The policy of the Italian Communist Party (PCI) today is based on the conviction that Italy is in the grip of a very serious crisis and that the labor movement must do everything in its power to overcome this crisis. To transform Italian society in the direction of socialism - which remains our ideal - we must emerge from this crisis. If the workers, the left-wing forces, and the Communist Party did not put forward their own constructive proposals - both short-term and medium-term - aimed at preventing a deterioration of the conditions in which Italy is struggling today, if they did not contribute to a united effort of all democratic forces, the crisis might come to a head, with catastrophic results for Italian democracy. Progress toward socialism would be hopelessly delayed; there might be a very grave political and social slide backward.

At the same time, it will be impossible to pull Italy out of the crisis without effecting certain far-reaching social reforms, substantial changes in policy and methods of government. This is why we say that economic, social and political reforms and victory over the crisis are two sides of the same coin. In this light, we have worked in recent years for a loyal collaboration among all democratic political parties, especially among the larger parties - the Christian Democrats (DC), the Communists (PCI), and the Socialists (PSI); this collaboration has been developing, in fact, since the general election of June 1976 and has already borne fruit. Italy is in a phase of transition, but certain basic conditions for real change have been agreed upon, although considerable difficulties and dangers still lie ahead, as the recent dramatic events have pointed out once again.

But what is the "Italian crisis"? What are its main characteristics? We fully realize that the whole global system of economic relations is in crisis. When the dollar was declared nonconvertible in 1971, there began a long period of monetary instability; and the sudden sharp rise in oil prices in 1973 convulsed the whole network of international economic relations. In industrial countries investments have for years been almost at a standstill; a perverse mixture of inflation and stagnation prevails, accompanied by mounting unemployment. But against this world background, the Italian situation has its particular characteristics.

Not only is it a crisis of economic and social structures, it is also an acute crisis of the state - its apparatus, its functioning. Until a few years ago we had a highly centralized bureaucratic state, becoming steadily less efficient; its mechanism had for years been shockingly out of date and rusty; its procedures always slower and slower. It is, however, quite difficult to distinguish between problems of the state and economic problems, between current economic difficulties and the malfunctioning of the state and certain of its important institutions, such as schools and universities.

The problems of speedy and correct enforcement of laws in the economic sphere, of economic planning and public spending, have become more serious every day. And so has the crisis in the educational system - the absence of an efficient modern system of professional training, the chaotic development of high schools and universities with no updating of their structures and objectives, inadequate and muddled state intervention in the field of scientific and technological research. At the same time, there has been a massive increase in current public spending, especially on social security.

The gravity of this crisis of the state in Italy lies not only in its direct effect on the economic crisis: civil liberties and peaceful civil life are also at risk. For years both the judicial system and the police forces have been in a deplorable condition of inefficiency and confusion. Democratic society is thus vulnerable to political violence - whether neo-Fascist or extremist leftist - and to ever more intense and purely destructive terrorist attacks.

II

The present condition of the state and its institutions, the crisis of public finance, the economic difficulties, result above all from the way in which Italy has been governed in the past, both before and after the year 1968 when a shift to the Left took place, as witnessed by the results of that year's general elections. In the 1950s Italian society and economy went through a phase of rapid expansion and change, but this was accompanied by contradictory and degenerative symptoms that were not corrected even in the years after 1962 under "Center-Left" governments (composed of Christian Democrats, Socialists, Social Democrats and Republicans). There was urban land speculation and there was corruption; a mistaken use of resources in general and a faulty allocation of resources among the various productive sectors; and a growing imbalance between the north and the south of the country.

Some people say that Italy's present crisis is also the result of what happened since 1968 - for which we all, and not only the Christian Democrats, bear a degree of responsibility. It is true that the intense wage push and the massive increase in public spending that took place after 1968, as a result of big labor struggles and under the pressure of a trade union movement that had once again found its unity, were factors creating the present crisis in Italy. And it is true that together with a positive and fully justified enlargement of the rights of workers and students and of democratic life in all forms, there appeared a widespread permissive trend, a dangerous slackening of discipline in many fields. For this, too, the parties that were in opposition during these years, as well as the trade unions, must practice self-criticism; to some extent they have already done so. But it cannot be denied that the main share of responsibility rests with the forces that governed the country, above all, with the Christian Democratic Party.

