Workers against Wall Street

President Obama’s “shock and awe” statism is failing. On the eve of the midterm elections, the US ec

Gary, Indiana

We're hurtling through downtown Gary at about 75 miles an hour but Officer Lilley, at the wheel of our car, remains relaxed. He's telling me languid stories about the AK-47s that the local teenagers carry, about the gangs, the drugs, the overtime. Then the city's "shot spotter" pings an alert on to his laptop, which is wedged right next to the handbrake.

He mutters a call for assistance into his radio and swings the police car on to the forecourt of a gas station where about 30 people are running, pointing, strung out, screaming recriminations. There's been a fight, but the fighters are gone, as is the kid who decided to let off his pistol. Nobody is dead. Everybody is shouting into the face of Officer Lilley, a black cop in a black crowd, who simply drawls soothing phrases back at them.

Eventually seven police cars arrive and the cops fan out to disperse the crowd of onlookers, many of whom they seem to know by name. Two years ago there were times when the city could field only five cars in total on a night shift, but federal dollars have paid for 96 new vehicles and allowed Gary Police to re-employ 11 laid-off officers. This short, sharp exercise in armed social work is possible only because of the fiscal stimulus.

Gary is a city where 84 per cent of the population is black and one-third of the people live in poverty. It is one of the most obvious places on earth where an influx of taxpayer dollars might do some good. It has 3,000 abandoned homes and a decaying infrastructure, and its public finances stand two years away from bankruptcy. Yet what is obvious, amid these wrecked streets and impoverished lives, is how little the stimulus has achieved.

Gary's urban texture - grass and ivy over broken concrete - is testimony to what happens when an economic model fails. In its deserted downtown district, the churches, the concert hall, the theatre, the ballet studio, the Gothic apartments from whose windows steel magnates once surveyed the city's pulsating wealth, stand ruined, unsecured against intruders.

Though atypical of America, Gary's broken landscape is spectacularly typical of what has gone wrong in the country at large. Its meagre progress, two years into the Obama administration, signals the president's failure to solve America's most basic problems and to deliver to the very people whose votes put him in the White House.

The problem for America today is that another economic model has failed: one based on globalisation, cheap credit, home ownership and mass consumption. Six million Americans have fallen below the poverty line since December 2007. The median income has fallen by 4.7 per cent. In the same period, more than 2.5 million homes have been repossessed. And that only compounds the long-term problems America hid beneath the financial euphoria of the boom years - but average real wages have stagnated since the 1990s; the number without health insurance has grown by ten million in a decade and stands at 50 million.

The most basic problem is this: in a system based on credit, the credit system is not functioning. It's easy to spot the malfunction in a city like Gary: I saw one home for sale at $7,900 cash, the scrawled street-corner placard adding, by way of explanation, the word "Foreclosure". The only part of the credit system that does function is the destructive part; the "payday loans" store on Gary's main street is the only thing left with working neon signs. Most of the other shops are closed for good.

With a swollen mass of people unable to borrow, save or spend, the great dynamo of the world economy - American consumption - is sputtering. And the stimulus has not yet managed to restart it.

Eighteen months ago, the mayor of Gary, Rudy Clay, told me that all the city needed was $400m. With that, said the dapper veteran of the civil rights movement, Gary would "fly like an eagle and once again make America proud". In the event, the city was given just $266m - most of that earmarked for education - and for spending not on current costs, but on reorganisation.

Of the $24m Clay applied for to knock down derelict homes, $2m was delivered - and most of the buildings are still standing. It took 18 months for the money to pay for new streetlights to filter through the system. And, with $266m, Gary has managed to create the grand total of 327 jobs. That is more than $800,000 per job.

“We were last in line," Clay complains. "We keep pressing the State of Indiana for more money - to fix our roads, for example - but the problem is they spent all the money. They probably thought, 'Well, Gary voted in large numbers for the president, so the president can take care of them.'" A glance at the city's finances reveals a more complex picture. Its financial controls are archaic, its debts to other agencies high; and its tax base is heavily dependent on one source - a property tax that brings in 80 per cent of Gary's revenue.

In 2008 the Republican-controlled state government of Indiana brought in tax-capping measures that will, by 2012, halve the amount of property tax Gary can collect. While richer, whiter counties surrounding Gary have their own local income taxes, Gary does not - for the simple reason that there is very little income to tax. Within this system, redistribution is impossible unless the state and federal governments make it happen.

