Via po is a broad, cobbled thoroughfare a few hundred yards from Rome's ancient city walls. It is known for its luxury shops and smart offices. Yet, in among the boutiques, embassies and jewellers, there is a plumbers' merchant, a tacky giftwear emporium and a basement pasta factory. Left to the mercy of market forces, shops like the one selling pipe joints and rubber washers would have gone long ago.
But one Friday in January, without warning, the Italian cabinet proposed a new law which struck at the foundations of the bureaucratic structure which has safeguarded Italy's family shops for more than 50 years. Within limits, the new law will allow them to open and close when they like (at present their hours are set by the city council). Even more subversively, it will allow them to offer what they like.
For the moment, anyone who aspires to open a shop in Italy is faced with a commercial assault course. First, you have to get a licence. New licences are rarely issued, so you buy one from someone who is going out of business: there is a flourishing "grey market" in these permits, with its own brokers and tariffs. Nor will just any licence do. You need one for each kind of merchandise you want to sell-so if you want to sell more than one kind of merchandise, you will need more than one licence. Once you have succeeded in obtaining your licence, or licences, you must then get it or them registered with the council, which can take several months and costs yet more money, then apply-and pay-to take an exam.
Licences for supermarkets and department stores are even more strictly rationed because, for almost 50 years, the Christian Democrats, inspired by Roman catholicism, sought to preserve the family shop as a redoubt of family values. One result is that, in the whole of Rome, there is no outlet comparable to France's Galeries Lafayette or Spain's El Corte Ingl?s.
A shop can be run entirely by one family if it has limited hours; it can get away with closing down at lunchtimes and for holidays because competing outlets are all forced to do the same. But, apart from protecting the family shop, the regulations surrounding the retail sector explain many other idiosyncrasies in Italian life. For example, try locating a computer shop in an Italian city; computers and their accessories are usually sold either by mail order or from warehouses miles from the centre because new licences are so difficult to obtain. Italy's antiquated retail sector, which forces shoppers to traipse from one shop to the next, helps explain why women find it so hard to break free of the home. It has also produced a nation virtually devoid of "shopgirls." In 1995, only 28 per cent of women of working age were in employment, compared with 55 per cent of men. Only 30 per cent of shop assistants in Italy are from outside the family which owns the business. In France and Germany, the comparable figures are 79 per cent and 85 per cent.
romano prodi, the Italian leader, has warned that the implications of liberalising the retail business are "enormous." And if Prodi is to be believed, this is the first move in a campaign to liberalise the whole of Italian society. If so, an epic battle lies ahead. The "Italian model," more than any other in Europe, transcends both the old division between left and right and that between corporatism and the free market.
In the Anglo-Saxon world, people tend to see conflict as invigorating. Britain and the US have both created bipolar democracies based on winner-takes-all, first-past-the-post electoral systems. English speakers also favour competitive economic arrangements such as free trade and free markets. And almost any nation which has been influenced by English common law has a court procedure in which the judge does not actually judge, but holds the ring between two sides who fight it out in front of a jury. Until recently, Italy had none of these things. Its extreme form of proportional representation ensured a multi-polar variety of democracy which vested huge power in the parties, yet ensured that no single party could, in practice, win enough votes to form a government by itself. Thanks to a specifically Italian quirk, this meant that there was no real alternation of power. Because one of the biggest parties, the Communists, was considered unfit for government, it was left to the others to form an endless succession of subtly varying coalitions. All included the largest of the non-Communist parties, the Christian Democrats. On the surface, Italy's problem was that power changed hands too often. In fact, it scarcely changed hands at all. The interior ministry-the key to power in Italy, with its control of the police, the secret services and sensitive archives-was headed by a Christian Democrat from the 1940s to the 1990s.
Over this period, Italy also developed an unusually "social" form of capitalism. Huge areas of the economy which had been taken over by the state under Mussolini were allowed to remain in public hands. Yet more were added. By the mid-1980s, the four main state holding companies had more than 1,000 subsidiaries. They accounted for one third of total industrial turnover. Mussolini's corporatism also lived on in the organisation of professional people into Ordini (Orders) empowered to cartelise their respective areas of the economy. The rest of the working population was equally organised within a web of employers' associations and trades unions which, at national level, acquired an automatic right to be consulted on economic policy. The strength of the communist movement, meanwhile, encouraged a proliferation of cooperatives, particularly in the centre and north of Italy.