If reforms were not carried out, or were begun only after long delays - reforms that were ripe for action in the early 1960s, such as reforms of the educational system, of public administration, of legislative codes, of the judicial system, of the health service, etc. - if the necessary correctives to the economic system were not applied at that time, even after the wage push of 1970 or the oil crisis of 1973, it is the Christian Democratic Party that bears the chief responsibility for its fierce resistance and continual postponement of measures that became ever more urgent and indispensable. In the years after 1968 the governments dominated by the Christian Democrats responded to new social and political pressures - and to the danger of increasing electoral success by the Communists - by handing out public money in an even more disorganized fashion, based on the DC's own particular political interests. The Italian crisis, in this respect, is also a crisis of political leadership.

Since 1947 the Christian Democratic Party has remained in power, alone or in coalition with other and much smaller parties, supported in Parliament by different majorities, in all of which it held a dominant position. Long ago there should have been a major change in the method of governing and of those holding office. If in recent years there has been a widespread loss of confidence in democratic institutions, this is, in part, attributable to the lack of change in government policy and personnel, and to episodes of mismanagement and corruption, many of which remain unpunished. All this has stoked up a moral crisis, leading to a lowering of moral standards among many Italians.

The Italian crisis is thus complex and runs deep. During the last two-and-a-half years some important new factors have appeared on the political scene, and we have begun to work at overcoming the crisis. The 1975 local elections brought about changes in administration in several regions and local authorities. The 1976 general elections, and a change in the attitudes of the Christian Democrats' old allies (Socialists and Republicans), limited the possibilities of maneuver and predominance for the Christian Democratic Party and led to the search for a new balance of power. A new line of approach emerged toward the Communist Party: despite some disagreement and ambiguity among Christian Democrats, the "strategy of competitive engagement with the PCI" replaced the old policy of outright frontal opposition.

This trend was encouraged by the Communist Party's efforts to clarify some of its basic tenets, both ideological and political, in the field of foreign affairs as well as in economic matters. All political parties felt the need for a period of collaboration even if only temporary - as distinct from the traditional division into majority and opposition - in order to cope with the emergency, because of the danger of a still sharper social tension and of a still deeper crisis of the state and of law and order, which would make the country truly ungovernable.

When the experiment of the Popular Unity government in Chile under Salvador Allende came to its tragic conclusion in September 1973, the PCI Secretary General, Enrico Berlinguer, declared the need for a long-term agreement, a broad-based form of "historic compromise" among democratic forces - Catholic, Socialist and Communist - to carry out the task of transforming Italian society without dangerous, possibly fatal, cracks in the tissue of civil liberties. These views have been discussed at length: both Christian Democrats and Socialists have rejected them. But it has been recognized that, for some years to come, such collaboration is absolutely necessary; in view of the complexity of the problems of reshaping the country's structures, Italy cannot afford the luxury of keeping either Christian Democrats or Communists in the opposition.

After the 1976 elections we had, first, a one-party Christian Democratic government that survived only because of the PCI and other parties' abstention. Then we moved on to a Six-Party Agreement (which included the Communist Party) with a short-term crisis program. Now we have yet another Christian Democratic minority government supported in Parliament by a five-party majority (again including the Communists). In our opinion the change in the form of government should have been more drastic and clear-cut: there should have been a coalition government composed of all the parties that at this moment support the government. The changes were too limited, and were effected by such tortuous methods that they lost much of the political impact they might have had.

All the same, a considerable joint effort is under way. We are trying to put our house in order and to create the basic conditions for a new expansion of national activity. The level of conscious democratic participation among the working classes and the people of Italy is very high, and this gives us confidence for the future and a firm base from which to fight terrorism and attacks on democratic institutions. But we must succeed in making these institutions function effectively, if we are to solve the most serious economic and civic problems of our country.

III

The effort we are now making to move from the old centralized state to a largely decentralized democratic state is vital. I refer to the current work of transferring administrative functions from the state to the regions. We have in Italy five "Special Statute Regions," which include Sicily and Sardinia; and we have 15 "Ordinary Regions" that were not set up till 1970 when, for the first time, Regional Assemblies were elected (and re-elected in 1975). Only recently have the administrative functions (as distinct from the legislative powers) of these Ordinary Regions been defined. Thus, the structure of the Italian state is being completely changed. Yet there are many difficulties to be overcome - on the one hand, opposition in certain political quarters (especially among the Christian Democrats) and in the central bureaucracy, which do not want to see the powers of government and of the central bureaucratic machine redesigned; on the other hand, the risk that the regions will not be able to cope with their new tasks quickly and effectively, that they too will become bureaucratic structures, slow and inefficient. All democratic parties must loyally work together to combat this resistance and these risks.

As regards economic and social questions, in the year between the autumn of 1976 and 1977, the fall of the lira was blocked, the rate of inflation slowed down, the balance-of-payments deficit changed to a surplus. But the danger of continued stagnation - behind the constantly shorter cycles of recovery and depression - remains very serious. Persistent low growth rates would exacerbate the problems of the south and of massive unemployment.