But that is where Gary's problems run into the culture war that has gripped America.The governor of Indiana is Mitch Daniels, a fiscal conservative who has made his reputation by balancing the state's books, privatising Indiana's major roads system in the process. Daniels - unlike some other Republican governors - agreed to accept the fiscal stimulus money, but on condition that the state retained control. He then decreed that the stimulus could not be used to fix the balance sheets of near-bankrupt city governments like Gary. Only major, one-off projects would receive federal dollars.

So, in the midst of the largest fiscal stimulus since the Second World War, one of America's poorest cities is being forced to cut taxes and cut spending. By 2012 its entire tax take will not be enough to cover the police, fire and ambulance services. Officer Lilley and his colleagues know that all the problems that fuel the crime - drugs, truancy, poor housing, unemployment - will remain unaddressed.

President Obama's stimulus was formulated with high hopes: two-thirds of the $787bn spent would be delivered not through the Bush-era mechanism of tax cuts, but through the overtly Keynesian channel of public spending. Jared Bernstein and Christina Romer, economists on Obama's transition team, predicted in January 2009 that the stimulus money would "create three to four million jobs" by the end of 2010, 90 per cent of them in the private sector. They projected that unemployment would peak at just 8 per cent in 2009.

The Romer/Bernstein forecast, like much of the Obama stimulus plan, was a triumph of optimism. Unemployment reached 10 per cent a year ago and has not been below 9.5 per cent since, even with the stimulus. Private-sector employment has shrunk. The money has been spent, but the jobs and growth did not follow.

The paucity of achievement is all the more remarkable given that, two months after the Romer/Bernstein report was published, the Federal Reserve was forced to launch its own, much bigger monetary stimulus package, known as quantitative easing (QE). By printing money and using it to buy a mixture of bank and government debt, the Fed pumped $1.75trn into the US economy.

Yet the combined results are poor. Growth is slowing. The threat of deflation is so clear that the Federal Reserve will, on the morrow of the midterm elections, be forced to throw several hundred billions more into QE.

In the housing market, there is already a double dip. Even with mortgage interest rates cut to their lowest ever, the sheer volume of un-sold properties - 1.5 million empty and a further five million trapped in a "shadow" market - has begun to push house prices down again. The banking sector has begun to shudder in turn at the prospect of another round of mortgage losses.

It is this tangible failure of economic strategy that is sapping the energy and credibility of the Obama administration. It has provided the American right with a convincing narrative to unite the plebeian conservative and "coastal elite" strands of Republicanism.

Governor Daniels, a mainstream Republican who is being tipped as the man to run against Obama in 2012, calls Obama's policy "shock and awe statism". But the real shock is how little has been achieved. Statewide, the whole of Indiana has managed to spend $4bn of stimulus money to create 10,000 jobs.

“It's not enough," the governor says, "and I would caution you that while I know the $4bn is real, I cannot say the same about the 10,000 jobs. We just don't know. They [the federal government] don't know."

Nationally, he says, "We've had this perverse outcome in which the private sector has continued to shrink and the public sector has gotten bigger. Frankly, it looks more like a way to take care of favoured constituencies than an economic policy."

So, for the mainstream American right, what explains the failure of the Obama stimulus is "crowding out": it is the size of the state that has prevented the private sector from responding to the crisis with fresh hiring and company start-ups. In addition, consistently large majorities polled by the Pew Research Centre believe that state intervention has benefited the banks and large corporations only - leaving the middle class, the poor and small businesses to rot. Finally, there is a growing fear that the size of the budget deficit will drag the United States into penury. Daniels tells me that the country faces a "survival-level threat".

It is in this context that the narrative of the Tea Party movement has emerged. And you have only to travel a hundred kilometres east of Gary, along the patched-up private motorways of Indiana, to hear it in full voice.

The hall is swaying to the tune of "God Bless the USA" - a song for which everyone except the journalists stands up, many clenching fists against chests. The crowd is 99 per cent white and 100 per cent Christian. Of those to whom I speak during the interval, several believe that the president is neither American nor Christian. One is selling a set of playing cards depicting Obama as a "Kenyan-born, lying, arrogant Muslim communist that hates America".

What the Tea Party objects to is the president's policies of state intervention. What it adds to conventional fiscal conservatism is the idea that all state intervention into economic life is immoral, un-Christian and unconstitutional. The plebeian right is convinced that a city like Gary neither deserves stimulus money nor can use it to any good effect.

