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The criminal core of Italian capitalism

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By late May 700 politicians, bureaucrats and bosses were being investigated in the bribes for contracts scandal that has rocked Italian capitalism. Marco Zucci makes sense of this controlled purging of the Italian state

One dramatic revelation follows another. Italians have been astounded by the uncovering of a half century of scandals, corruption, clientelism, and embezzlement. A new word has entered the language—“tangentopoli” to describe the system of corruption that embraces their political leaders together with major employers.

Those in the dock include the leaders of the major parties; Craxi, the leader of the Socialist Party (PSI), Forlani, ex-president of the Christian Democrats (DC), and the Republican, La Malfa the self-styled spokesman for “ordinary decent people”.

But the fall which has caused the biggest reverberrations is without doubt that of Giulio Andreotti the boss of the DC and six times Prime Minister. According to the testimony of several mafia supergrasses, in between meetings of the G7 and his Cabinet Andreotti called in on the godfathers of the Sicilian mafia to negotiate the elimination of his political rivals.

The Italian bourgeoisie is forced to reach for drastic solutions—a clearout of a generation of leaders and restructuring its entire constitutional framework—because a system that once served it so well has become destabilising.

But in stirring the muck of ages past they are obliged to reveal that their democracy disguised a real dictatorship of money and patronage. The revelations have unleashed a process whose outcome is unforeseeable. In this present phase of instability and extreme fragility a danger emerges for the Italian working class; the danger of authoritarianism feeding off regional populism. But there is also a possibility that workers’ combativity and class consciousness could give the entire system such a blow that it could shatter into fragments.

Dishonesty in the state is not an Italian prerogative even if they add style to it. Political power represents the interests of the economically dominant class, and it is natural that the convergence of interests between them should be consumated through a series of reciprocal favours. In the Democratic Republic, wrote Engels,

“wealth exercises its power in an indirect manner, but sure nevertheless. On the one side, through the form of direct corruption of the state functionaries, of which America furnishes a classic example; on the other side, in the form of an alliance between the government and the Stock Exchange.”

That one form should be explicitly punished in the Italian penal code as a crime, and the other should, on the contrary, be showered in praise changes nothing. The two represent a continuity and in practice they overlap. Italy, for specific historical reasons, has turned this process into an art.

The reason for the apparently abnormal scale of the corruption scandals and the pressing need for change is to be found in the character of state intervention in the Italian economy.

Such intervention is not an Italian peculiarity. In the imperialist epoch the role of the state as a crutch of monopoly capital has not declined but, on the contrary, grown enormously. In the face of sharpened inter-imperialist competition, crises of overproduction, and falling profitablity, it is the state which aids the industrialists in their search for capital, raw materials and markets. Internally, this aid takes the form of erecting customs barriers, providing an efficient industrial infrastructure (transport and energy) and mediating class conflict to the advantage of the bosses.

The Italian state developed this interventionist role well before the other European countries because, as Gramsci’s posed it, during the period of national re-unification the problem was not so much to liberate already developed capitalist forces from their old, juridical and political fetters, as to create the general conditions for these forces to be born and to develop along the lines of other countries.

However, it was only during the Fascist dictatorship that this intervention took on present proportions. Mussolini’s state first and foremost straightjacketed the workers, securing a very low level of strikes, social conflict, and wage levels. But it also began a policy of large scale public works, offered advantageous contracts to the industrialists and acted to save the big banks and the large scale enterprises from collapse. The bosses thus discovered the advantage of the nationalisation of losses.

The bourgeois politicians discovered a new hunting ground for lucrative posts in the “councils of administration” (PDGs) and a great increase in their power. This was the birth of the nationalised sector of the economy and also of the fusion between the political party, the state and a sector of industry, a situation which was deepened under the DC governments.

The state holding company, IRI, was created in 1933, a giant conglomerate which controlled 21.5% of total shareholding capital. It owned three banks, a majority stake in the telecommunications network and the navigation system. It also held a strong stake in steel and mechanical engineering. Today, IRI still maintains its collosal power, through a system of one hundred and forty companies, with a workforce of over 500,000.

After the Second World War the Italian bourgeoise found itself in a weak position, that has parallels with today. Having abandoned the fascists on the eve of their fall it was necessary to create a new basis for governing and to rearrange the political furniture in the house of state.

