Print Friendly and PDF
only search openDemocracy.net

Corruption in Italy: a resilient equilibrium

Corruption in Italy is a well-established fact. Combined pressure from internal and external sources might perhaps be able to achieve what the Italian political system seems incapable of: a shift to a low-corruption equilibrium.

That corruption is widespread in Italy is a well-established fact. Its harmful effects on public finances, SMEs, the quality of public investments, productivity, and trust in the country’s institutions increases informality in the economy. This vicious cycle tends to keep corruption in Italy at a high level.

Nadia Fiorino, Emma Galli and Ilaria Petrarca have all shown that corruption in Italy is negatively correlated with economic growth for the period between 1980-2004. According to Fabio Monteduro, if Italy had corruption scores similar to those of relatively more virtuous countries, its economy would have grown two to three times faster than it has. In addition, as Figure 1 indicates, citizens tend to show a lower level of satisfaction with democracy in countries where parties rely more heavily on clientelistic strategies.

Figure 1: Relationship between clientelism and satisfaction with democracy in selected countries 

Contrary to conventional wisdom, corruption in Italy does not seem to be a cultural issue. According to the latest survey by Eurobarometer, shown in Figure 2 below, Italian respondents are consistently below the EU average in deeming corrupt practices acceptable.

Figure 2: Percentage of respondents finding corruption practices acceptable when dealing with their countrys public administration 

A similar pattern emerges from an indicator of ‘civicness’, for example with election turnout figures. In Italy election turnout has constantly been high for national, local, and European elections. Figure 3 shows voting trends for the European Parliament,. These elections have historically been less influenced by voters’ attribution of blame for their socio-economic conditions and consequently are more likely to serve as an indicator of ‘civicness’. Whilst all countries’ in Figure 3 show negative trends, Italy’s turnout still stands out as especially so.

Figure 3: Trend of turnout in European Parliament elections in selected EU countries 

 

When comparing two Italian regions normally viewed as opposite extremes in terms of social capital (Emilia Romagna and Calabria), we can see that their trends in voter turnout in regional elections have both been negative, with Emilia Romagna showing an accelerating trend in Figure 4.

Figure 4: Trends in turnout in regional elections in Emilia Romagna and Calabria 

Whilst the diffusion of corruption is well established, less well known is that Italy exhibits remarkably little determination in fighting it. Why this is so is as unsettling a question as it is underexplored. Our tentative answer is based on the hypothesis that the diffusion of corruption – which we define broadly as the use of public office for private gain – is an equilibrium outcome.

Based on literature that originated from Seymour Martin Lipset, any rational agent when pondering whether or not to offer (or accept) a bribe makes a cost-benefit analysis: the cost of being caught and punished versus the benefit of corruption.

The latter depends on a number of factors; a large public administration with relatively low-paid civil servants; a highly regulated public sector,;fast-changing legislation,; a lack of firewalls between politics and businesses; low social cohesion, or social and political fragmentation, and economic inequality; oligopolistic markets and finally amoral familism.

This analysis depends on the level of effectiveness of the judicial system and the special protection treatment provided to those who report such cases. We argue that Italy carries most of the above-mentioned characteristics that tip the balance towards the benefit side of corruption. Furthermore, during the 1990s in Italy there was a sudden retrenchment of the public sector, which, following the same logic that existed in the former socialist bloc, gave rise to more cases of corruption linked to privatisation and a shrinking fiscal space.

As Figure 5 below shows the percentage of citizens in Italy who think it is likely that corruption will be punished is lower than the EU average for both general and petty corruption.

Figure 5: Likelihood of being punished for general and petty corruption in France, Germany and Italy 

On the cost side of the analysis, the judicial system in Italy is characterised by relatively limited (financial and human) resources and inefficiencies, as the tables in Figure 6 show below.

Figure 6: Characteristics of the judicial system in Italy 

 As a result of the inefficiencies of the judicial system amongst other factors, the levels of corruption-related crimes reported to the authority are the lowest of all types of crimes. Official data published by the national statistical office shows that the number of convictions per year declined by a factor of 14 between 1996 and 2012.

