For those who think that the political and economic incompetence of our rulers is confined to the Anglo-Saxon states the following article from our Italian comrades, written just before the European elections, only underlines the same sorry story for Italian capitalism. The salient fact is that there is no viable capitalist solution to the global economic crisis which continues to bring only wealth to those who have it and greater stress in making ends meet for those who actually create that wealth. The idea that the so-called populists of either Right or Left have any solution where the traditional parties have failed is already unravelling, as the Italian example shows.

CWO

The Cat And The Fox [1] in Search of Funding to Hide the Flaws in their Dodgy Reform Plans

They promised us a new economic boom, the creation of new jobs, an improvement of the pension system and, last but not least, a social policy aimed at improving the lives of 5 million Italians living below the poverty line.

In 11 months of the Lega-Five Star Movement coalition government we have seen very little, almost nothing, of what was promised in the election campaign, except a repeated relaunching of the promised reforms in a climate of conflict between the two governing parties that is becoming unsustainable.

The first in their long series of "shootouts" was the one relating to the presumed start of an economic cycle (a new boom for the 2020s equal to, if not greater than, that of the 1960s). They predicted an increase in GDP around 3% with all that meant in terms of development, jobs and social achievements. This is the tangible sign that these “populist/nationalist and ignorant" rulers have no idea what the crisis that still oppresses us is, what its causes are, nor admittedly, since there does not appear to be any practicable way out of it, how a ramshackle Italian capitalism can survive. Our rulers have not even backtracked in the face of the pitiless reality of the facts.

In the first half of their administration, instead of the expected boom, they found themselves in a "technical recession" with a decrease in GDP of 0.1%, with general unemployment stable at around 11% and youth unemployment well above 30%, among the highest in Europe, accompanied by a decline in full-time jobs and the inevitable increase in temporary jobs at very low wages. Public debt rose to 132% and the notorious spread [2] continued to rise to 300. A disaster.

Of course, the failure to overcome the crisis is not the fault of to this apprentice government, but its economic policy is certainly not the best way to keep its electoral promises. Instead it is making the already precarious state of health of the Italian economy worse. The less well-off social classes, including the proletariat, will pay for this impossible attempt at “expansion”, with greater exploitation, lower pensions and a reduced welfare state in terms of health care, schools, etc. ... But Salvini, the unspeakable Minister of the Interior, a specialist in Mussolini poses and not just them, argues that a "healthy" economic policy in deficit, despite the limits imposed by the EU, would be the primary engine of economic revival and bring about the promised boom. Only, from the mouth of Prime Minister Conte himself, do we learn that the cost of the manoeuvre for the two-year period 2020/2021 would be no less than 52 billion euros. In the Economic and Financial Document, Conte officially declared "new tax revenues of about €52 billion will be needed between 2020 and 2021". These taxes are not only needed to repair the disruptions of the 2008 recession and the consequent collapse of GDP, but also to deal with the growth of public debt and the increase in interest rates, if not especially to finance much trumpeted reforms, such as the Citizens’ Income and "Quota 100". [3]

Such a public finance programme necessarily involves an increase in VAT and the most important customs duties, even though Salvini and Di Maio swear the opposite. The cat and the fox think to find the money through privatisations, cutting tax breaks and saving on the cost of some ministries, with the usual plan to fight tax evasion, a policy which, by the way, has never worked. But these measures cover only a small fraction of the cost. As if that were not enough, there is also the proposal to reduce tax rates (with a flat tax), which, all economists, including the Economy Minister, Tria, say would increase the deficit between €12 and €17 billion per year. In this perspective, the Treasury would have to place at least €300-400 billions worth of bonds on the market every year for the foreseeable future, inflating the budget deficit by a further 3.4% of GDP in 2020, while the public debt would rise to 139% by 2024. These projections, mind you, are not ours but those of the IMF.

According to Boccia, the secretary of the bosses organisation Confindustria, such an economic policy, besides going beyond Europeans limits and increasing distrust of the government, would be a serious gamble with catastrophic economic and financial consequences and easy prey for thirsty markets and their speculative practices. In his statement he criticised what was going on: "Don’t use Europe as an alibi to avoid dealing with the Italian situation, with our public debt we cannot exceed the deficit just to carry on as usual [...] The overrun of 3% is not a European but an Italian issue. I think that no ally would allow us to run up such a deficit. This is an Italian and only Italian matter."

The next financial manoeuvre must forcibly provide for either a substantial increase in VAT to 25% or invent another financial package of at least €23/25 billion. If we add to this an increase in interest on government bonds with a huge outlay for taxpayers (today we are already close to €90 billion a year), an annual budget deficit of 3.5% and public debt at 139% with the related downgrading of government bonds to a lower investment grade index, the bleak picture is complete. The result would be a hasty flight of capital abroad and foreign capital would be too frightened to invest in Italy, all with worrying repercussions on the stability of the banking system, still suffering, despite a flood of billions of euros produced by the rain god Draghi [4] for the Italian banking system. Thus the circle of radical right-wing reformism (as of any reformism) is tragically closed. The writing is already on the wall. Those who offer radical reforms within the capitalist framework as a necessary condition to win the elections, either lie knowing they are lying, or are simply irresponsible.

Whether it is the Right or Left wing of this decaying bourgeoisie, what is unfortunately important is that fringes of the proletariat, orphans from the revolutionary left, have fallen into the electoral network of these fishermen of illusions. In such an economic context, outside the electoral scripts of the two deputy Prime Ministers, the new Italian miracle of an economic recovery is as realistic as the photo of a pelican smoking a pipe. Certainly, however, we will have a weaker economy, higher debts, higher taxes, more exploitation and fewer jobs, with the risk that the 5 million Italians living below the poverty line will become 7 or 8, if not double the current number. This also means that the reformist maximalism in whatever form it may be, that of national-populism or the confused and undergraduate ideas of the Five Star Movement, are destined to fail, for the simple reason that they are incompatible with the economic system that they shamefully claim to want to save, but which they are actually pushing towards the bottom of the barrel.

In the European elections the League will maintain, and strengthen its role as the prime mover whilst the Democratic Party will make some gains at the expense of the Five Star Movement. This is all part of a well worn theatrical game where Right and "Left" alternate in running a system which can only be destroyed by a determined working class defined by the presence of a revolutionary party, putting an end to the havoc that this bourgeois society has produced every time a crisis has returned.

Fd

27 May 2019

[1] The cat is Salvini (of the League) and the fox is Di Maio (Five Star Movement), the two bickering Deputy Prime Ministers of the current coalition government in Italy.

[2] The difference of the interest rates on Italian and German bonds.

[3] The citizens’ basic income is a pet policy of the Five Star Movement but the coalition as a whole has put forward a pension reform which calculates your age of requirement by adding your chronological age to the number of years you have paid in contributions. If they add up to 100 then you can retire. This is little different from the unpopular reform proposed by the previous “left” government of the Democratic Party.

[4] Head of the European Central Bank whose programme of quantitative easing has bailed out the European banks, especially those in Italy.