London 25.11.99
"THE FREE MARKET AND THE RADICAL PARTY'S REFERENDUMS"
Speech by Emma Bonino
The Italian Radical Party and the economy. A strange combination? Most people would say so. You were great, people tell us, when you used to address the problems of civil rights, justice, and famine in the third world. But now, with your obsession with free trade economics . This kind of reaction, provocative though it is, can actually help us to put the picture straight.
In reality, the Italian Radical tradition is very much characterised by reflection and initiative on economic issues. Ernesto Rossi was a forerunner of the battles for the economic liberalisation of the Republic. He fought hard against monopolies and economic parasites, he engaged in violent clashes with the Confindustria, with its protectionist policies and reluctance to uphold the principles of free trade. And, forty years ago, he attacked the trade unions, accusing them of being conservative and of opposing the innovations that would benefit the poorer workers and the unemployed.
Even in more recent times, in the eighties, the Radical Party has addressed economic issues: it presented a bill, for example, which posed the question of the control and reduction of the national debt, following the American example. And at that time Maastricht was just a small Dutch town that nobody had heard of. Another initiative in the eighties, once again strictly nonviolent, was the campaign to double the minimum pension, not for demagogic reasons, but because the measure would have little effect on the national budget and would correct a clear imbalance in our pension system. And even the campaign in favour of the first-past-the-post electoral system has economic implications: the International Monetary Fund recently recognised that - all other things being equal - majority electoral systems ensure the best economic performance by reducing the weight of the political parties in economic policy decisions.
Having said that, it is undoubtedly true that, without forgetting civil rights, anti-prohibitionism on drugs, and so on, the political initiatives of the Radical Party in the last few years have revolved around economic reforms. In present-day Italy it is economic reforms - greater freedom of enterprise, less state intervention in the economy, flexibility in the labour market, less public spending, an end to monopolies, and the liberalisation of the markets - which are the key to modernisation. Similar, in fact, to civil rights in the seventies. I say this because it must be clear to everyone that freedom for the people of Europe in the next century will increasingly mean freedom of choice, as consumers and users, from a wide range of options in a competitive market. Through our support of the free market economy we wish to uphold freedom of enterprise, certainly, but also the freedom of the consumer to choose products and services offered through real competition. Economists talk of the theoretical "soverei
gnty of the consumer". We want this sovereignty to become practice as well as theory.
During the last decade, we backed the Amato government in its attempt to avert economic catastrophe; we supported the attempt made by the Berlusconi government to reform the pension system; we organised referendums for the liberalisation of opening hours and licenses for retailers; for the liberalisation of access to the professions; for the abolition of golden shares in privatised companies. In more general terms, we have denounced the ruinous results of "consensus politics" in negotiations between the all-powerful unions and the compliant Federation of Industry. The exaltation of consensus as the only way of coming to decisions in the field of economic policy has led to intolerable paralysis. Consensus politics has handed the keys to some of the central reforms for the modernisation of the country to the unions, rather than to the government and to the MPs elected by the people. I am thinking here of the reform of the welfare state and of the labour market, though we could also include the reform of educat
ion, the health service, the post office, public transport . The keys have been cast away.
We have denounced the fact that Italy is preparing for the challenge posed by the single European currency in a passive and completely inadequate manner. Let me explain. The sacrifices made to achieve the Maastricht parameters were borne entirely by the tax-payers, through a considerable increase in fiscal pressure on both individuals and companies. I will come back to this point in a moment.
Many people point out that taxes in Italy are now in line with Germany and France. True. However, only ten years ago taxes were far lower: but has anyone seen great improvements in public services and infrastructures, bringing these too into line with European standards?
Nothing, or almost nothing, has been done in terms of structural reforms: the liberalisation of markets, of products, services and labour, an improvement in the efficiency of the public sector, the reduction of public spending and taxes. A start has been made with regard to privatisation, but the Treasury still holds 15% of the value of shares quoted on the stock market, which is an intolerable situation .
As you know better than me, the single currency creates a rigidity that is dramatic for a country such as Italy, accustomed to turning to devaluation in order to increase competitivity. If we lack the strength to introduce other crucial elements of flexibility, the economy will slow down, and the gap between Italy and the other countries in Euroland will slowly but inexorably widen, day by day. In recent months we have often heard about the increasing competitivity gap.
The existence of this gap in competitivity is proven by the rate of growth of GNP in the last five years: in the five-year period from 1994 to 1998, the Italian GNP grew by an average 1.7% a year; during the same period, the average annual growth of the fifteen members of the EU was 2.5%. The gap is even wider compared to those countries that have already begun, with more courage, to pursue policies of liberalisation: the GNP of Great Britain has grown by an average 3.1%, that of Holland by 3.3%, that of Spain by 3%, and that of Ireland by 10.1%.
A further yardstick to measure Italy's declining competitivity is represented by direct investment from overseas: Italy is in last place in Europe - apart from Portugal and Greece - both in terms of percentage of GNP and in absolute terms. And, what's more, the situation is getting worse. If foreign companies will not invest here because they believe it is not worth their while, and if they prefer other countries - Great Britain, Holland and Spain, and not only the Far East - how can we expect Italian companies to invest in Italy?
How can we expect people to invest in a country where, as the Governor of the Bank of Italy Fazio has just pointed out, fiscal pressure grew between 1979 and 1989 from 29% to 39%, and where this suffocating trend has continued through the nineties: the current figure is 50%, well over not only the 30% in America and Japan, but also the EU average of around 42%, which is already high enough.
All this has happened without any particularly striking results, unlike in other countries, in terms of the reduction of the ratio between national debt and GNP.
The inflation figures, despite appearances, are also worrying: the current 2% rate has to be compared to the 0.8% in Germany and France, the two main players in Euroland.