The counterweight to this "socialisation" was the existence of a highly successful private sector. But even here Italy was idiosyncratic because of the predominance of family businesses. Many of Italy's biggest corporations are still family-based and family-run. Fiat is one. Berlusconi's media-to-property empire is another.
Even the judicial system reflects an emphasis on group values rather than individual rights. The defence begins each case at a disadvantage. The prosecutor, who has carried out a detailed investigation before the trial and concluded that the defendant is guilty, is as much a representative of society as the judge or judges. The prosecutors are not attorneys, but themselves judges, who belong to the same corporate body as the men or women presiding over the court. Thus a prosecutor's task is not so much to defeat an adversary, as to get his or her conclusions endorsed by a colleague who is also expected to act on behalf of the common good.
For the most part, Italy's non-confrontational practices have served it well. Italians and non-Italians alike might complain of the disorganisation, but they cannot dispute some remarkable achievements -several decades of political stability and strong economic growth which, by the start of the 1990s, had given Italy a higher GDP per capita than Britain-or indeed Kuwait. Furthermore, the choices Italy made appeared to offer solutions to at least two specifically Italian concerns.
One of these was the experience of dictatorship under Mussolini. A political system which, by its nature, ensured that no one individual or party could gain control of society was as good a guarantee as any that the country would not slip back into totalitarianism. The "chaos" of Italian politics, with its revolving door governments and interminable crises, can be seen as a healthy reaction to the "order" imposed by Il Duce.
The other concern-felt unevenly in Italian society, but keenly by the Vatican and by successive US administrations -was the power of communism in a country which had been allotted to the western sphere of influence in the postwar agreements. During the cold war, Italy's PCI was the west's best-supported Communist party. One of the effects-and purposes-of a "social" form of economic organisation was to cut away the ground from under the Marxists. It was more difficult to claim that the workers were being exploited. Indeed, there are still times-when faced with senseless official restrictions or the power of the unions-when it seems that Italy avoided communist rule only by becoming a passable imitation of the old Soviet Union.
for some time, though, it has been clear that Italy's anti-Darwinian, catholic-corporatist model is not working. Politically, this manifested itself in the collapse of the partitocrazia at the start of the 1990s. Economically it has been discernible too. By the mid-1990s, Italy's much-publicised sorpasso-overtaking Britain in the league table of average output-had been reversed. The EU figures for 1995 put Britain's GDP per capita at 14,358 ecus, ahead of Italy's 14,245 ecus.
Anecdotal evidence of relative decline is particularly noticeable in Rome. In the north, it is masked by the prosperity generated by the region's thousands of export-led light industrial firms. In the south, its impact is diluted by the outsider's expectation that the Mezzogiorno will, in any case, be poor and backward. But here, at the southernmost tip of the north (or the northernmost tip of south) there is no mistaking the fact that Italy is beginning to get out of step with the rest of western Europe.
Visitors arriving at Fiumicino airport may feel-as they are arriving in the world's fifth industrial power-that they need not bring currency or travellers' cheques. A Spanish friend made this mistake. He set off with a pocket full of credit cards, expecting to raise cash at Rome's airport. He remained penniless. Only some of the Italian banks' cashpoints recognise cards other than their own and they are often out of operation. In Italy, the number of people who own a Visa card is lower than in Turkey. (The lack of plastic money is less obvious to the tourist because restaurants and hotels have had to adapt to this odd foreign quirk.)
On his way into Rome, our Spanish friend passed an elegant bridge on the right hand side of the road. He noticed that it leads from one field full of sheep to another field full of sheep-it is one of those monuments to the trillions of squandered lire which have gone towards building up a national debt which is 125 per cent of the nation's GDP.
Across the motorway is a petrol station. The owners recently made it self-service, to cut labour costs. But they were unable to secure the agreement of the unions. So drivers arriving on the forecourt will find several attendants standing around in spotless overalls, whose only function is to show the customers how to operate the pumps by themselves.
Whatever happens, Italy will continue to be a relatively prosperous country. But it is being slowed down by a stiffening of the joints. A further example: as we approach the year 2000, Italy-a member of the G7-still does not have a mail service which can deliver letters quickly and reliably. The Italian postal service claims that 85 per cent of letters sent from the provinces to the cities are delivered within three days, but few of us who live here believe it-and, in any case, what happens to the remaining 15 per cent?
Recently, a kidnap victim sent a desperate plea to a television station. The envelope took 11 days to get from a village near Arezzo, in Tuscany, to Milan, 240 miles away. The chairman of the Italian mail was unabashed. He blamed the fact that the kidnappers, while remembering to enclose the amputated lobe of their victim's right ear, had failed to use a postal code.
