Fears of an Italian debt crisis are sweeping through financial markets this week, after its two populist parties, which won roughly half the vote in March’s election, failed to form a government that can pass constitutional muster. As a result, Italians will likely head to the polls again later this year in the hopes of electing a government that can resolve the country’s ambivalence towards its place in the Eurozone.
New elections are not good news for supporters of the euro, as the mismatch between the currency and the relatively uncompetitive Italian economy is becoming more salient by the day. “It won’t be an election,” said Matteo Salvini head of the League Party on Sunday. “It will be a referendum between Italy and those on the outside who want us to be a servile, enslaved nation on our knees.”
The Italian electorate’s growing weariness with the European Union is more than understandable. Since the signing of the Maastricht Treaty in 1992, Italy’s per capita income has barely grown at all, and the overall economy is 10 percent smaller than it was a decade ago. Italy’s inability to devalue its own currency, or use significant deficit spending to boost demand, has kept unemployment in the world’s 9th-largest economy at 11 percent, with youth unemployment reaching as high as 35 percent.
Whether or not the Italian government’s/European Union’s failure to provide Italians with basic economic security will lead to Italy leaving the EU remains to be seen. Greece’s experience shows that member countries have become so dependent on European institutions that they can be blackmailed into accepting severe austerity in exchange for avoiding the economic punishment that the global financial system would enact on any country attempting to abandon the euro. But the events of the past week follow a clear pattern of advancing populism and retreating liberalism that should strike fear in the hearts of America’s elite.
As political scientists Jordan Kyle and Yascha Mounk argue, Italy’s recent election should dash any hopes that the country was evolving away from the illiberal, strongman politics of Silvio Berlusconi. The former Prime Minister was forced out of office by the European Central Bank in 2011, in exchange for its help quelling a run on Italian government debt. “Populism, it turns out, has staying power,” Kyle and Mounk write. As the resurgence of populist parties show,” the assumption that [populism] somehow leaves the political stage when its most prominent practitioner is repudiated at the polls, or even punished in a court of law, is wrong. Even when they lose elections, they can continue to sow chaos and instability. And even when a particular populist movement crumbles, other politicians can build on its success.”
The United States is heading towards an election cycle in which Trumpian populism will likely take a beating, but the Italian example argues against the idea that Trumpism is a flash in the pan. That’s because all of the problems which gave to Trump’s rise, like the changing racial makeup of the country, rising economic inequality and insecurity, and the growing power of undemocratic institutions have only gotten worse as time goes on.
In fact, there are feedback loops that continue to exacerbate and accelerate the growth of these problems. Take, for instance, the growth in power of bureaucratic institutions at the expense of democratic ones. The Federal Reserve has been the most effective government institution at fighting the ravages of the financial crisis. Relatively insulated from the vicissitudes of public opinion, the Fed has mounted an aggressive campaign of bond buying to lower interest rates and unemployment, and its efforts have been a success. But this freedom from the paralysis of democratic gridlock has also made it appear unduly powerful and made it a prime target for populists on the left and the right.
The Italian experience shows just how empty the promises of populism are. The Five Star Movement, which was the leading party in March’s election with 33 percent of the vote, has attacked the EU relentlessly without presenting a plan for how Italy can extricate itself from it, without sparking an economic crisis worse than its already in. The disease of populism will produce different symptoms in the American government, which, in order to function, demands compromise and sacrifice to the greater good.
But in today’s America, politicians are punished severely when they prioritize the functioning of the overall system over their own political ideals, because populists have effectively portrayed such actions as corrupt rather than high-minded. There are no signs of this attitude retreating, whether in Democratic primaries (where senators are pilloried for consenting to any Trump cabinet picks), or in GOP house conference (which can’t agree on a farm bill because it’s not ideologically pure enough for its most conservative members.)
Donald Trump has made enough mistakes, politically and legally, that it's probably safe to bet that he’s not in office after the year 2020. But populism in the Trumpian mold is just getting started, and the architecture of the American government may not be designed to survive it.
Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.