As a result, in 2010 both Italy and Finland - the third least corrupt country in the world, according to Transparency International’s latest data, and the second ‘cleanest’ in Europe - opened the same number of corruption investigations in per-capita terms this was 0.4 per 100,000 inhabitants. Alberto Vannucci, a political scientist who wrote extensively on corruption recently noted that the number of convictions is also similar. This strongly suggests that Italy’s current system to combat corruption is gravely inadequate. The Table below illustrates this picture.

Table: Adults subject to investigations from judicial authority by committed crime (per 100,000 inhabitants) 

On the public opinion side of the analysis Figures 7 below illustrates businesses’ and citizens’ opinions concerning some of the points mentioned above.

Figure 7. To what extent are the following issues a problem in doing business? 

Figure 8: Citizens views on the system being unfair in selected countries (percentage who believe statement to be true)

 

 Between 1992–94 a series of investigations unveiled deeply entrenched corruption in many areas of the public sector. For example, it emerged that almost every contract made by the public agency in charge of roads during the previous two decades was tainted by corruption, through a well-organised cartel among infrastructure companies that had entirely superseded the official public procurement system.

The investigations, which came to be known as ‘Mani Pulite’ (Clean Hands), unfolded during a period of economic crisis and budget consolidation. Its political effects remain unprecedented in post-war Europe. Besides sending much of Italy’s political establishment to trial, the investigations provoked a wave of popular indignation that caused the sudden extinction of the five political parties that had governed the country since 1946 and led to the birth of what came to be known as the ‘Second Republic’. Elections held in 1994 marked the rise of a fresh political establishment and the emergence of a roughly bipolar political system, which recently seems to have morphed into a more complex and fluid system.

In the course of the following two decades, however, corruption rose again. Figure 8, above, is drawn from the World Bank Institute’s Worldwide Governance Indicators and measures perceptions of corruption. Given the characteristics of this phenomenon, perceptions are generally regarded – including by Italy’s anti-corruption agency (see this methodological study, in Italian, and this interview) – as a reasonable proxy for its actual diffusion.Figure 9 shows corruption cases per 100,000 inhabitants.

Figure 9: Corruption crimes per 100,000 inhabitants 

Figure 10: Group trends in the perceived control of corruption  

Both figures 8 and 9 show specular trends of a reduction in corruption cases and a parallel improvement of the corruption indicator by the late 1990s. This,was followed, however, by a reversing of the trend. Indeed, since 2000 the gap has almost trebled leaving Italy with levels of perceived corruption typical of Eastern European middle-income transition countries.

These findings are corroborated by a plethora of resources. Opinion surveys, such as those conducted by Eurobarometer; Transparency International’s latest Corruption Perceptions Index, published last December and therefore not included in the indicator shown in Figure 9, which identifies Italy as the EU’s most corrupt country, together with Bulgaria, Greece and Romania; official reports, such as those of Italy’s supreme audit institution and those of the European Commission and by the ample anecdotal evidence offered by the corruption scandals that have marked the past two decades.

Interestingly and in line with Lipset’s hypothesis, at the regional level corruption cases are consistently higher in Lazio, Rome’s region, where all national ministries and agencies are located, and lowest in Emilia Romagna, the region studied in depth by Putnam (1993) for its high level of social capital.

How, then, can the trend depicted by Figure 10 be explained? Control of corruption depends on several mutually influencing variables, which include slow-moving factors such as social norms on the acceptability of bribery. Among these variables are the adequacy and efficacy of the legislative instruments used to repress and deter corruption which influence the cost-benefit analysis that corruption entails. These variables determine the probability of being caught and the severity of the consequences. As these variables are relatively easy to measure and largely determined by political choices we shall focus on them.

'Wake up Italy' graffiti in Venice. Flickr. Public domain.

The criminological and politico-economic literature shows that since 1994 Italy’s parliament has adopted a succession of laws that have had the effect - and sometimes the explicit purpose - of weakening the fight against corruption. In particular, parliament has cut the statute of limitations by half, leading many investigations to collapse or never to be opened; has complicated the procedural rules, allowing wider space for delaying tactics aimed precisely at benefiting from the statute of limitations; has restricted the means of evidence that prosecutors can employ; has effectively de-penalised certain more easily detectable crimes that are typically ancillary to corruption and can therefore signal it (the falsification of a company’s accounts, primarily, which is necessary to create the slush funds out of which bribes can be paid) and has continued the practice of entrusting large public works to private ‘general contractors’which spend public money under false auspices.

