The cavaliere and the cavallo

The symptom, not the cause

WHAT DO THE following countries have in common: Madagascar, Bahamas, Kiribati, Togo, Brunei, Saint Kitts and Nevis, Central African Republic, Haiti, Côte d'Ivoire, Liberia, Eritrea and Zimbabwe? Their economies all performed worse than Italy's over the past decade in terms of growth per person. This is not the sort of company that Italy is accustomed to keeping, but unless it can shake off its torpor it may have to get used to such unflattering comparisons.

Silvio Berlusconi has been the dominant figure in Italian politics for 17 years, more than a tenth of Italy's life as a nation. To attribute too much praise or blame to him for the state of Italy today is to exaggerate the power of one man, even a billionaire who has used his money to create his own political party, reached the country's highest elected office and then used it to preserve his interests. If Italy is a patient with some peculiar complaints, Mr Berlusconi is more symptom than cause. Still, to some extent he has shaped the country in his image. Though he jokes about living until well past 100, at 74 he is now in the twilight of his political career. He recently hinted that he will stand down in 2013. What will he leave behind?

When he first became prime minister in 1994 his pitch was simple. He would use his entrepreneurial skills to get Italy moving again, and he would inspire by his own example: the hard-working boy who excelled at his legal studies and built a commercial empire, proving that the American dream could come true in Italy. “When my morale is low, I put my hands in my pockets and go for a walk in Milano 2 [one of his property developments],” Mr Berlusconi once told an interviewer. “I remember how many people were against me…Theirs was a political and bureaucratic machine perfectly designed to impede, to prohibit, to delay and to hinder.”

There is a positive side to all these omissions: Italy's recent underperformance leaves room for a vast improvement with a relatively small amount of effort

Italy's poor economic performance is sufficient evidence of his failure to sweep away that machine. With hindsight it is clear that he never intended to do so. On the way up, Mr Berlusconi was too big a beneficiary of political and bureaucratic cronyism to regard it as his enemy: the key change to the law that allowed his television network to broadcast nationwide was made by Bettino Craxi, a former prime minister who was also godfather to one of Mr Berlusconi's children. The prime minister has proved repeatedly that he is not an economic liberal.

He has, however, been assiduous in carrying out the second part of his promise: inspiration by example. In 2001 “An Italian Story”, a short hagiography of Mr Berlusconi, was distributed to 15m homes. The hero of this tale is a brilliant businessman and good family man who came from nowhere to achieve great success and is now determined to give something back to his country.

Despite all his trials for bribery and fraud, as well as the one currently in progress for paying an underage prostitute for sex, about 30% of Italy's electorate still support him. They are disproportionately old and female and live in small towns, according to Nando Pagnoncelli of Ipsos MORI, a polling company. They watch a lot of television but do not read newspapers. Many of them do not believe there is any truth in the accusations against the prime minister.

In government Mr Berlusconi's achievements have been unimpressive, given the power he has enjoyed. One reason for this is that business interests and legal troubles have absorbed his energies and distracted the government. In local polls in Milan and Naples last month Mr Berlusconi's party performed abysmally. The decline is his ratings reflects a widespread view that a politician who once claimed to be able to cut through bureaucracy and get things done is now bogged down in a personal battle with the courts which has turned into an obsession for him. His approval ratings rose after an earthquake in L'Aquila two years ago which he was seen to have handled well, but then tumbled when the promised action did not materialise. The town centre there is still barred to property owners and residents. Contracts for making the buildings safe are, not surprisingly, being handed out without competition. Mr Berlusconi's generous personal gift of cash to L'Aquila's rugby club has not atoned for this.

It was, though, characteristic of Mr Berlusconi's style of government. On a recent visit to Lampedusa, the island overwhelmed by the arrival of North African refugees, he declared that the parched outcrop would become a new Capri and announced he would buy a villa there. “Berlusconi is pathologically inclined to please other people; he needs their affection,” says Giuliano Ferrara, editor of Il Foglio (funded by Mr Berlusconi), presenter of a talk-show on RAI and briefly a cabinet minister under Mr Berlusconi. “He needs to come to terms with this with his analyst.” This streak affects the way decisions are made. “Berlusconi says yes to everything and then Tremonti [the finance minister] says no,” says another former cabinet minister, who thinks Mr Berlusconi has damaged Italy but nevertheless describes him as “charming, magnetic, one of the most intelligent people I have met”.