Jackie Walorski, a Republican who sits in the Indiana legislature and is standing for the US House of Representatives on 2 November, tells me: "We are watching a freight train of spending in this country. Americans don't live that way. We're the land of capitalism; we're not the land of taking people's public tax money and throwing it into a concept that isn't proven, that has not produced jobs."

Does she begrudge the money spent in Gary? Would she have blocked the cash for schools, more police and police vehicles?

“It's not a question of begrudging," says Wal­orski, a 47-year-old former TV journalist. "Just because it's gone to education, police and fire doesn't mean the money has done anything in those areas. That's not what the key is in this country. You can continue to write cheques but recovery comes from private-sector jobs and holding a line on spending."

What is sapping the energy of Democratic Party supporters, even in a place like Gary, is that if you strip Walorski's words of all the rhetoric, economically they ring true. America's governance system, lacking the basic capacity, and in some places the will, to spend the money, looks ill suited to delivering maximum bang for 787 billion bucks.

But the rhetoric itself has material impact, and way beyond the worried Christian faces assembled to hear it. It is a rhetoric that - intentionally or otherwise - identifies the recipients of state spending as the enemies of the American constitution. From Indiana to the Gulf of Mexico, that means the public sector, migrants and the African-American poor.

When Walorski takes the stage at a Tea Party rally in the small rural town of Angola, Indiana as warm-up act for the Fox News commentator Glenn Beck, she points to a giant US flag behind her and whips the audience to its feet with the warning that they have just days "to fight for who we are in America".

She continues: "If we don't fight for freedom, liberty, individual destiny, they are redefining this country out from underneath us. The battle we're facing is to defend this flag on our turf, our soil. When our soldiers came out of the boats in Normandy they literally walked over the bodies of other soldiers to fight for our freedom. The battle we face today, the ideological war that we're fighting, is for standing up for a constitution. The land of the free and the home of the brave is under assault today."

It is worth unpacking this statement. In the literal text, Obama and the Democrat-voting Congress are the "they" Walorski refers to. But America's airwaves are alive with the angry voices of enraged white Christians, channelled towards coherence by the right-wing commentators. No one on the stage in Indiana needs to assert that Obama is "a racist" with “a deep-seated hatred for white people or the white culture" - because Beck already said so on TV, on 28 July 2009.

Back in Gary, for the black community activists trying to hold things together, it feels as if the word "they" has another meaning.

“When you turn on the TV and hear all this anger, all this vitriol," says Ben Clement, who helps run a community theatre group for teenagers, "well, it's culture-based, race-based, and it's frightening. And it shows that there's a disconnect - it's almost like we're living on two separate planets."

Clement, like many Obama-supporting black professionals, rues the complacency of a generation that has drifted out of activism. "Our parents went through the civil rights movement, but for our generation it's been a time of rest, where we didn't think those were going to be issues. Now, when I see Obama vilified, my stomach tightens up, because he is the best of us, the best of what we have to offer. If they feel like that about him - how would they treat me?"

This is the real culture war - an artillery battle of words in which the two sides never meet.

It has blindsided America's political commentators. The polling organisations record no perceptible increase in the numbers of extreme right- and left-wing views. But distrust and fear are tangible once you get where the American media dare not venture - into the honest and considered thoughts of ordinary people.

So, where does the battle go after 2 November? Economists on the Keynesian left of the Democratic Party are now clamouring for a further fiscal stimulus as they frantically try to recover ground in the ideological war they have essentially lost. Judging by the polling on all possible outcomes, the Congressional arithmetic makes another fiscal stimulus impossible. And even if it were possible, it is difficult to see how a second stimulus could overcome the institutional problems that Gary typifies.

Over at the Federal Reserve, the chairman, Ben Bernanke, is inching towards a further round of quantitative easing. In September, he conceded that even if the Fed did opt for a second round of quantitative easing, the impact of this might be softened: though central bankers have no way of knowing how much increased demand they get from QE, they suspect it works best as an anti-panic measure, not as an additional boost. Once "QE2" is begun, the Fed has in effect fired the last bullet in the clip. It may signal the start of a unique period of policy stasis in which all conventional options have been used up.

One route out would be through a trade war and dollar devaluation - a route as popular among the Democratic grass roots as it is among the Tea Party activists.

