Monday, December 5, 2016

Analysis of Italy’s 2016 Referendum: Beyond the Euro and the E.U.

The predominate axis of analysis in the wake of the Italian referendum in early December, 2016 centered on the euro, the federal currency of the European Union. For example, an article in The Wall Street Journal begins with the following: “Sunday’s referendum vote in Italy reinforced a widening split between the economics needed to sustain Europe’s common currency and the continent’s rising tide of populism.”[1] At the time, however, the populism in the E.U.’s states had more to do with immigration than the federal currency. Even so, analysts predicted that Italian parties antagonistic to the currency could be expected to benefit. Stephen Gallo at BMO Financial Group went so far as to claim, “Eurozone breakup risks are rising,” given “the political currents at work in the Eurozone.”[2] Although he makes a good observation in noting the lack of a political will in the States “to finish building the missing architecture of the single currency area”—implying that the underpinnings of the euro were inherently unstable—he overlooked the matter of the distribution of wealth, and in particular the element of fairness, which I submit is salient in the Italians’ ‘No’ vote as well as in the rising anti-establishment, or shall we say, anti-elite, populism of the day.
The constitutional changes proposed in the referendum were “aimed at streamlining lawmaking and boosting competitiveness”[3] Whereas The Wall Street Journal adds that the ‘No’ vote marked “a sobering start to a defining year ahead for the European Union,” I submit that the pro-business nature of the proposed changes is more salient.[4] Mateo Renzi, Italy’s prime minister who resigned after the vote, had argued in defense of the changes that Italy needed to be more competitive by making it easier for companies to do business there.[5] Translation: the changes would have enriched businesses in the State. To be sure, boosting the State’s economic output would have positively impacted the euro’s underlying stability as well as that of the Union itself. Even so, it is interesting to contrast the pro-business impact of the proposed reforms with the populist, or antiestablishment 5-Star Movement party’s platform’s proposed income guarantees for all Italians.[6] The contrast gets to the real meaning of populism—the populous, or people, as distinct from the mutual-reinforcing economic and political elites. In this light, the resounding 60% ‘No’ vote can be understood as a rejection of the mutual-reinforcing dynamic as well as the increasing concentration of wealth rather than as being primarily about the euro or even the E.U. If so, the question is whether such populism can concentrate enough power of its own to overcome the resistance/power of the financial and political elite. In other words, can populism result in a wholesale change in the political elite when so much money funnels in from the business world. This is a question for every republic, rather than just for E.U. states that use the euro currency.

1. Stephen Fidler, “Italy’s ‘No’ Opens Harrowing Year for EU,” The Wall Street Journal, December 5, 2016.
2. Jon Sindreu, “Euro Falls as Italian Reject Renzi’s Changes,” The Wall Street Journal, December 5, 2016.
3. Fidler, “Italy’s ‘No’.”
4. Ibid.
5. Ibid.
6. Ibid.