They found forces ready to hand; politicians not too compromised with the fascists, though all of them had been part of the People’s Party (Partito Popolare), the catholic party that supported the first, “legal” governments of Mussolini. The new party would have to be based on the petit-bourgeoisie, the functionaries of the enormous bureaucratic machine of the fascist state (1.1 million people in 1941). To stick together all these social forces and to bind large sections of the peasantry and even of the working class to the project, an essential cement was furnished by the church. The depth of its implantation via its parishes, its educational and “cultural” organisations provided an enormous ideological weapon for the state. Catholic Action with its 2.6 million adherents in 1954, its network of co-operatives, private schools, hospitals, rest homes and its social assistance, was its core.

Out of this crucible was born Christian Democracy, the political force that was to dominate the political scene for four decades. Yet despite its electoral strength (48.5% in 1948) this formation embodied deep contradictions that would in the long run prove destructive. It acted as a veritable “popular front” of differing class forces; it was at once a mass party at the service of the big capitalists, an openly confessional party directing a secular capitalism.

There were, however, two factors which stabilised this political formation for a long time. On one side, there was a very strong Communist Party, which forced the bourgeoisie to put up with this party of backward looking clericalism, as the price for keeping the ‘Red danger” at bay. On the other hand, the DC had no scruples in using the state apparatus to fund its links with all the social forces within its electoral bloc.

In order to maintain itself in power in a country where the electoral system was one of proportional representation the DC assembled behind it a powerful bloc of heterogenous social forces. All of them shared in the redistribution of the national revenue operated by the state but in different proportions; to the bosses went the public works, the grants to industry, the tax benefits. To the popular classes went the crumbs from this feast.

The DC carried on a policy of more or less direct pay-offs from the state to the commanding heights of industry and commerce. As an example, among the scandals coming to light today is the sale in 1987 of Alfa Romeo to Fiat for 1,000 billion lire of which only 400 billion were effectively paid. Alfa Romeo had estimated its value of 5,000-6,000 billion!

Other examples include thousands of billions of lire paid out for new factories in the impoverished south, generous orders for military material, millions of hours of fake unemployment benefit paid for by the state.

Under DC rule the role of the state in the basic industries sector was reenforced. In 1953 ENI was created, a state holding company for petroleum, which developed very rapidly under the leadership of Enrico Mattei. His origins lay in the strata of high state functionaries, who taken together today find themselves at the centre of the judges’ attentions.

In 1962 the policy of nationalisation led to the creation of ENEL. Despite appearences and despite the presence in the government of the Italian Socialist Party (PSI) this was not a reform of the left but a simple service rendered to the big industrialists, who afterwards received the privilege of paying only one fifth the price per kilowat for electricity as working class consumers.

Small scale industry was not neglected either. They prospered through state contracts in construction and public works (motorways, hospitals). The public tendering procedure was reduced in practice to choosing from a list of favoured companies linked to local DC clients. In return kickbacks went into funding the party and its election campaigns.

But the loyalty of the real mass base could only be assured by efforts aimed at the peasants. Organised in the association of small proprietors (Coldiretti), which reached a record membership of 1.6 million families, these peasants were bought off with cheap credit, farming equipment, wholesale purchase of crops and the protection of the ministry of agriculture. In addition, their vote corresponded to 50 deputies, a considerable weight within the DC parliamentary bloc.

Another maintstay of DC policy, once again taken over from the fascists, was the policy of swelling the ranks of the state bureaucracy. Clients of the DC expected many of their “own” to be elevated into permanent posts; they were rarely disappointed. One way of doing this was the creation of incredible numbers of “Enti”. These were public organisations which stretched from large-scale mutual benefit societies, directed by the state to to hundreds of minuscule organisations useless for any purpose beyond clientelege.

If you missed out on that layer of easy money then there were “invalidity” pensions and grants for the handicapped awarded on the basis of fidelity to local party notables. In this way the great masses of the people—whom above all in the south and in the rural areas lived in a situation of poverty, unemployment and chronic underdevelopment—constituted a great resevoir of guaranteed votes which could be garnered through an extensive network of patronage.

The incoveniences of this system for the big bourgeoisie are evident. The state machine has become elephantine and its upkeep is extremely costly. Inefficiencies in the public service (post, transport), delays due to bureaucratic procedures, institutionalised bribery (a sort of informal tax paid by business), all these risked becoming unbearable.

