December 29, 2003

The new sick man of Europe

Remember, it was Mussolini who said "Facism" would be better termed "Corporatism."

Will Hutton, Guardian: Corruption in politics and the media is turning the once core EU state of Italy into an international disgrace


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http://www.guardian.co.uk/italy/story/0,12576,1113229,00.html

The new sick man of Europe

Corruption in politics and the media is turning the
once core EU state of Italy into an international
disgrace

Will Hutton
Sunday December 28, 2003
The Observer

Suppose Tony Blair owned ITV, had disbanded the
majority of the board of governors of the BBC and that
director-general Greg Dyke had resigned because of the
impossibility of maintaining the corporation's
impartiality in the face of unfair, growing and
politically motivated competition from Mr Blair's
interests. Suppose, too, that Mr Blair owned both the
Daily Telegraph and the Express. And suppose the Queen
had extraordinarily refused to enact a parliamentary
Bill that would, in effect, allow Mr Blair to expand
his media empire despite earlier promises to disband
it. There would, I suspect, be just a little political
disquiet.
Suppose, too, that, while we were digesting all this,
one of our largest companies had gone into
receivership. Over the past few years, it had falsely,
and probably fraudulently, accounted for a cool 7
billion, but attempts to recover the cash were being
grievously hampered by new Blair laws which weakened
protection against false accounting, largely to ensure
that the Prime Minister's media empire would better
survive scrutiny. We could start to wonder what kind
of banana republic we were living in.

But this is no banana republic - this is present-day
Italy, one of the chief states in the European Union.
The Prime Minister is not Tony Blair but Silvio
Berlusconi; Mediaset is ITV; RAI is the BBC; Lucia
Annunziata is Greg Dyke: Il Giornale is the Daily
Telegraph and the company in receivership is Parmalat.
For the Queen, read 83-year-old President Ciampi. The
analogies are not exact - Italian institutions and
processes are not mirrored in Britain - but the
similarities drive home what has been happening there.
It is a salutary warning not just about democracy and
capitalism in Italy, but about modern times.

The British are as complicit as the Italians in not
taking Italy sufficiently seriously. Italy suffers
from a curious inferiority complex, in which its
military glories ceased with the Romans and its
cultural influence ended with the Renaissance. Italian
citizens take no pride in their state or democracy;
avoiding taxes is a sign of canniness and to comply
with regulation is to be seen as weak. Italian
reunification is not yet 150 years old, and there
isn't the loyalty to political, judicial and
democratic institutions that you find in Britain,
France or the US. Loyalty is to family - the vehicle
for building everything from restaurants to great
companies. Italians despair of their public realm.

Yet Italy matters. It is one of the Group of Seven
industrialised nations (now eight with Russia). It
matters as a founder of the EU; indeed, without
Italy's willingness to sign the original Treaty of
Rome, the so-called European project would have been
little more than a Franco-German friendship pact of
the kind tried and found wanting in the past. Italy
plays that role still; no other mainland European
country has the population weight and GDP to
Europeanise Franco-German relations. Nor does its
political salience stop there; Berlusconi's Italy gave
Britain and the US political cover during the Iraq
war.

Italy is a crucial market. Rupert Murdoch, with an
ever keen eye to the main chance, was more than happy
to buy the two distressed Italian satellite platforms,
Stream and Telepiu, now absorbed into Sky and carrying
a diet of dubbed US retreads from Fox, with news as
pro-government as anything carried by Berlusconi's
Rete4, Canale5 and Italia1.

Playing his political cards carefully will create from
this market of 60 million Italians a cash cow to equal
his British operation. We neglect Italy at our peril;
it has always been a forerunner of European trends,
whether the Renaissance, fascism in the 1920s and now
the integration into a powerful unity of media baron
and financial casino capitalism, all the while
co-opting the state to serve its ends.

At first, Parmalat seemed a typical Italian family
business built around dairy and ham products. It was
no such thing. Founder, chairman and chief executive
Calisto Tanzi, whose family controlled the majority of
the equity, was using the core business to support an
extravaganza of invented contracts, particularly in
the Cayman Islands. American banks, many of which see
dodgy practice as a natural outgrowth of capitalism,
continued to lend money against the contracts until it
was too late. Wall Street met Italian capitalism to
produce a European Enron.

But what made it possible, as with Enron, is that
national and international financial regulation has
not kept pace with today's opportunities for fraud and
deception by company leaderships minded to take this
step. Nor is this a technical failing. It is because
today's leitmotif is that regulation inhibits 'wealth
generation' and 'free markets'. Tanzi pulled some
political favours to build the core of Parmalat, and
then exploited Italy's - and the West's - weak
regulatory environment, supported by the ideology that
business must be free, to cover his tracks.

And Italy is more wide open than most. Creating almost
impossible-to-follow audit trails is easier in
Italian-style family-controlled firms: corporate
governance rules are scandalously inadequate;
regulation is habitually weak. Attempts at reform have
been fiercely contested by the Berlusconi-controlled
media portraying any such initiative as anti-business,
anti-free market and anti-Italy. As Prime Minister, an
office Berlusconi won with the support of his own
media, he is able to practise what his TV companies
and papers preach. His control of the media suffocates
debate and criticism. The result: bad government,
nearly extinct political pluralism and Parmalat.

In Britain, we ride the same tiger, albeit one in a
different guise. The same ideology rules, generating
the same temptations: Daily Telegraph proprietor
Conrad Black is no stranger to hard-to-follow audit
trails and disappearing cash; naturally, he is as
fervent an apostle of the 'free market' and
anti-public-service broadcasting as Mr Berlusconi.

The potent mix of an ideological and powerful media,
self-seekingly promoting particular corporate
interests as the public interest, is not confined to
Italy. Nor is the exchange of commercial advantage for
political support just a feature of Rome and Milan.

Events in Italy are the concern of all of us and the
EU should signal its fundamental interest in the
outcome of Italy's battle to defend the integrity of
its capitalism and public realm. The first act of the
incoming Irish presidency of the European Union should
be to say just that. Mr Blair should be in the
vanguard of European leaders pressing for such a
statement. Instead, we can be sure that silence will
reign.

An editing slip in last week's column gave Britain's
private debt as 65 per cent of GDP, rather than 165
per cent, as Will Hutton originally wrote. Sorry for
any Sunday morning perplexity that caused.

Posted by richard at December 29, 2003 12:46 PM