Back in Indiana, Walorski swaps insults with the Democratic incumbent, Representative Joe Donnelly, whose support for the stimulus, she claims, has "exported jobs to China". Meanwhile, in the union hall of Local 1066, which represents employees of US Steel Corp in Gary, workers are calling for the government to impose tough trade sanctions against Chinese steel imports.

But, for now, the Obama administration is sticking to the economic doctrines that formed the shared belief set of both parties since the 1990s: globalisation and a strong dollar. Even as Bernanke's promise of further QE caused the dollar to slide against other currencies, the treasury secretary, Timothy Geithner, took to the airwaves to promote keeping the dollar strong. "It is very important," he said, "for people to understand that the United States of America and no country around the world can devalue its way to prosperity . . . It is not a viable, feasible strategy and we will not engage in it."

Another route out is the one offered by Governor Daniels: a new, national, one-year fiscal stimulus of between $400bn and $800bn, including suspension of payroll taxes, in return for equivalent cuts in state spending and a bonfire of business regulations. Though fiscally neutral, a tax cut on this scale could put money where neither state spending nor money printing has yet managed to put it - into the pockets of American consumers.

Yet the problem remains: without restarting the credit market, nothing can sustain growth. There needs to be some kind of defibrillating shock. The American patient, with all its problems of obesity and fast food, has to have its heart restarted before the rehab and the statins can get to work.

For two years, America's political cycle and its economic crisis have been parallel stories, the one played out on brash television shouting shows, the other handled by the super-brained east coast policy elite in the privacy of summits and retreats. After the midterm elections, the two cycles will collide. Either the Obama administration will find a new kind of circuit breaker for the economy, or America will face stagnant growth, deflation and the possibility of a further banking crisis.

In Gary, the people know what they want the president to do: to break with Wall Street, ditch the doctrine of free trade, end foreclosures and deliver jobs. There is, despite the political chasm between the union guys and the Tea Party activists, a parallel desire for politicians to break with the lobbying industry and speak for the people. "He [Obama] has to drive the agenda," says Steve Dunn, a steelworker. "If you ever listen to a speech by Franklin Delano Roosevelt, it's basically you against me; it's the working class against Wall Street. And that's the way things are today - but I don't hear that from President Obama."

The irony of American politics, on the eve of the midterms, is that if anybody owns the narrative of "workers against Wall Street", it is the ultra-conservative, free-market right.

Paul Mason is the economics editor of BBC Newsnight. His reports from the US can be seen at A revised edition of his book "Meltdown: the End of the Age of Greed" (Verso, £8.99) is out now.

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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.

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Matteo Renzi, the scrapper in the swamp

 Italy’s prime minister – “Europe’s last Blairite” – vowed to take on vested interests and smash open the economy. Can he still succeed?


In the summer of 2009, Daniele Caponi graduated from Sapienza University in Rome. His CV looked impressive. He had a degree in languages, and was fluent in four: Spanish, German, English and Italian. But the timing of his entry into the job market was terrible.

The global financial crash the previous year had badly affected Italy’s already weak economy. Prospects for graduates were so bleak that the best work Caponi could find was as a taxi driver. Six years later, the situation remains so precarious – youth unemployment is running above 40 per cent – that Caponi says he is “proud and honoured” to have a job at all.

Intelligent, confident and articulate, Caponi would appear to be precisely the type of person that Prime Minister Matteo Renzi has in mind as a beneficiary when he says he wants to jumpstart Italy’s economy by breaking it open to competition – with a war on entrenched interests and an influx of foreign capital leading the way to more jobs. Yet Caponi also embodies forces conspiring to defeat him. As a taxi driver, he belongs to one of Italy’s “closed-shop trades” (which also include chemists and lawyers) that hold back the economy, clinging to privileges and blocking outsiders from entry. For members of these trades, the benefits of the status quo are clear: Caponi makes enough money to wear smart clothes, eat at good restaurants and go trekking in south-east Asia or Latin America every year.

He is not willing Renzi, who has been called “Italy’s Tony Blair”, to fail, but thinks it is inevitable that he will. For the man at the helm of the centre-left Democratic Party, who a year and a half ago – at the age of just 39 – became his country’s youngest-ever prime minister has the task of changing not only Italy’s legislation, but its way of life. It is a struggle of allegiances versus globalisation; gerontocracy versus meritocracy; made-in-Italy quality versus stark economic efficiency – and the rule of law versus the tendency to bend it.