In the 1980s the benefits of this system to the bosses was outweighed by the costs. More and more money was demanded by the parties of business before lucrative public contracts were awarded. In May the head of Olivetti, Carlo De Benedetti, volunteered the information that his company had paid out around$12mn in bribes to politicians since the early 1980s. Until then they had been put on the “black books of the state railways.” De Benedetti said that soon the pressure on Olivetti “reached an impressive crescendo . . . of menaces and extortion to become in the last few years nothing short of racketeering . . . The demands from the representatives of the parties were systematic and unavoidable on everything they controlled without exception.”

According to unofficial estimates, the number of people who live more or less directly thanks to party politics is close to one million. It is clear that even if the capitalists could participate in the share out of the state budget, the weight of all these parasitic social layers weighs heavily on the costs of production.

One study has concluded that since 1980 the system of kick-backs has cost betwen $10-$20 bn. In 1992 alone it amounted to around 23% of total industrial profits. Direct payments to political parties by business has been estimated at running around $5bn a year, or around 1% of GNP!

The bosses have taken stock of the situation and several times tried to change it. Way back in 1976 the existence of bribery broke to the surface thanks to the revelations of the US press. Lockheed’s bosses had oiled the wheels of the bureaucracy, beginning with government ministers themselves, so as to assure the purchase of their planes for the Italian armed forces. The President of the Republic, Giaovanni Leoni, was obliged to hand in his resignation. But the scandal was contained.

That same year Agnelli, Pirelli and Carli launched an operation to transform the miniscule Republican Party (3% of the votes) into a new modern secular party. But the time had not yet come, for social conflicts where then at a high point and the PCI too was enjoying its highest ever electoral support. Also the bureaucrats in the DC and in the state were difficult to eliminate for “in the course of time they had consolidated themselves and had become transformed into institutional granite.”

Today the situation is more favourable. The USSR is no more and with it has evaporated all the dangers of a Cold War let alone any “sovietisation” of Italy. Even the PCI is only a shadow of its former self, dominated by a new generation of cadres and functionaries who aspire only to get into government. Pushed to do so quickly by the frittering away of its electoral strength, the PCI burned its bridges to its anti-capitalist past in order to become a good social democratic party. It has changed its name, becoming the PDS, and evinces no desire except to slavishly follow the orders of the capitalists.

A second factor pushing the capitalists on is the risk of the public debt getting out of control. The whole inflationary budget served as a way of financing the state expenditure; now it has now reached collosal proportions. The total public debt in 1991 represented 102% of the Gross National Product and the printing necessary to finance even the interest servicing on this debt was 11% of GNP.

This scale of debt crowds out the private sector from the capital markets, boosts inflation, destabilises the lira and, above all, is absolutely incompatible with the criteria of European integration as laid down by the Maastricht Treaty. Not to be part of a future unified EC monetary system would be a grave blow to the Italian bourgeoisie for 60% of its trade is carried out with other countries of the Community.

In this context it is clear that the Italian judiciary is not acting as a power above society but rather as a ruling class tool to carry out serious running repairs on the machinery of state.

The current investigations began in the heart of modern Italy itself, in Milan, the banking and finance capital. The investigation rapidly spread to engulf all the big cities. Soon the entire system was in the dock. Heads of huge companies have spoken out, probably in order to reduce their jail sentences. The bosses know, moreover, that the next government will issue an amnesty and absolve them of all guilt; they have nothing to fear in revealing what they have done.

It is a dangerous game, however. It reveals all the dirty business in which the bosses and politicians were accomplices. There are now 164 Deputies and 78 Senators whose parliamentary immunity from prosecution is under threat. Aside from the bosses of the state industries—the President of the FS (Italian Railways), the President of the ENI and even the chief of IRI itself—the handcuffs are ready for Gardini, ex-boss of Ferruzzi and the top dog of the Italian PDGs. Also at Fiat three top directors are implicated in major corruption.

Once the new government, armed with a new constitution, stabilises it will try and put this painful business behind it and move, with more relish onto the offensive against the workers. A strong executive would seek to continue the work of the Amato government, reaffirming the end to wage indexation, raising the age of retirement from 60 to 65, increasing taxes for the workers and organising a bargain basement sale of state assets.

In reality, there will be no end to corruption or increased power to the citizen. Rather, the neo-liberal politics of Thatcher will reign down on Italy. The workers will be asked to pay for the china broken by the bosses and, through new taxes, replenish the coffers of the state.

There is still some difficulties ahead for the bourgeosie. The machinery for realising all this is not yet ready: the Great Secular Conservative Party is a beautiful project with its name in place—“Alliance For Progress”—but nothing more. In this transition phase, as long as the old DC bureaucrats are still able to hang onto some of their power and are able to try to counter-attack, it is necessary to seek the active support of the ex-PCI, called upon once again to come to the help of the bourgeoisie as in 1943.

