Italy’s Zombie Politicians Have Crossed The Atlantic

Zombies have overrun Rome—and they’re spreading to Washington. Politics on both sides of the Atlantic is stuck in limbo between life and death as politicians stagger about hopelessly to stall on reform. Italy’s reformist technocrat government, led by Mario Monti, came to an end last month, which means the country is at risk of losing its only hope to escape political stagnation. Meanwhile, despite all the grandstanding from President Obama and Congress, nothing seems to change in the U.S., either. Yesterday’s tax-raising deal to supposedly avoid the “fiscal cliff”and punt on cutting spending is just the latest episode of Washington’s lifeless routine. Italy’s broken political culture represents the political zombie apocalypse that America must avoid.

This “28 Elections Later” endgame begins with special interests, with which the political systems of both America and Italy are deeply entangled. But Italy has gone much further down that road to perdition.

For nearly 50 years before the early 1990s, one-party rule in Italy meant huge concessions to special interests, especially unions and professional guilds, to keep the peace in Parliament and thus keep Italy’s sizeable Communist Party from exploiting partisan disagreement to gain support. The unions and the guilds said “jump” and politicians asked “how high?”

In Italy, this sorry spectacle continues today. Each special interest has its own sacred cow after five decades of gorging at the public trough, and politicians don’t dare to even hint at slimming them down.

The labor unions have Italy’s rigid employment law. Article 18 of the Statute of Workers forbids firing an employee for poor performance. Only cases of negligence can be grounds for dismissal. Essentially, older workers have jobs for life while younger workers precariously jump from job to job under temporary contracts because firms won’t take the risk of hiring new employees. It’s no wonder that Italian firms are small and refuse to grow, and that Italy has one of the highest youth unemployment rates and the second lowest level of employment in the Euro Zone.

Italy’s powerful unions will do whatever it takes to keep this law on the books. When the Monti government attempted to reform Article 18 last spring, it met fierce resistance to compromise from Italy’s largest trade union, the Italian General Confederation of Labor. Union Secretary-General Susanna Camusso went so far as to claim that reforming Article 18 would have no effect on Italy’s employment problem.

The unions have a stranglehold over Italy’s center-left Democratic Party, which is poised to gain the most votes in the spring 2013 elections, according to a November 2012 Ipsos poll. During talks on labor reform, Party Secretary Pierluigi Bersani rejected changes to Article 18 on the same grounds as Camusso.

Italy’s service guilds hold dear the intricate system of stringent licensing schemes and tough industry standards that allow them to erect barriers to new competition. According to the OECD’s professional service regulation index, Italy’s service sector is the most regulated in the developed world.

One of the guilds’ most glaring protectionist achievements is the scarcity of taxis in Italy’s capital. Rome has less than a third fewer taxis per resident than London or Paris, because the Italian taxi guild lobbies and strikes to keep taxi licenses to a minimum and competition non-existent. When Monti introduced modest liberalizations to Italy’s taxi sector in January, drivers protested by blocking roads all over the country.

Imagine the unrest that significant reform would have caused.

Monti—the technocrat-turned-politician who will be a candidate in the spring elections—is Italy’s only zombie hunter. Although his record has been largely lackluster, he at least has exhibited some courage to take on the entrenched interests and politicians keeping Italy’s economy and politics stuck in a rut. That’s more than can be said for politicians like former Prime Minister (and now 2013 election candidate) Silvio Berlusconi—who was forced to resign last fall after financial markets sent Italy’s sovereign bond yields through the roof because of his refusal to countenance reform—and for the union puppet Bersani.

What can Americans learn from this? Plenty, since it offers a glimpse of the future if politicians in Washington fail to confront the country’s fiscal challenges. Grand talk of cutting spending and shrinking debt has failed to deliver time and again in the United States. And even when the Beltway zombies made a modest achievement to cut spending through an automatic sequester agreed to in August 2011, they work at its reversal before it can take place this year. This is the definition of going nowhere.

Democratic zombies hunt for tax money to keep funding unsustainable entitlements, while the Republican undead try to scare the public into believing that a military budget trimmed back to pre-2004 levels will leave America defenseless. Every politician has a special interest to please, whether it’s the AARP or a defense contractor. As in Italy, America’s political culture is broken.

Super Mario was not able to save Italy from the walking dead. But the spring elections might just give him a second chance. America should seek to avoid using up its nine lives and simply learn from Italy’s mistakes.