On the day I meet Caponi, he is illegally cramming extra passengers into his car because a transport strike has affected his takings. “You see, Italian politics mirrors Italian people,” he says. “Even me, you find me criticising politics. But look at what happened today. I pulled two rides into one – I did something I was not supposed to do.”


When Renzi took over as Italy’s leader in February 2014, many in the country felt it as a gale of fresh air after two decades of political tragicomedy and economic stagnation dominated by Silvio Berlusconi, whose main interest in power, his many disparagers say, was to protect his media empire and keep himself out of prison. That protracted era of zero growth, from 1994 to this year, left Renzi with enormous problems: more than one in every ten people out of work, chronic dips into recession, and a national debt that is 135 per cent of GDP, against 95 per cent for France, 90 per cent for Britain and 75 per cent for Germany. Add to that one of the rich world’s lowest fertility rates, at 1.39 births per woman – a demographic crisis that prompted the health minister to call this a “dying country”– and it may seem surprising that anybody would want the job of extracting Italy from the bureaucratic and parliamentary mess that Italians call il pantano, “the swamp”.

Renzi, however, seems to relish challenges that are the proper measure of his ambition, which was apparent from an early age. The son of a centre-right municipal councillor, he grew up in Rignano sull’Arno, a quiet Tuscan town outside Florence, where he became a keen Boy Scout. (His official website uses a quotation from Robert Baden-Powell,
the founder of the Scout movement, as its epigraph: “Leave this world a little better than you found it.”) The modest scope of this idealism provides clues to Renzi’s combination of pragmatism and engagement.

His passion for politics began in high school, and as a law student at the University of Florence he co-founded a committee to help Romano Prodi, a Democratic Party stalwart, become prime minister. Around that time, the 19-year-old Renzi appeared on the Italian version of Wheel of Fortune, raking in £20,000. It was a precocious sign of his penchant for games of risk.

His first break in politics came at the age of 24 when he became provincial secretary of the centrist People’s Party. From there, his rise was fast: president of the province of Florence at 29; mayor of Florence, a much bigger job, five years later. As mayor, Renzi shook up the city by cutting back sharply on the number of councillors, increasing the efficiency of public services and boosting welfare spending. As Italy began to take notice, the young mayor already had his eyes on a bigger stage: national politics.

In early 2013, he sensed the moment had arrived. In parliamentary elections, one in four Italians had voted for a comedian, Beppe Grillo, whose populist Five Star Movement proudly stood for little other than revulsion with the ruling elite. It was a turning point in Italian politics. After the Berlusconi era – and a brief technocratic government led by Mario Monti, who imposed austerity to pull the country back from a financial abyss – Italians were fed up with the political class and hungry for change.

Renzi, then still mayor of Florence, blitzed TV and social media with a vision of himself as the saviour of Italy, while his Democratic Party colleague Enrico Letta plodded along at the head of an unwieldy coalition government. Renzi promised to rottamare – “wreck” – the system (from this he acquired the nickname “The Scrapper”). He was bold and passionate and, like Berlusconi, he projected sunny optimism. Best of all, as mayor of Florence from 2009, he was an outsider, untainted by the machinations and scandals of national politics. Many Italians dared to hope again, as Renzi promised a bold reform programme that would generate jobs and revive the economy.

Late in 2013 he won the Democratic Party leadership, and quickly showed his ruthlessness by orchestrating what the Italian press called a “palace coup”, toppling Letta the following February. (A popular cartoon from the time shows Renzi in a relay race, handing his predecessor a stick of dynamite.) Days later, without ever having been even a member of parliament, Renzi was appointed prime minister.


While many Italians began to place their hopes in Renzi, there was also an undercurrent of suspicion about him that still prevails. One reason for this is his opportunism. On a stroll through Rome’s best food market, in the rough-and-tumble Testaccio district, I heard a story about him that went like this.

“A municipal councillor of Florence from the time that Renzi was mayor was once asked by a journalist: ‘Renzi – according to you, is he a capable man?’

“The councillor responded: ‘Yes, he is capable of anything.’”

Indeed, while Renzi purports to be a man of the left he often doesn’t sound like one. Besides smashing open protected sectors and taming the trade unions, he wants to overhaul the bloated and coddled public sector and attract overseas capital, which would inevitably entail foreign corporate takeovers. In the context of the rise of far-left parties in Europe, such as Syriza in Greece and Podemos in Spain, and given Jeremy Corbyn’s ascent to the Labour leadership in Britain, Renzi is increasingly looking like Europe’s last Blairite. (He got to know Blair when he was serving as mayor and Blair holidayed in Tuscany, and they became friends. Last year, Blair told the newspaper Corriere della Sera that Renzi was “the only way forward for Italy’s left”.) Indeed, on 21 September, Renzi appeared to be channelling Blair when he said that Corbyn’s victory was evidence that Labour “delights in losing”.

