Grillo-Stiglitz Coalition in Rome?

By
Beppe Grillo a Ravenna
Grillo-Stiglitz Coalition in Rome? - Alex Weaver

Beppe Grillo, the leader of Italy’s “5 Star Movement” (M5S), presents his group as an alternative to the politically entrenched, out-of-touch parties that have controlled Rome since the dawn of the Second Republic, and it won a percentage of votes in the February election great enough to necessitate inclusion in a parliamentary majority in most imaginable scenarios. Since the election - in an effort to reassure markets, the public, allies, and everyone else who read the results of the election and said, “Wait what?” - Grillo’s office has announced that the inspiration of his economic plan is none other than Nobel Prize winner Joseph Stiglitz, famous for his theories of informational asymmetry and for rejecting the neoclassical notion of the invisible hand. Stiglitz also used this framework, also known as Information Economics, to explain wage stickiness during recessions (the “Stiglitz-Shapiro” model). Former World Bank Vice President and Chief Economist, vocal critic of the IMF, advisor to President Clinton, and most recently an advisor to the post-debt crisis greek government, he is a prominent, public voice in questions of contemporary political economy.

It is important to note that Stiglitz has not claimed a role in Grillo’s plan, and that his wife has denied Mr. Stiglitz’ involvement. (See this article, in Italian.) Notwithstanding Grillo’s tendency towards exaggeration, Stiglitz and he have a demonstrable relationship, and recently Stiglitz has been featured in a video on Grillo’s widely read blog speaking out against austerity, calling the current demands of austerity “the pact with the devil.” The information about Stiglitz as inspiration comes from the coordinator of Grillo’s economic program, Mauro Gallegati. Gallegati, who also cited that the specifics of the plan will come from Columbia economist Bruce Greenwald and French economist Jean-Paul Fitoussi. The true “sponsor,” however, is Stiglitz, says Gallegati, as reported by French publication Les Echos.

The fact that Stiglitz has inspired Grillo’s economic program does little to clarify most post-election questions. On broad questions of political economy in the age of globalization, Stiglitz’s 2002 work Globalization and its Discontents has been a source of contention not only because of its strong critiques of the IMF and of the current path of globalization, but because of differences in opinion on how to implement or interpret the alternatives he puts forth. The resultant dialogue is known as the “Stiglitz debate,” as described by José Antonio Sanahuja Perales, and arguably has affected the institutional behavior of the IMF.

The confusion regarding implementation of his ideas reflects a disconnect with his position and the position of those who lionize his work. Although his critiques of the international financial system have been taken up by many anti-globalization activists, Stiglitz remains firmly on the side of market economy, albeit one with more checks on externalities and a more comprehensive developmental approach. This begs the question: does Grillo’s program take its inspiration from Stiglitz’ own models or from the views attributed to Stiglitz?

In one regard, however, Stiglitz is unequivocal. He stands firmly against the austerity programs imposed by the affluent European powers in attempting to right the path of debt-stricken nations like Greece and Italy. The empirical justification for this position comes from his model of efficiency wages; his belief is that unemployment will not be righted by labor-market reform and deficit reduction. For the same reason that Stiglitz criticized the IMF involvement in the Asian financial crisis of the 90s, he condemns the imposition of an economic path on an unwilling participant. His latest opinion column in the Guardian, in which he comments on the outcome of the Italian election, shows this line of thought.

That said, Stiglitz advocates neither an abandonment of the Euro nor any overtly Eurosceptic position. Hopefully this part of his position will determine the tack taken by any governing coalition that includes Beppe Grillo.

Alex Weaver is a first year MA candidate at Johns Hopkins SAIS.