The basic objectives of a medium-term economic program must therefore be development in the south and increased employment. All the democratic parties, trade unions and employers' associations agree on this. They also agree that the ratio of investment to gross national product must rise and that the national growth rate (less than two percent in 1977) must be improved. But on some important aspects of the economic policy that must go forward in order to realize these goals, there still is a discussion going on between parties and with social organizations. Let me, however, explain the Communist Party's positions in our search for a common policy.

The first major point is our refusal to accept inflationary solutions, or a short-lived, overstimulated expansion. We must arrest the decline in output of the last few months, fight the trend toward recession and the risk of stagnation, aim for a higher growth rate, but all this without for one moment ceasing to fight inflation and while pursuing a sensible monetary policy such as that adopted by the Bank of Italy during the last 18 months - and keeping the lira exchange rate steady. We must succeed in getting inflation down to 12 percent in 1978 and then to under ten percent, and not let it climb back to 20 percent or more.

A second important point is our rejection of all protectionist temptations. The Italian economy largely depends on the import of raw materials and of sources of energy: it cannot do without this large volume of imports and counts on a considerable volume of exports for its development. A massive use of protectionist measures would be suicidal; nor could it be undertaken within the European Economic Community (EEC). It is a different matter to try to get EEC policies modified if they appear to grant a privileged position to other members (e.g., in the agricultural sector) or to get the EEC to react to dumping by countries outside the Community. While constantly seeking new forms of international economic cooperation, Italy's efforts - and, I wish to add, the efforts of the Italian labor movement - must be devoted to discouraging, not encouraging, the protectionist trends of other countries and the possibility of trade wars. The guideline for the Italian workers must be solidarity with developing and poorer countries, a determination to help in every possible way their prospects for economic development.

Italy's recurrent balance-of-payments difficulties reflect both serious mistakes in government policy (especially having allowed certain agricultural/food-producing sectors to run down very seriously) and the convulsions of international economic relations following the rise in oil prices, the rapid increase in economic power of certain industrial countries (especially Japan), and the emergence of new producers. These serious difficulties, which threaten to reappear every time we move from a phase of depression to one of recovery, must be met by (1) trying to replace some imports (for instance, agricultural foodstuffs) by national products at competitive prices, and (2) increasing the international competitive range of Italian industry and adjusting its structure to the changes in the world market.

If you exclude resorting to any form of either galloping inflation or protectionist policies, you can see how complex the problem is of finding an adequate solution to the needs of the south and of the million unemployed. The only possible road to take is that of a rational and rigorous use of our resources, which, in turn, implies a considerable degree of democratic control and planning. An outstanding feature of PCI thinking is just this emphasis on the need for such a change of policy.

It is impossible to improve our growth rate unless we eliminate waste in every sector and switch resources from consumption to investment. We must put the brake on nonessential, artificially stimulated consumption; we must try to satisfy specific needs (an example is urban transport) in social and not individual terms, and thus in more economical, more sober forms. This is the meaning of the policy of austerity that the Communist Party supports.

The work of eliminating waste is especially urgent in the area of public spending. Here an appreciable effort has already begun: there has been an attempt to determine the real size of the public sector deficit and to bring under control the rise in public spending and in social security services by reforms of local finance and health services, by making local utilities pay for themselves and by revising pension schemes. A reform of the state budget is on the docket: this would allow Parliament to check on the real situation of public finances at any moment; in the past, balances were subject to manipulation and discretionary measures by the executive.

The need to fight inflation and to devote a larger share of resources to investment also implies that the cost of labor must be contained. This should not be regarded as the only problem in Italian economic development, but it is a significant aspect of the effort needed to secure investments, to enlarge the productive base, to develop the south, and to increase employment. The trade unions have openly recognized this.

Wages have gone up sharply since 1969, even if they are, on average, lower than in other West European countries; and they are protected against inflation by built-in indexing. Social security contributions are a heavier element in the cost of labor than is true in other countries, in part owing to the excessive cost and wasteful methods of these social services. As a result, profit margins, and hence the amount available for self-financing, have been severely squeezed. Though high profits are by no means a sufficient condition for investment, too high a degree of leverage has been an obstacle to investment activity.

