The Italian Referendum: Strike Three Against Globalization?

Following the United Kingdom’s decision to leave the European Union and the election of Donald Trump, a “no” vote in Italy’s upcoming constitutional referendum could further agitate the international order.

Over the past few months, the American elections have left little space for substantial media coverage of the December 4 referendum. If approved by Italian voters, the measure would increase the power of the lower house of parliament, the Chamber of Deputies. Additionally, it would relegate the Senate to an advisory role, similar to that of the House of Lords in the UK, and reduce the number of senators from 315 to 100. Therefore, the party that controls the Chamber of Deputies would gain more power. Currently, Prime Minister Matteo Renzi’s center-left Partito Democratico (PD) controls a majority of seats.

Renzi claims that the constitutional changes would enable him to implement a number of economic reforms to revive the ailing Italian economy. He has pledged to resign if the referendum fails to pass. The prime minister is a staunch supporter of European Union policies, and a “no” vote would be an outright rejection of not only his leadership, but the EU and the Euro as well.

Proponents of the referendum argue that the constitutional reforms are necessary to kickstart economic growth. According to Lorenzo Codogno, the former chief economist of the Italian Treasury, these reforms “would allow the government to regain certain key responsibilities, which would make the public administration more effective.”

A rejection of the proposal would increase the political standing of the populist Five Star Movement (M5S). The leader of M5S, comedian Beppe Grillo, has called for Italy to withdraw from the Euro and return to its own former currency, the Lira. An “Ital-Leave” from the Eurozone would threaten the stability of the Euro and the overall European monetary system.

In February of this year, around 60 percent of voters expressed a favorable opinion of the constitutional changes. Polls now appear to indicate a “no” vote, with slightly more than half of voters opposed. Nonetheless, the past year has clearly shown that polls are often wrong.

But markets, too, are currently predicting a rejection of the proposal. Italy’s Target2 balance, or its real-time gross settlement system, shows a tremendous capital flight from the country over the past few months. A “no” vote next week would almost certainly devalue the Euro and increase capital flow into American markets (strengthening the U.S. dollar even further).

Given the current economic conditions in Italy, rejection of the referendum and the political establishment would come as no surprise. According to the International Monetary Fund, real income per capita in Italy is 12 percent less than in 2007, just before the global financial crisis. Unemployment continues to hover around 11 percent, while youth unemployment is 40 percent (50 percent in southern regions). According to Eurostat, government debt is 133 percent of GDP.

Furthermore, Italy has grown much more slowly than other EU members since the end of the recession. The appalling economic conditions have created the ideal conditions for populist movements. Like their counterparts in the United States and Britain, working-class Italians feel alienated from the political establishment. The idea of a group of German bureaucrats sitting around in Brussels, crafting the nation’s economic policy, does not appeal to unemployed blue-collar Italians. They believe that the parliamentary reforms will give them more say in Italy’s economy than they currently have under the EU, which is dominated by representatives from other European countries. Despite such concerns, only time will tell if a rejection of the referendum produces an overall positive outcome for the Italian people.

Duterte: A Disaster for the Philippines

Following the regime of dictator Ferdinand Marcos, the People Power Revolution of 1986, along with the election of Corazon Aquino, ushered in a sense of optimism in democracy and political stability for the Philippines. However, corruption and cronyism have persisted until the present day. High poverty rates, crime, and little economic growth continue to plague the country’s people. According to a recent report from CNN, the vast majority of Filipino politicians come from political dynasties, and 76% of new economic growth in the past few years has gone to the 40 most affluent families. Additionally, the Philippines has dealt with a number of external conflicts over the past decade. China continues to increase its geopolitical power in Southeast Asia and threatens valuable Philippine maritime territory in the South China Sea. These factors have created the conditions for a power vacuum, legitimizing another questionable “strongman” leader touting the mantra of political stability and domestic order.

Earlier this year, the Philippines elected Rodrigo Duterte to serve as president. Duterte, a member of the Philippine Democratic Party-Power of the People (PDP-Laban), served as mayor of Davao City for 22 years. While in office as mayor, he implemented a “tough on crime” approach against alleged criminals and drug dealers in Davao City. Duterte is rumored to have played an instrumental role in the Davao Death Squad (DDS). This vigilante group was responsible for extrajudicial killings of more than 700 people from 1998 to 2008. (Duterte denies any affiliation with the DDS.) Davao City, a city of one million people in the southern province of Mindanao, still has one of the highest crime rates in the Philippines despite Duterte’s crime policies as mayor.

Despite the allegations of involvement in the death squad, Duterte still won by a large margin in the Philippine presidential election in May. The election had a record voter turnout of 81%. Duterte received 16.6 million votes (38.6%), followed by about 10 million votes (23.4%) for Mar Roxas. Senator Grace Poe came in third place with 21.7% of the vote. Since then, the number of extrajudicial killings has skyrocketed in Duterte’s war on drugs. According to data released by the Philippine National Police last month, vigilantes have killed 1,391 people. Based on his actions in the past few months, it is evident that Duterte will not bring much-needed political stability to the Philippines, but will preside over a reign of terror, potentially throwing the country back into undemocratic chaos. He even stated in August: “I don’t care about human rights, believe me.” He has also threatened to declare martial law in the event that political opposition attempts to halt his crime policies.