The fundamental defect of Mr Berlusconi's governing style is that he often confuses private interests with public ones. This is most obvious when using the power of his office to protect himself from foreign competitors to his business or from prosecutors (some years ago he took this newspaper to court for publishing an investigation into some of his business dealings). But it has also defined Italy's recent foreign policy. As the leading western European provider of blue helmets to UN peacekeeping operations, Italy has a good story to tell, but Italy's two most distinctive positions in recent years have been determined by Mr Berlusconi's friendships. Italy long offered unquestioning support for Muammar Qaddafi in Libya. It has now changed tack, but Mr Berlusconi has said in private that he is “mourning” for Colonel Qaddafi. Italy has also taken an odd stance towards Russia, taking every opportunity to stand up for Mr Berlusconi's friend and fellow prime minister, Vladimir Putin. “Even the foreign minister admits to wielding no influence on Berlusconi on Russia,” wrote the author of the cables sent from America's embassy in Rome and published on WikiLeaks last year.

In all, Mr Berlusconi's legacy will be the further weakening of institutions that were not strong to begin with, and an even greater tolerance for damaging conflicts of interest. Fifteen years of verbal assaults on Italy's courts have left many people believing that the legal system is a conspiracy of diehard leftists trying to undermine the government. Mr Berlusconi and his supporters have buttressed these attacks by falsely claiming that he has never been convicted of anything and that he was never in any trouble with the courts before he went into politics. In 1990 Mr Berlusconi was convicted of lying in court but avoided jail on a technicality. On several occasions since then he has been saved by time limits on prosecutions. Meanwhile the difficult reforms required to make Italy grow have been put aside.

There is a positive side to all these omissions: Italy's recent underperformance leaves room for a vast improvement with a relatively small amount of effort. Most of the reforms that the country needs to introduce in order to get going again are tweaks to microeconomic policy that would not cost much. Reforming the labour laws would be a good place to start. In their book “A New Contract for All”, Tito Boeri and Pietro Garibaldi have outlined how this might be done: by creating a single contract for all workers, with privileges increasing in stages. The European Commission and its single-market directives provide plenty of political cover for Italy to push towards greater liberalisation. Politicians should make the most of it. Who knows, one day voters might even reward them for being brave.

Such reforms would be resisted by the little guilds of workers, but change is not impossible, as has been shown by a series of pension reforms introduced by governments of various stripes between 1992 and 2009. They are considered a model for the rest of Europe, raising the retirement age and indexing it to life expectancy. Italy's expenditure on pensions will soon start to shrink from its current high. The European Commission expects the country's pensions spending as a proportion of GDP to fall by 0.4% between 2009 and 2060, whereas expenditure in the euro area as a whole will rise by 2.7% of GDP.

Likewise, by driving so many of its brightest and best abroad, Italy has created a precious resource of émigrés with useful experience who could have a huge effect on national life if they returned. A small town called Catanzaro in Calabria, Italy's most benighted province, recently witnessed a fascinating mayoral campaign that pitted a 27-year-old called Salvatore Scalzo, returned to Italy after studying international relations in the Netherlands and briefly working at the European Commission in Brussels, against 64-year-old Michele Traversa of the PdL. Though he lost by a wide margin, Mr Scalzo (whose surname means “barefoot”, prompting headlines about “the barefoot candidate”) shook up a place not renowned for its competitive politics by relentlessly campaigning on Twitter and Facebook and fund-raising online. If the barefoot effect were multiplied a few thousand times, it would test Italy's resistance to change.

For all its quirks, though, there is much that is admirable about Italy. It is a rich, peaceful, civilised country that does not feel like a place in crisis. Its president, Giorgio Napolitano, manages to float serenely above the political turmoil and use his largely honorary office to rein in some of the more outrageous antics of elected politicians. Its constitution has stood up surprisingly well under bombardment. The Bank of Italy is a great institution in a country with few of them. Its boss, Mario Draghi, should make a fine leader of the European Central Bank. Italy has many brave anti-mafia campaigners who have risked their lives to keep an old Italian tradition of civic activism alive. And as 42m foreign tourists a year can attest, it is a lovely place to visit.

In its short life as a nation Italy has already rebuilt itself several times. For the past few decades, though, it has been living on the afterglow of an economic miracle that came to an end in the 1970s. It could continue like this more or less indefinitely, steadily growing poorer and older but still managing quite comfortably. For the moment this seems the most likely thing to happen. But the country is overdue another reawakening like the one that led to unification 150 years ago.