This succession of laws was interrupted only in 2012, under a technocratic government, when parliament eventually passed an anti-corruption law. Yet even this law is widely regarded as weak, primarily because it failed to reverse any of the legislative choices already enacted.

In parallel to this legislative policy the number of corruption investigations and convictions declined sharply, as noted above. This decline is probably one cause of the rise in corruption over the past two decades, and it is equally as plausible that the succession of laws mentioned above is one important cause of the reduced effectiveness of the fight against corruption. So there is very likely a causal link between those legislative choices and the rise of corruption. If this was their effect, however, why were such laws adopted and never reversed and how could the political élite get away with it?

The fight against corruption was often high on the political agenda during the past two decades. The political system that emerged after the 1992–94 investigations declared its full support for the repression of corruption and initially hailed the prosecutors conducting it. Once the leader of the main centre-right party (Silvio Berlusconi) became involved in some investigations, howeverm the position of that party changed: most of the laws we mentioned above were adopted by parliamentary majorities controlled by it, especially during the 2001–6 legislature.

Its centre-left opponents vehemently criticised those laws but when they were in government they failed to reverse any of them, even adding a few equally damaging ones. They effectively did nothing to strengthen the fight against corruption. The electorate has punished neither of the two coalitions for these choices, even though segments of public opinion vocally denounced them.

The change in circumstances of a rather prominent target of the 1992–94 corruption investigations – one Gianstefano Frigerio, then a member of parliament for the party (Christian Democrats) that had governed Italy since 1946 – can serve as an illustration of this evolution. Between 1992–94, four separate corruption trials were opened against him. One collapsed due to the statute of limitations, but in the other three he was found guilty. In 2001, when these convictions were confirmed in a third instance and became final, he was elected to parliament again, in the ranks of the centre-right party.

Frigerio obtained a reduction of the six-year jail sentence. The sentence was then converted into a social work order where his public service as a parliamentarian was accepted as social work. He effectively, therefore, served his sentence by sitting in parliament for a legislature, from which he emerged as a free citizen. In July 2014 Frigerio was arrested again. He was accused of having acted as a mediator – together with another veteran of the 1992–94 investigations, a former member of the main opponent of the Christian Democrats, the Communist party – in a wide corruption scheme concerning the public works for the universal exposition that opens in May in Milan (‘Expo’, whose direct cost to the public purse, narrowly defined, approaches €2 billion).

This case is likely not unique and Frigerio is still  presumed innocent for this last episode. If we assume, however, for the sake of argument, that the charges are well founded, then the story seems straightforward: if Frigerio could become a legislator right after having been found guilty of corruption and could serve his sentence by making laws for five years (including several laws weakening the repression of corruption), it is hardly surprising that he would continue a profitable practice that society and the political system evidently tolerate and that the legal system effectively failed to punish.

If we move from the hypothesis that corruption is an equilibrium outcome these apparently puzzling facts find a rather simple explanation. Where corruption is systemic, rarely punished and supported by tolerant social norms, it becomes individually rational to engage in it. Even if at a macro level corruption is inefficient: it is a rational choice not just for the companies and public officials that directly profit from it, but also for the ordinary citizens who resort to petty corruption to solve the everyday problems that an inefficient public administration creates.

This, in turn, creates an adverse selection system in the sectors where corruption is widespread: corrupt companies, civil servants and politicians prosper, whereas ‘clean’ ones are at a disadvantage and are gradually marginalised. As these phenomena become entrenched and expand into other areas of the public sector, the combined economic, social and political power of the groups that engage in corruption rise, further reinforcing the system. Thus the resulting equilibrium is stable and resilient.

It follows, therefore, that a government wishing to shift the country from such an equilibrium to a low-corruption one faces a difficult and long-term struggle because the means at its direct disposal – strengthening the laws and the law enforcement system – are not sufficient. Furthermore, social norms and agents’ expectations need to change. If they do not, the equilibrium will eventually absorb the shock, adjust, and re-establish itself (the personal story we just described illustrates this dynamic rather well).