Yet there are signs that Renzi may not be winning his own battle. Another reason for Italians’ growing scepticism about him is that six months into his premiership the country slipped back into recession. This year, according to the European Commission, Italy is projected to eke out 0.6 per cent growth. By contrast, Spain and Portugal, which also have suffered severe debt and austerity crises, are forecast to grow at 3.1 and 1.6 per cent, respectively.

Meanwhile, unemployment remains stubbornly high despite the passage in the spring of Renzi’s signature “Jobs Act” – a package of laws that aims to generate employment by scaling back job protections and offering tax incentives to companies that hire long-term workers (as opposed to the surging number of people on precarious short-term contracts). And reform means nothing unless people believe it will work. Foreign investment has increased but Italian businesses are clinging to their capital. After rising early this year on the back of the imminent labour reforms, business confidence slumped again over the summer.

Critics say that whatever growth Italy does achieve this year may be due less to him than to another Italian: the European Central Bank chief, Mario Draghi, who has sought to invigorate the eurozone economies with a flood of easy credit. Some economists say that without a cheaper euro to boost its exports, Italy would still be in recession.

Meanwhile, in times of uncertainty, Italy’s business cliques hunker down to their old ways – hostile to hiring young people and preventing newcomers from encroaching on their turf. Renzi is fighting hard to tame these entrenched interests. The problem is that he may be running out of time. His approval ratings have nearly halved, down from more than 60 per cent after he became premier to around 32 per cent today.

“If nothing happens, especially in terms of kick-starting the economy, then people will start saying you’re just hot air,” said Vincenzo Scarpetta, an expert on Italy based at the Open Europe think tank.

One might imagine that students here would be among Renzi’s biggest fans, given that he is promoting policies that would help them find work. But on the Sapienza campus, Caponi the taxi driver’s alma mater, I cannot find a single student who believes that Renzi could improve their prospects by the time they enter the workforce. The overwhelming message: once I graduate, I’m out of here.

Beatrice Parsi di Landrone, studying chemistry, shakes her head at the thought of change being possible in Italy. The economy, she says, is built on patronage and favours that keep talent out of the best jobs. She wants to move to England and apply her skills in cosmetics, working for Max Factor.

“You can’t work here unless you have an inside track,” she explains. “For 20 years now, the government has been ruining Italy, even if we’re the best in the world in so many things. Overseas, it’s our brains that make a difference.”

The message on the sweatshirt worn by Mirko Mandarino, a medical student, speaks for his generation: “F**KIN’ PROBLEMS”. He is from Calabria, in the deep south, where people are poorer on average than in other parts of Italy. That makes it even harder for him to succeed in this country, where
many northerners hold southerners in contempt. Under Renzi, the gap between north and south has widened: national GDP fell 0.4 per cent last year but the south suffered a 1.3 per cent decline. “Renzi?” Mandarino says with a chuckle. “He’s an opportunist. A social climber. That’s how he’s gotten to where he is. My future? Outside of Italy. There are no other alternatives.”

Like Parsi di Landrone, Mandarino laments a culture of vested interests that blocks young people from achieving their dreams. “Nobody wants to give up anything,” he says. “They’re clans. The mentality is mafioso.”

Still, he feels sympathy for older Italians who cling to jobs and power. “In Italy, an old person can’t give way to the young, because at his age he wouldn’t find anything else. I have an uncle in Canada. He got fired at age 48. The next month he found a new job. That kind of thing doesn’t exist in Italy.”

Christian Abete, a classics student, sums things up: “We export wine and graduates.”


Franco Pavoncello, a political scientist and president of John Cabot University in Rome, meets me on the terrace of Vanni, a café in the genteel Prati district. Of the dozens of Romans I speak to, Pavoncello is the only one who believes that Renzi will succeed. “I am bullish about Italy,” he says.

The professor presents a heroic narrative of the prime minister, calling him a “revolutionary figure” – and only time will tell whether he is right. But he does make a basic point that it is hard to argue with: “He’s the only game in town. The right is dead. Completely melted. The left continues to be the usual communist left. It’s a disaster.”