But the policy of austerity, says the Italian Communist Party, must be based on criteria of social justice. If fresh development in the south and new jobs for unemployed youth require sacrifices by all social classes (except the lowest income brackets), by all those now employed and by all persons having an adequate basic income, these sacrifices must be distributed fairly and enforced in just measure on the wealthier classes. Positions of unjustified privilege and based on unearned income must be contested by a rigorous campaign to check fiscal evasion. The reorganization of our tax-collecting system - already begun - must be speeded up. And even among both blue-collar and white-collar salaried employees, injustices and absurd inequalities - what has been called the "incomes jungle," covering wages, pensions, termination bonuses - must be ironed out. Finally, the widespread practice of "black labor" (regular but unofficial work carried out under conditions of flagrant violation of fiscal, social security and other legislative controls) and the practice, closely related, of having two jobs ("moonlighting") must be gradually brought under control.

The mere increase in resources available for investment does not, however, guarantee that investments will actually be made or that they will be directed to those sectors or regions that should have priority in the national interest, to ensure balanced growth, with progress especially in the south. We must relaunch the process of accumulation of capital, at industry and at national levels: there is not a shadow of doubt about this, and the workers' movement must make its contribution. The workers cannot pretend to be indifferent to the financial crisis of their industries, to the relations of costs to profits, and to productivity; they must think through their own autonomous proposals on ways and means of overcoming the crisis. Business and industry must be able to restructure and reconvert, so as to regain a dynamic, productive and profitable position. To this end a greater mobility of labor is essential, both within industry or between one business and another. Workers and their organizations must be given adequate guarantees, but they cannot defend the "status quo" in industries running at a loss but which might be put on their feet again through drastic reorganization. All this is indispensable for new economic expansion in Italy - but it is not enough.

IV

In the years when profit margins and self-financing prevailed in industry, when there were larger resources available for investment and considerable state aid for private investment, did not the spontaneous choices of industry, especially of large-scale industry, still leave the problems of the south and of full employment unresolved? Did not those spontaneous choices actually destroy resources and seriously weaken Italy's balance of payments? Was it not true that in the south priority was given to capital-intensive operations, while agriculture and food-producing industries were seriously neglected? That there was a continuous diversion of capital into speculative and luxury building, to the point that today large cities, such as Rome, have thousands of empty apartments that cannot be sold or rented? That the productive capacity of the petrochemical and synthetic fiber industries was expanded beyond all reasonable marketing estimates? And we could go on adding to this list of industrial mismanagement.

In order to avoid a repetition of such phenomena, to guarantee, insofar as possible, an allocation of resources and investments that corresponds to the national interest and the needs of productive reorganization, we must have an incisive programming policy. This must not be a return to the vague overall experimental planning of the Left-Center period of Italian government, but concrete intervention in selected directions - a program spread out over several years of public spending, state assistance for plans in specific sectors of industry and agriculture, etc. - and bargaining among major industries and trade unions to ensure activity consonant with the national interest.

We do not believe that the public sector of the economy should be expanded: it is already sufficiently large in Italy to enable the state to influence the course of investment and development in the whole country (by direct control of part of the productive and financial apparatus, as well as by fiscal policy, incentives, etc.). We are convinced that a party of Marxist formation in a country like Italy should not aim at total state ownership of the means of production. This should not be considered a necessary condition for achieving socialist ends and values in an industrialized, Western-style economy. The role of private initiative, and even large-scale private industry, the function of profit and the market economy, cannot and should not be denied. The characteristic feature of our Party's program today lies in its refusal to abandon economic development to spontaneous activity, in its insistence on democratic control of the use of the "surplus," and in the guidance given by democratic public powers to social and economic transformation, thus ensuring continuity and a new quality of development, not merely a steadier overall growth.

We are not impressed by the fact that our economic proposals are from time to time accused of being "Keynesian" or that they smack of orthodox monetary theory. Frankly, we think our views go far beyond a mere policy of support for effective demand or monetary stabilization, far beyond the short-term economic management prospect. However, I wish to make things quite clear: we do not believe that you can dig detailed economic programs out of Karl Marx. Marx provided us with an analysis of the functioning of the capitalist system and its contradictions, and described its future crisis and the historical necessity to supersede it. A large workers' party of Marxist formation, such as the PCI, must today make a concrete contribution to the task of overcoming those contradictions that have led to our current social and economic crisis - not identifying with this or that academic trend but drawing from all the resources that modern economic science can offer as well as from the experience of public policies in Western industrialized countries. Moreover, we must always bear in mind our objective - that it shall not be the masses alone that pay the price for this crisis; but, on the contrary, that they should be able to see the road opening toward real progress for all workers and for the nation. And in this way - not by waiting for the "collapse" of capitalism - the workers' movement can demonstrate its capacity for governing and can thus transform society.

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  • Giorgio Napolitano is a member of the Directorate of the Italian Communist Party, with responsibility for economic policy and social affairs. This article is drawn from talks given at Harvard and Yale Universities.
  • More By Giorgio Napolitano