This, indeed, is probably what has happened during the past two decades. The period between 1992–94 was an unplanned, episodic shock: a severe one, no doubt, but one that was not part of a deliberate, clear and credible political strategy to shift the country to a low-corruption equilibrium. The resilience of the existing equilibrium – due not just to the social norms and individual incentives supporting it, but also to the political and economic power of the groups benefiting from it – was such that it prevented the emergence of such a strategy.

Social norms and individual incentives and expectations, therefore, did not change. The shock could be absorbed and even the governments and political forces that could have benefited from fighting corruption declined to do so. On the one hand because of the difficulty of the enterprise, whose time horizon exceeds the political cycle, and on the other because of the strength of the vested interest opposing such policies. Thus the rise of corruption measured – with a short time lag, presumably – by figures 8 and 9, for the equilibrium, is not static. Rather it is dynamic and corruption is a pervasive, self-replicating phenomenon.

The current parliament has been discussing a set of anti-corruption measures for more than two years. The drafts underwent successive changes, alternatively weakening and strengthening them. Besides genuine debate about the merits of these measures, this back-and-forth probably also reflects an underlying struggle between forces favouring the fight against corruption and vested interests opposing it. The current government, which relies on a broad parliamentary coalition, has not yet taken decisive action in one or direction or the other. It is likely that these laws will be adopted and that they will somewhat strengthen the fight against corruption (one law on money laundering has already been approved). Yet they are unlikely to establish a truly effective system to prevent and punish it.

Above all, the political system has not yet sent to Italian society a sufficiently credible signal that it intends to shift the country to a low-corruption equilibrium. Without such a signal it is unlikely that social norms and individual incentives and expectations will begin to change. It is therefore likely that the existing equilibrium shall persist, despite its very harmful effects on economic productivity, public finances and social cohesion.

If, as seems to be the case, the political system alone is unable to begin that shift, the reduction of corruption to physiological levels will depend on either a change in social norms, which education and public debate might induce, or on pressure from the electorate. A spontaneous change in social norms under the existing equilibrium is a long-term prospect, however, and citizens face severe collective action problems.

Collective action is not impossible, however. For example, in 1991 a broad movement succeeded in tabling and winning a referendum to change one aspect of the electoral law. The parallel is imperfect, of course, and the social and political conditions that exist today are different, but that such a movement could mobilise vast numbers of citizens and civil society organisations, despite the explicit and determined opposition of much of the political system, gives hope. Opposition against a hypothetical anti-corruption movement would probably have to be subtle, however, and would therefore be less effective, which is a further positive.

Furthermore, a hypothetical anti-corruption movement in Italy might be able to receive support from abroad, if its domestic roots were sufficiently deep and widespread to lend the necessary credibility to it. Indeed, if it is true that Italy’s high debt-to-GDP ratio is the gravest threat to the survival of the euro (and, therefore, also of the European Union), and if it is true that corruption weighs heavily on both the numerator and the denominator of that calculation,  it ought to follow that it would be in the interest of every European to assist Italy in reducing corruption to levels typical of its Eurozone and OECD peers.

So combined pressure from below and from outside, within the framework of an open and reasonable public debate, might perhaps be able to achieve what the Italian political system seems now incapable of: a shift to a low-corruption equilibrium.

If you enjoyed this article then please consider liking Can Europe Make it? on Facebook and following us on Twitter @oD_Europe

About the authors

Andrea Lorenzo Capussela has a PhD on competition policy. After a few years in the private sector, he served as the head of the economics unit of Kosovo’s international supervisor, the International Civilian Office, in 2008–11, and as the adviser to Moldova’s economy minister and deputy prime minister, on behalf of the EU. He then took a sabbatical period, during which he wrote one book (State-building in Kosovo: Democracy, Corruption and the EU in the Balkans, I.B. Tauris: London, 2015), is conducting research on another one, and is doing some voluntary work on the development of a district in Calabria.

Vito Intini has conducted post-graduate studies in several economic fields and has worked for different research and development institutions, in Italy and abroad.

Subjects


We encourage anyone to comment, please consult the
oD commenting guidelines if you have any questions.