If You Have a Politician in Your Pocket, Profits Take Off
Two decades after Bribesville, the Italian political class faces a similar credibility crisis. Not a day goes without news revealing entrenched connections between political and economic power, both at the national and local level. International corruption indicators, constructed on the basis of expert opinion, give Italy scores that are well higher than all other developed countries. According to the latest edition, the Corruption Perception Index puts Italy at an unenviable 72nd place, between Bosnia and Bulgaria, on a total of 174 countries. First-ranked is Denmark, while Somalia is last-placed.
However, news and comparative indicators do not accurately portray the phenomenon. With corruption, there is connivance between who bribes and who is bribed, a complicity between perpetrator and victim you don't find in other crimes, and both parties have an interest in keeping the matter secret.
Nevertheless corruption leaves a "statistical trail. Ceteris paribus, firms enjoying political backings will have higher than average revenues and profits. Therefore, these firms will be statistically anomalous. Recent studies have investigated the economic benefits of political connections, comparing performance between well-connected and non-connected firms.
The same type of analysis conducted on a sample of Italian manufacturing firms for the 1985-1997 period, suggests that companies connected to a local politician (mayor, alderman, and the like) increase their market share and profits by 5%. The connection works only if the politician belongs to the local governing majority, and it brings higher benefits (+25%) for companies that are also public contractors. Findings also show that politicians see their income from private sector sources increase following their appointment to local office.
On the basis of these results, it's possible to draw some lessons from the Italian case. Firstly, although public opinion is focused on national scandals, local corruption is more widespread, creating veritable power blocs that prevent efficient monitoring at all the levels of public administration. It is noteworthy that the repression of corruption in national government after Bribesville seems to have left collusion and wrongdoing in local government intact. Recent proposals to reduce the levels of public administration should thus be welcome. Finally, the recent debate on Italian politicians' high salaries has left untouched the perverse relation between public power and private profit that exists in Italian cities, provinces, regions.