The reason why the mail service is so poor is that, for decades, it was treated, not as part of the nation's economic infrastructure, but as part of its welfare system. Political parties used to give jobs in the mail service to poor, but politically loyal, southern voters. Because the posts were regarded by their occupants as rewards rather than challenges, the mail service became a stronghold of bureaucratic obscurantism, petty corruption and hair-splitting trade unionism.
the most important event in Italian public life in recent years has been the campaign against corruption. This began in 1992 and became known as Tangentopoli (a "kickback" in Italian is a tangente). Thousands of business executives and party officials were jailed. Much of the subsequent reporting of Italian affairs has dwelt on the drive to clean up public life after half a century of corrupt partitocrazia.
Tangentopoli was important. But, six years on, it is clear that it was a symptom of something much more significant for Italy's long-term future: a shift away from Italy's collaborative traditions towards something closer to the Anglo-Saxon model. This is the real revolution taking place in Italy, although progress has been faltering and its outcome is far from certain.
Tangentopoli did not stamp out graft. As I write, the lead story in today's La Stampa is about huge bribes paid as recently as February 1997. But what Tangentopoli did achieve was to undermine the specific form of graft on which the old order was based.
The parties, which all needed huge sums of money to thrive, levied unofficial commissions at every level of government-from the village to the state-on a huge array of public contracts. The investigation from which all other Tangentopoli enquiries stemmed was into a bribe for the right to clean an old people's home. So as to be able to pay these tangenti, the companies which secured the contracts inflated their prices. The fact that the state was paying more than it needed to for nearly everything it commissioned or bought explains why its debts kept increasing. From 1980 to 1992, $20 billion was paid out in bribes-about 15 per cent of all that the state owed.
But-and this was the stroke of genius-the debt was financed by means of bonds which were made available to ordinary Italians at attractive rates of interest. The most popular of these bonds were-indeed are-known as BOTs and the millions of Italians who acquired them came to be known as "BOT people." The orchestrators of corruption thus succeeded in giving millions of their compatriots a direct interest in the survival of graft, by turning the cost of venality into lucrative fixed-interest securities.
What brought this experiment crashing to the ground remains a matter for debate. One explanation puts it down to the end of the cold war: Italians realised they could no longer count on being saved from their excesses by the US and other European countries fearful of a communist take-over. Another explanation is the onset of a recession: companies were unable to pay the 10 to 15 per cent mark-up which they had paid in the booming 1980s.
But at least as important as these was Italy's commitment to join a single European currency. Signing the Maastricht treaty in 1991 meant that the merry-go-round simply had to stop. Participation was conditional on a low budget deficit and modest government borrowings. So there could be no more tangenti.
Why did the Italians sign up to this revolution? The answer lies in the nature of Italy's relationship with "Europe." Italy is a country still lacking in self-confidence. It has only been a unified state for 128 years. Before that, German, French, Spanish and Austrian armies tramped over the peninsula, reducing swathes of it to servitude for centuries at a time. The Italians share with the Irish, the Norwegians and the Dutch the unusual historical experience of having been the colonial subjects of other Europeans.
This has helped to explain why the EU, which gives Italians the same status as their former colonial masters, exercises a peculiar fascination and attraction. Diplomats in Rome will tell you privately that Italian civil servants show little concern for the detail of European projects. Unlike the British, French or Germans, they do not draw up detailed position papers, weighing pros and cons. What is important is belonging; and this sometimes means that the government will go along with initiatives which are not to the country's advantage.
At the same time, Italy's semi-colonial past has created a striking deference towards outsiders. From the start, the task of meeting the Maastricht criteria was depicted in the Italian media as a school examination set by the rest of "Europe." Chancellor Helmut Kohl was the stern headmaster and his finance minister, Theo Waigel, the bullying prefect. Each time one of these two men met his Italian counterpart, the outcome would be reported in the newspapers as a pagella (report card). Whether or not the Germans happened to be taking a benevolent view of Italy's chances, sooner or later one of Italy's leaders could be counted upon to declare that, in the end, Ce la faremo ("We'll make it").
Monetary union itself is seen-approvingly-as a way of imposing on Italy from outside the kind of discipline which Italians find it so hard to impose on themselves. The veteran commentator Indro Montanelli greeted the news that Italy had met the Maastricht criteria with the only half-joking remark: "At last, we shall be governed by foreigners."