Apart from the slender contribution of the bosses of Confindustria the biggest backing for the project of the ten referendums was from the PDS, who collected a large number of the 500,000 signatures necessary to get the referendum on the ballot form. The PDS were ecstatic once again to be in an alliance with the “progressive” sector of the bosses.

Traditionally, the ideological justification for this bloc lay in the supposed need for workers to approach the goal of socialism cautiously and with many detours (stages). Indispensable for the education of workers was an intermediate phase consisting of a democratisation of all society, in the first place of the Christian Democracy. In the words of one of the masters of ideological frippary, Asor Rosa;

“The working class and capitalism still find that there is quite a long period in which they share common interests. Ranged against them will be both privileged and non-privileged parastic layers, the latter not going beyond the sterile and desperate defence of their own interests.”

In place of the “working class” one should read: “bureaucrats of the PC.”, yesterday and today ready to come to power. Thus they do not hesitate to form coalitions even with the Leagues in several local adminstrations in Lombardy. PDS Senator Vincenzo Visco recently pledged himself and his party to do “everything possible to avoid economic collapse” and that this meant backing the privatisation programme for the state owned electricty and insurance companies, more austerity measures and reaffirming the end of wage indexation.

The great wave of strikes that followed last September’s decree against wage indexation and the hostile attack on wage levels met with strong resistance and showed the vitality of the working class. The Italian workers, although betrayed by their trade union leaders, revealed themselves to be the only force in the country capable of stopping the reactionary advance and defending their gains together with all the oppressed layers, the youth, unemployed, the aged, women.

Their reponse was clear: they said “no” to Amato, and they registered a violent protest, on occasion even a physical one, against some trade union bureaucrats. In February 300,000 demonstrated again in Rome, showing unity and the workers’ capacity to fight.

However, despite the sign of revival, the forces opposed to the leaders of the big central trade unions are fragmented as well as politcally and organisationally weak. On one side, Essere Sindicato (ES), an opposition current within the CGIL, shows a great fear in taking coherent and clear positions. It may even split away from the CGIL and form a new union. In addition, there also other small minorities in favour of building a new union from scratch, sometimes with sectarian positions.

There is a serious danger of the wholesale regionalisation and even localisation of the trade unions. These unions may be long on left rhetoric but impotent in fight the new found centralised power of the bosses and their government.

Worse, the wave of industrial unrest was highjacked by the referendum campaign. And the CIGL leadership, influenced by the PDS, were happy for this to happen. The same was essentially true of Refoundation, the so-called left remnant of the ex-PCI. These reformists proposed to make use of the referendum in order to restore the indexation of wages, to guarantee democracy in the unions, and modify the labour code.

It is a dangerous path because it places the destiny of the workers in the hands of a “nation” that produces an atomised vote, one conducted under the influence of a mass media controlled by the bosses. This nourishes crippling illusions in parliamentary institutions, at a time when these institutions stand exposed as maleable putty in the hands of a corrupt bourgeoisie.

At the same time it demobilises the workers in the face of growing unemployment and renewed factory closures. In today’s conditions, dominated by the fragility of the bourgeoisie and its parties, there is only one weapon that the Italian proletariat has to hand and which should be used without any concession: the indefinite general strike, occupation of the factories, workers’ control over production.

Only along this path is it possible to develop the degree of independent organisation that could root out corruption by subjecting it to the scrutiny of workers’ tribunals. Workers should sit in judgement on the polticians and the bosses who have exploited and oppressed them while subjecting them to endless moralising sermons on the virtues and self-sacrifices of civic duty.

If this power were to develop workers could stop the installation of a bonapartist republic in Italy, organise the working class in councils of action and strike out on the road to its own, a workers’, government.

Italy and proportional representation

Proportional representation (PR) was introduced in Italy after the war along with the Republic itself. For twenty years the bosses had not had to think for itself allowing fascism to rule on its behalf. Released from this, the weak and uncertain bourgeoisie, faced with a strong Communist Party opted for PR to try to incorporate the widest possible range of forces from the ruling class.

This system eventually threatened to discredit bourgeois politics entirely, inextricably linked as it was to the system of corruption. The advantages of a first-past-the-post system were clear; first, multi-party coalitions with huge pay-offs to all the smaller parties will no longer be necessary. Corruption will no more be absent than in Britain or France but it will, they hope be kept within limits and below the surface.