However, the aspect of the economy that has suffered and continues to suffer most from the effects of state intervention and union power is that of employment.
The situation of the Italian labour market, regularly laid bare dramatically by economic studies, most recently by that of the IMF, can be summed up in a few significant statistics: the overall rate of unemployment is 12%, though the figure is much higher among young people and women: 33.2% of people under 25 and 16.7% of women are unemployed. Of the total figure, moreover, 68% regards long-term unemployment. And if we look at the South of Italy, the situation is even more dramatic: the overall rate of unemployment is 22%, while for people under 25 the figure rises to 54.9%!
A fine record, you will agree, for those - trade unions and "left-wing" governments - who make the defence of the weakest sectors of society the mainstay of their policy programmes. The truth is that if you're unlucky enough in present-day Italy to be young, or female, or from the South, you are very likely to be unemployed and almost certain to stay that way for a long time (long-term unemployment is another Italian record: in other countries people who lose their jobs can reasonably expect to find another one before too long). The truth is that these trade unions and these governments pursue policies aimed at guaranteeing the privileged few (public sector workers, the workers and the "bosses" in large-scale industries) and closing the door on the weak (young people, women, immigrants, and small and medium-sized businesses). I say this in particular to Sergio Cofferati, the leader of the CGIL, whose political talents are more evident than his union-leadership talents, and to his unending criticism of the re
ferendums, "You are against the weakest sectors of society." Cofferati knows this is not true, and knows that when the referendums are held the majority of the Italian people will turn their backs on him, and he will be forced to admit that representing pensioners (most of them members of the CGIL) and a few million privileged workers in the public sector or in large-scale industry is not the same as representing "the world of work" - a world which identifies less and less with the official unions and increasingly demands economic freedom and flexibility.
A quick look at what happens outside Italy (not all that far away, in fact) might be illuminating. The best results, in terms of both growth in GNP and the reduction of unemployment, have been achieved by those countries that have introduced tax reductions and measures to make the labour market more flexible, including the removal of restrictions on sacking (and therefore on hiring), replaced by financial compensation, thanks to part-time and fixed-term contracts and to efficient job centres. The rate of unemployment in the UK, Ireland, Holland and the US ranges from 3.3% to 6.8%. While the number of people in work in Italy has fallen by 6%, in the US it has risen by 12.5%, in Holland by 18.2% and in Ireland by 25.3%. These countries have also achieved the best results in terms of employment opportunities for young people and women: the figures for the number of young people and women in work are hardly different from the overall figures.
As I have said on other occasions, President Clinton is right when he says that Europe must look towards the United States if it wants to avoid the road to economic and social decline. All we have to do to allow Europe, and especially Italy, to achieve a true liberal revolution is to imitate "left-wing" America.
This is the direction in which the Radical referendums are pointing. These referendums, signed during the last few weeks by over 800,000 Italian citizens, are the only instrument we have to overcome the power system run by the parties and the corporations, to win the right to work and to choose when and how we do so, to win the right to go into business, to win those economic liberties that are ultimately the extension and consolidation of the civil liberties won by the Italian people, through the referendums promoted by the Radicals, in the seventies.
It would not be reasonable to expect European integration to drag Italy along with it, towards the liberal, free market policies that are already bringing economic growth and well-being to some parts of Europe. A sort of new, beneficial side-effect from Maastricht.
It would not be reasonable because the current grave situation - the millions of people out of work, the time bomb represented by the pension system, the flight of capital and business, and the inefficiency of the judicial system and the uncertainty it creates for companies operating in Italy - require immediate, radical reform, a reform which only the people of Italy themselves can carry out.
Nor would it be reasonable to expect the "European influence" on Italy to help us solve our problems, for the simple reason that in recent times we have witnessed a worrying "Italian influence" in European politics. With the sole exception, perhaps, of the acceleration of the liberalisation of markets, we cannot expect Europe to pull the chestnuts out of the fire for us!
Are the Italian politicians, the ones we see wheeling-and-dealing on the 8 o'clock news, capable of coming up with the goods in the immediate future? I do not think so. They have not done so up till now, and I have no reason to believe that they will do so in the run-up to the general election in the next two years. The power of veto of the unions and the acquiescence of the Federation of Industry will not be defeated. Beyond their liberal declarations, like Prime Minister D'Alema's latest comments on the pension system, the left has shown itself incapable of overcoming the ideological and corporate resistance of the groups that make up its power base. Liberal policies, the only ones that can avert the decline that threatens our country, can only be implemented by liberals, by the Radicals.
This is why we have chosen the path of referendums, especially on the issue of the labour market, but also on the issues of the pension system, the health service, and the judicial system. We have made enormous sacrifices in terms of human and financial resources. We have staked the financial patrimony built up over decades of good management. Other political forces have chosen not to give open support to this campaign; and the business world has contributed neither verbal nor financial backing. So far, however, our efforts have been rewarded by the participation of hundreds of thousands of people: the required number of signatures has been reached.
At this point only one question remains: will we manage to get to the end, that is to a successful vote, to the beginning of a true liberal revolution in Italy? Will we have the political and financial clout to avert the "axe" of the Constitutional Court? For an electoral campaign in which all the "official" powers will be against us? Beginning with the media, wholly devoted to reporting and feeding the endless chatter from the halls of power, playing off ideas and opinions that are actually variants of the same conservative design in order to conceal the real battle that our referendums imply - the battle between the party and union bureaucracies and the vast majority of the Italian people.
The liberal referendums, simply by virtue of their existence, have already opened a few breaches in the conservative wall. As always, we will give it all we've got. And as always, we ask everyone to take part, to give us a hand, not to shy away. And to remember that an investment in this political project may be well worth it.
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