Maastricht meant that the administration had to stop over-spending-and not just on tangenti. The two main themes in Italian politics over the past six years have been the need to prune back Italy's welfare provision and sell off its loss-making state industries. Three separate attacks have been launched on the welfare state, each of which has trimmed entitlements. And in the three years to 1997, the Italian treasury sold off more than $20 billion of assets.
Italy may not have been able to reduce its accu-mulated debt by very much. But it has been able to reduce its budget deficit to below the 3 per cent of GDP demanded by Maastricht. And now that the lira is to be dissolved into the euro, Italy will be able to pay off what it owes at interest rates traditionally associated with low-inflation, strong currency nations such as Germany.
Monetary union, however, calls for a discipline which goes beyond the containment of public spending. There is not much point in enforcing tight fiscal restraint if, every few months, one of the main partners in the euro is alarming the markets by plunging into a government crisis. Hence the third theme in recent Italian politics: constitutional reform.
In 1993, parliament approved a compromise whereby 75 per cent of the seats in the lower house would be allocated to single-member constituencies and the remaining 25 per cent decided by proportional representation. At two successive elections this arrangement has given working majorities to, first, the right; then the centre and left. But in both instances, the administration was at the mercy of an ally whose parliamentary strength rested on proportional representation-the separatist Northern League in the case of Silvio Berlusconi's right-wing cabinet, and the hard-line Communist Refoundation in the case of Romano Prodi's coalition of the left and centre. The Northern League brought down Berlusconi's administration in 1994. The Communist Refoundation came close to felling Prodi's government last autumn.
A more rigorous solution is clearly required. The bicamerale, a committee of both chambers of parliament set up at the urging of the former Communist leader, Massimo D'Alema, was meant to agree on reforms which would deliver more stable government. Last year, it got as far as finalising a new draft constitution. But in June this year, after months of inter-party diplomacy, brinkmanship and melodrama, the bicamerale had to be wound up-killed off, the left and centre alleged, by Silvio Berlusconi's fear of judicial reforms which could have landed him in jail for corruption. The effects of this failure are potentially perilous for the entire euro project. The tangentopoli investigations, welfare cuts and constitutional reform could all be viewed as elements in a single package designed to limit the damage Italy could do to the euro. A key element of that package is now missing.
But it is an indication of the depth of Italian "Europhilia," that until now little has been said about the damage that the euro could do to Italy. By sacrificing their currency, the Italians will be sacrificing the right to devalue it. Yet devaluation and, more recently, depreciation have been choice weapons used by successive governments to enhance the competitiveness of Italian business whenever the going got tough. Despite talk of Latin solidarity, the real reason why the French are so keen to have the Italians in the monetary union is that it will end the intermittent flooding of the French market with cheap goods from Italy.
This is where Prodi's new shop law comes in-if it really is the first step towards a wider programme of deregulation. Such a programme would help prepare the Italian economy for what is going to be a straight fight with the Germans, the French and others. Prodi's next target is the professions.
In the meantime, one of his ministers has tabled a bill which would shake up Italy's civil service by decentralising the state and giving regional and local authorities much wider powers to deal with matters such as the environment, zoning, roads and transport. This in turn could be a step towards resolving the other historic challenge facing Italy: how to remain united. The very inadequacies which have to be made good if Italy is to make a success of monetary union are those which have driven many, in the more prosperous areas, to dream of secession.
Umberto Bossi's Northern League is not the first regional/nationalist movement to have grown up in one of the richer parts of the state from which it intends to secede, nor is it the first to have been motivated by the perceived failure of a backward capital to understand the problems of an advanced region. The Basque and Catalan movements in late 19th century Spain are textbook examples. But Bossi may well be the first regional/nationalist leader to make such a case without recourse to ethnic, cultural or linguistic differences. The inhabitants of his imagined republic of "Padania," stretching from the French to the Slovenian frontiers, would have no common history, culture or language (other than Italian).
In its most thoughtful form-not often heard from Bossi himself-the League's argument is not that northerners are innately different from southerners, but that the Piedmontese, Lombards and Venetians have been made different by their more rapid economic progress. They therefore need a different, "lighter" form of government. They do not need as many handouts, but they do require an advanced infrastructure.