Secondly, with a first-past-the-post system one can control the country with a reduced number of votes. The example of the right in France with its 40% of votes and 80% of deputies and of the Thatcher governments in Britain indicate what can be achieved. Like there this system will enable the bosses to carry through their chosen policies—erosion of welfarism, lower wages, financial rigour—all with the backing of a minority of the better-off.

Here then we have the reasons for the highly charged campaign, one hammered home by the major papers. All these are controlled by big money and sang in unison the praises of the method of majority voting: ‘freedom to each citizen, a direct relationship between the citizen and the elected, clarity of choice, stability of governments, transparency of all political life . . . ’.

Those clamouring for change eventually found a politician to give expression to all this, Mario Segni. After decades mired in the corruption of the DC Segni was struck with a vision of his future at the head of a new conservative party. In order to get it he launched a campaign for ten referendums of which nine were just so much window dressing, the only important one being the method of voting in elections.

Segni’s campaign found a receptive audience in the population, increasingly sick of corruption scandals and the endless kaleidoscope of cosmetic cabinet changes.

Under intense pressure 82% of Italians approved this constitutional reform on 18 April.

Of the major parties only the Rifondazione comunista and the fascists called for a no vote on the issue of reforming the electoral system; both rightly fear that their chances of being represented in the Senate would be much reduced if PR was abandoned.

Despite the discrediting of the institutions of the state Rifondazione chose to do its bit to restore their supporters’ illusions in it. Rifondazione played the key role in last autumn’s demonstrations but allowed the mobilisations to be derailed by the referendum campaign Rifondazione then complained about bias in the media for a “Yes” vote. They even petitioned the President: “Honourable President, there was overt propaganda for the “Yes” vote on public television on at least two instances . . . We ask for your intervention which can guarantee institutional correctness.” We can only hope for the sake of Rifondazione that this President at least does not find himself at the centre of the judiciary’s corruption enquiries!

Revolutionaries should have argued for a “No” vote in the referendum. Not because the current system is good but because the first past the post system will guarantee power to a minority administration, an elected dictatorship capable of savage measures while drawing on the active electoral support of the privileged minority. Furthermore, the current system, with all its defects, does allow the real spectrum of political opinion to find its way into parliament including the minority voice of the far left. This can and should be used as a tribune from which to denounce the system, expose its rotten secrets, and call the workers to action.

The Mafia, the state and capitalism

In the popular imagination, corruption means the Mafia. In fact, the two only partially overlap. The Mafia is also involved in legal business while respectable business is up to its elbows in corruption.

The Mafia originated in the south of Italy during the last century when rich landowners were pitted against poor peasants. The former took advantage of a weakly developed state structure and organised their own “bodies of armed men” to act as police, defend their land and cattle against land occupations and cattle rustling. The armed gangs took their new members from the poor peasants. This both divided the peasants against each other and provided an illusion of social mobility for the peasants.

Twentieth century industrialisation witnessed the strengthening of the town over the countryside and mass emigration also weakened the ferociousness of the class struggle in the rural areas. For decades the Mafia was a weakened force.

But in post-war Italy as investment seeped into the south, the Mafia forged a new role for itself. Using their traditional links with the politicians they controlled the running of public works and later credit distribution and access to employment in local councils.

The fusion between organised crime and local government was at its strongest in Sicily. In Palermo, the capital, between 1957 and 1963 80% of building permits were granted to five people, front men for the Mafia cartel which employed 50,000 people in Palermo alone.

In return for these kickbacks, the Mafia can deliver up to 15% of the vote in certain regions for these politicians.

Italian capitalists have been quick to recognise the efficiency of the Mafia and have made lasting links. The big companies are happy to extend the prestige and security that is associated with their own business, allowing the Mafia to escape legal controls. In return the Mafia provide competitive sub-contracting services.

Why are the judges only now showing determination against the Mafia? In part it helps to break up the hegemony of the DC to which it is fused.

Sectors of big business accept that huge parts of the criminal economy (drugs, prostitution, gambling) are outside of their immediate control.

But this empire avoids tax, social security payments and legal controls. Meanwhile, the legal business sector has to pay towards the upkeep of the state As the Mafia spreads its branches too much into the world of “normal capitalism”, the Mafia becomes an unfair competitor. That is why the Italian state has decided to prune back the creeping vine of criminal capitalism.