It is the disarray among Renzi’s opponents not only on the right, where Berlusconi’s Forza Italia is fighting to regain relevance, but also in the crumbling old guard of the Democratic Party, that may allow him to press forward. “Nobody can stop this avalanche,” Pavoncello says.

That is an exaggeration, as the reform process is moving slowly. The big question is whether the Italian people will have the patience to endure a drawn-out and complicated overhaul – which promises pain to millions who benefit under the status quo – as the economy continues to stagnate. A stumble for Renzi’s party in regional elections in late May signalled threats hovering over his future. Voters are growing hostile to his pro-business ethos, alien to Italian tradition, and his own camp is beginning to bridle under a leadership style often described as dictatorial. Adding to his problems, the xenophobic, anti-euro Northern League’s vote share jumped across the nation, extraordinary for a party that long advocated a divorce between the affluent Italian north and the poorer south.

Pavoncello insists that Renzi has the political smarts and determination to be a transformative figure. But won’t he hit the brick wall of Italians’ cherished way of life?

“What way of life?” he fumes. “People staying at home? Fifty per cent youth unemployment? Taxi drivers who think they’re middle-class? In New York taxi drivers are not middle-class. Here taxi drivers make three, four, five thousand dollars a month. They feel they are shopkeepers. Taxi drivers are not middle-class. They are the bottom of the class! Can you remain middle-class when you have Uber? You can fight. You can try. But the world is going against you.”

Roberto Fabiani, the spokesman for Rome’s main cabbies’ association, who is a taxi driver, too, does indeed come across as middle-class. He wears Ray-Ban aviators, designer stubble and a crisp white shirt as he meets me at the Romana Tassisti headquarters on the outskirts of the city. Like Caponi, he is university-educated and asks why he shouldn’t have a pleasant family life after working a hard shift behind the wheel. He sees Renzi’s argument about reviving the economy by making it easier for firms to fire as being fundamentally at odds with Italy’s communitarian sensibilities.

“This is a philosophy that is molto liberal,” Fabiani says of the Jobs Act programme. “In Italy we have a vision that is very much to the left. Article 1 of our constitution says that Italy is a country founded on work. Translated, that means that every citizen should have the right to a dignified job, not extravagantly paid, but one that allows him to live in a dignified manner. ‘Dignified’ for me means not only to have an income that allows me to live, but also the security to know that I can live my life. If I’m hired, and in three months somebody says ‘you’re no longer needed’, that’s a problem.”

Italy’s commitment to social welfare, with its roots in age-old ideas about community and family, has provided cushions that allow people to live with dignity even in the midst of a sharp downturn. Yet millions of young Italians are living with precisely the indignity of uncertainty that Fabiani finds unacceptable. He is prepared to fight to protect his own. “If this happened,” he says of Renzi’s plan to break open closed sectors, “it would be the end. We’d take a hard position. Until the bitter end.”


There is no country in the world where cliques do not fight hard to keep their privileges. In Italy, however, the instinct is particularly strong; and this may present the greatest challenge of all to Matteo Renzi’s desire for reform. Italy’s historical experience as a jumble of city states and patches of empire has left a structure of allegiances and patronage that poses daunting obstacles to change.

Campanilismo, loyalty to the village bell tower, is central to Italian life. This signifies loyalty not only to your village, but to your trade association, your social circle, uncles and cousins, and, at the highest echelons, your political faction or business cabal.

“I’m not Italian, I’m a Roman,” says Caponi the taxi driver. “This is another thing that we are missing. We aren’t like the French or the Germans or the English, who are French and German and English.”

It’s a spirit captured in a song by the singer Luca Carboni called “Inno Nazionale” – “National Anthem”. You might expect a patriotic paean, but it goes like this:

“I’m too much of a Bologna man,

And you’re much too Neapolitan.

Him? Too much from Turin,

And you guys too stuck in Bari.

And if we’re all too proud,

They’re all too Venetian.”

The song continues in this vein, a hard rap with a techno beat. In its simplicity, this national anthem conveys how the Italian identity is precisely the lack of one. The paradox hits home in the song’s conclusion:

“We were once too fascist, and then

Too don’t-give-a-fuckists . . .

And then became too communist,

As well as too Christian-Democratic.

And even as time passes,

We’re still too ITALIAN!”

This article first appeared in the 01 October 2015 issue of the New Statesman, The Tory tide