The League's view is that the north, by itself, would be able to hold its own in the proposed monetary union (an independent Padania would have the highest GDP per capita in the EU). But it fears the future tied to the rest of Italy, weighed down, as it sees it, by the exactions and inefficiency of Roma ladrona ("Rome the she-thief"). It could be that the north will indeed get richer as a result of Emu, and that the south will get even poorer. It is one thing to imagine Milan as part of the same economic area as Lyons or Frankfurt; quite another to think of Catania or Naples having to compete with, say, Malm?.
To prevent Emu splitting the country in two, Italy needs to reform. The track record so far is patchy. Reforms have been introduced, but all too often they have been tentative. The legal system remains unchanged despite years of discussion among politicians. The prosecuting magistrates have had their powers curbed, but they have still not been hived off into a separate career structure which would put them on a par with defence lawyers.
Foreigners often assume that because Italians are so vivacious and energetic, they are also highly flexible. Although this may be true of individuals, it is not true of the culture as a whole. In Giuseppe di Lampedusa's The Leopard, the Prince of Salina makes one of the most famous remarks in Italian literature. "We want things to change," he says, "so they can stay as they are." It is what happens so often in Italian life-frantic, hectic, even melodramatic activity disguising an underlying continuity.
Change is viewed with suspicion and tradition is honoured with tenacious respect-apparent in the Italians' attachment to family and respect for age. Indro Montanelli at the age of 88 is Italy's most respected commentator. The chairman of Fiat has just stepped down at 75, having been handed the job by Gianni Agnelli when he himself reached 75.
A deep conservatism is equally apparent in dozens of little ways not obvious to the visitor: the Italians' reluctance to try foreign food or wine, their attachment to a traditional, voluptuous notion of female beauty, the formality of Italian forms of address. "Good morning, accountant," says the waiter in my local bar to one customer. "Good morning, engineer," he says to the next. Italy may have undergone an economic revolution, but what is obvious to anyone who lived through the late 1960s in the Anglo-Saxon world is that it has yet to undergo a social one. This is still a country in which the working man "knows his place" and signals that knowledge by addressing anyone he suspects may have a university degree as "Dottore."
The present coalition government is a good example of the Prince of Salina principle. Strip away its "post-modern" title-the Olive Tree-and you are left with an alliance between what remains of the two biggest parties from the old order. Its main components are a group of the more progressive-and honest-Christian Democrats and the PCI's successor party, the Democratic Party of the Left. Prodi is a former chairman of the corporatist holding company, the IRI. His deputy prime minister, Walter Veltroni, once edited L'Unit? , the Communist party organ.
How much of the government's commitment to liberalisation is born of necessity and how much of conviction? The grasp, among ministers, of what liberalisation means can seem shaky. Not long ago, a plan was announced to lighten the burden on government by divesting it of responsibility for issuing licence plates and driving licences, examining drivers and inspecting automobiles. To whom was it proposed to give these duties? To the Automobile Club of Italy, which already has an ambiguous function as the body which both represents Italy's drivers and issues them with their vehicle licences. It is difficult to imagine a better example of corporatist thinking-off-loading a state function on to a para-state body formed around a vested interest.
If the Olive Tree administration does succeed in carrying through a liberal revolution, it will be ironic, not only because its component groups have a history of antipathy to the free market, but also because that is what unites them. The Olive Tree can be seen as the realisation of the hopes of the late Communist leader, Enrico Berlinguer. His dream was of a "historic compromise" between Italy's two main parties. In a passage from his Aust?rita, occasione per trasformare l'Italia, quoted in Paul Ginsborg's A History of Contemporary Italy, he noted that the PCI and the Christian Democrats shared a commitment to saving the country from, among other things, "unbridled individualism, senseless consumerism and economic disorder."
What Berlinguer correctly identified as common ground was the concern of the Roman catholic church-and hence, at least in theory, the Christian Democrats-with the negative side of individualism. This is still a powerful force in Italian society, powerful enough to ensure that it will not follow Anglo-Saxon individualism too slavishly.
Among those you might expect to be most committed to reform is the governor of the Bank of Italy. Last June he was invited to contribute to a debate at the University of Bologna on "Competition and Values in the Market and Society." Governor Antonio Fazio had this to say: "In Italy, the values of the catholic church have always been an important point of reference for society and individuals. They are profoundly rooted in civil society and are reflected in the prevailing concept of social justice. These values are developed in the social doctrine of the Roman catholic church beginning with the Papal encyclical Rerum Novarum and ending with Solicitudo Rei Socialis, taking in... Quadragesimo Anno, Populorum Progressio and Laborem Exercens. I identify with that doctrine and vision of the world." Alan Greenspan would not, I suspect, have said quite the same.
