reputation for unpredictability. Monti wants to change that by changing Italians’ “mentality,” as he puts it – a gargantuan task, but also a political opportunity that he has yet to fully seize.

The relationship between Monti, a former university professor, and Italy’s politicians and political culture is a complex affair. While the credibility of his government of technocrats rests on impartiality, all policy measures are inherently political to the extent that they reflect a vision about the organization of society. To be both neutral and right is a logical impossibility in politics. Rising tension over Monti’s proposed reforms is a sign that his government has effectively become politicized. 

Fortunately, Monti has not shied away from the political game. A visceral attachment to the European project makes him the most pro-EU head of government in Europe today. In an ironic reversal of the continent’s north-south divide, his views are influencing German Chancellor Angela Merkel’s position on the need to stimulate growth in Europe. Italian government officials speak openly about the need for “political synchronization” with Berlin.

Monti now has the unique opportunity to take another page out of the Nordic playbook by turning his set of centrist policies into a collective narrative of political responsibility. To be sure, he is constantly treading a fine line between jittery markets, EU demands, and partisan maneuvering ahead of national elections in less than a year. But his opponents’ dismal approval ratings grant him the power of brinkmanship, and the growth and competitiveness agenda that Italy and Europe crave require him to command political center-stage for whatever time he has left in office.

Keeping politics out of government as much as possible is a risky strategy. After all, Monti is not the only one who can play that game. Indeed, support for “anti-political” movements, such as comedian/activist Beppe Grillo’s Movimento 5 Stelle (Five-Star Movement), hover around 8% in some polls. Grillo regularly calls the premier “Rigor Montis,” and has depicted him lying in a coffin. In a country where left-wing extremists gunned down the last labor-market reformers a decade ago, the joke carries ominous undertones.

This kind of virulent populism thrives in Europe’s political vacuum. The fact that Monti’s government is unelected should not prevent him from filling that vacuum with a determined, reform-minded program. His ability to make the most of his brief, exceptional power will test the maturity of Italian democracy. Grillo titled a recent entry in his hugely popular blog “Dreaming about Denmark.” That vision, however remote, is much safer in Monti’s hands.

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  1. Portrait of Nils-Göran Areskoug

    CommentedNils-Göran Areskoug

    A Counterpoint from Stockholm.

    The egalitarian model of the Nordics does not imply wealth equality but only relative income equality. The latter is a prerequisite for the well-functioning social protection system, so much admired here by Monti and Tassinari. The relative income equality achieved by modest salaries among managers and a Scandinavian tax system that effectively levels off unmotivated excesses among top earners (even mitigates some excessive greed) seems fully capable of contributing to the sustainability of the Nordic societal model.

    But wealth disparity is another thing. Wealth in the Nordic countries is built not so much by a long-standing stream of high income cash flows among high earners (as in US); instead it accumulates as savings from value growth and results from excellence in performance among skilful entrepreneurs who need their capital to invest and promote further growth.

    This is the core of the Nordic model which in a distinct way combines a unique social safety net with policies that strongly promote business innovation and dynamic growth. But such a model is, as Tassinari correctly suggests, deeply rooted in culture and mentality – and reflected in the high level of trust among Nordic peoples.

    I agree it would be difficult, if not entirely impossible within short and medium term, to implant the Nordic model “onto” Italy and even more so to get it anchored deep “into” its society. However, an effort to reinvigorate own ideals and values deep down in the rich Italian cultural history should not be impossible – even if it might provoke some resistance among some populist groups.

    After having experienced Rome and one of its marvelous cultural institutions I am convinced that currents of strong cultural values are persistent even in times of crises, not the least in Italy with its rich heritage of ancient arts.

    To rely on these values, cultivate them, disseminate them, and get people committed to a great call, would help restoring the (forgotten and deep-rooted) strengths of a great nation that presently needs to mobilize with utmost determination its past in the pursuit of its near future.

  2. CommentedPaolo Magrassi

    People, including our excellent author here, are always impressed by headlines saying that «the combined wealth of the ten richest Italians equals that of three million of their poorest countrymen». However, if you replace «Italians» with just about any other nationality (including Swedish: http://alturl.com/kuas6), the statement will still hold true, with little variations. Anyone reading these lines is probably wealthier than a million or so of their fellow countrymen: this happens because a lot of people have no savings or have debts offsetting their savings. Income and wealth inequality are serious issues, but we shouldn't approach them from a superficial angle.

  3. Portrait of Asgeir B. Torfason

    CommentedAsgeir B. Torfason

    Coming from the Nordic it is worth pointing out that there has been an ongoing a bank crisis in Denmark for the last couple of years, with 10-20 banks in bankruptcy situation. But the Danes are handling it admirably, with the fourth special bank legislation since 2008 and an effective resolution process, so it goes more or less unnoticed.

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