Earlier this fall, President Obama raised concerns about the extrajudicial killings resulting from his policies, but Duterte fired back: “I am no American puppet. I am the President of a sovereign country and I am not answerable to anyone except the Filipino people [...] son of a bitch I will swear at you.” The new president has a long record of making extreme statements. He once referred to the Pope as a “son of a whore” and the U.S. ambassador to the Philippines as a “gay son of a whore.” At a recent press conference, Duterte revealed plans to cut ties with the U.S. and align the Philippines with China and Russia. He has created a frighteningly erratic political environment in the Philippines, and another Marcos-style dictatorship may materialize in the coming years.

GOP: Forget Trump, Save the House & Senate

The greatest reality television show in human history is over. The overwhelming majority of data reveals that Hillary Clinton has virtually secured the presidency. The latest polling data from the Real Clear Politics average shows Clinton leading nationally 48.1 percent to Donald Trump’s 41.4 percent: a gap of 6.7 percent. Just one month ago, Trump had gotten within striking distance and was trailing by only one point.

Additionally, the current Real Clear Politics electoral college map has Clinton solidly with 256 Electoral College votes and only 170 for Trump, while 112 votes remain a toss-up. Pennsylvania and Virginia, two crucial states for Trump, both lean in Clinton’s favor. She leads Trump by 6.7 percent in Virginia and 8.4 percent in Pennsylvania. In order to be competitive, Trump would need to secure victories in Florida, North Carolina, and Ohio; Clinton currently leads by about 2-3 percent in all three states. According to New York Times data from The Upshot, Clinton now has an 89 percent chance of winning compared with just 11 percent for Donald Trump. Unless Wikileaks’ Julian Assange releases further incriminating information or she has another major medical episode, we’ll have a President Clinton in January.

Interestingly, Trump has ceased campaign activity in Democratic vice presidential nominee Tim Kaine’s home state of Virginia. Trump’s former Virginia campaign chairman, Corey Stewart, expressed outrage regarding the decision to concede the state: "I think it's totally premature for the campaign to be pulling out of Virginia after so much work and all the hundreds ... of hours of volunteer time and thousands and thousands of volunteers." Historically, Virginia has been a solidly Republican state for every presidential election from the 1970s until the re-election of George W. Bush in 2004. However, changing demographics and urbanization in Northern Virginia have transformed it into a swing state. President Obama won it in 2008, the first time a Democrat won Virginia since Lyndon B. Johnson defeated Barry Goldwater in 1964. Obama went on to win there again in 2012.

Following the release of Trump’s 2005 lewd comments about women, a number of prominent Republicans have withdrawn their support for him. His former primary opponents Carly Fiorina and Governor John Kasich no longer endorse him. Senators John McCain, Kelly Ayotte, Lisa Murkowski, and Rob Portman, and Congressman Jason Chaffetz have all retracted support shortly after the release of the tape. Former Secretary of State Condoleezza Rice put out a statement expressing utter disgust with Trump: “Enough! Donald Trump should not be President. He should withdraw. As a Republican, I hope to support someone who has the dignity and stature to run for the highest office in the greatest democracy on earth.”

Let’s be practical: it’s time for the Republican National Committee to stop devoting its precious time, money, and resources to Trump’s hopeless campaign. Instead, top GOP officials should direct all resources to maintaining the Senate majority. The Real Clear Politics polling averages indicate that the Democrats and Republicans each have 46 Senate seats that are safe or not up for election, leaving eight toss-ups, seven of them currently held by the Republicans. It appears Republicans will maintain control over the House of Representatives. 218 seats are needed to secure a majority, and the GOP currently has 231 safe seats. There are 15 toss-up seats, 11 currently controlled by Republicans. It’s unlikely the GOP will lose control of the House, but current polling shows that their majority will weaken.

A spokeswoman for House Speaker Paul Ryan recently stated: “The speaker is going to spend the next month focused entirely on protecting our congressional majorities.”  It’s also time for more GOP elected officials to publicly denounce Trump in order to salvage the legitimacy of the party going forward.

Italy on the Brink of Instability

For the past decade, Italy has faced a series of economic challenges that have threatened the country’s stability.

Since the economic downturn of 2008, Italy has experienced a triple-dip recession. According to a report from the American Enterprise Institute (AEI), lingering effects of the recession are exacerbated by Italy’s recent transition from the lira to the Euro, as switching currencies has resulted in a failure to achieve long-term growth. Last week, the Italian cabinet revised the estimated 2016 GDP growth forecast from 1.2 percent down to 0.8 percent. Italy’s GDP remains 6 percent below its pre-recession peak and the country’s public debt has reached a staggering 133 percent of GDP; only Greece has a higher debt to GDP ratio in the Eurozone. Comparatively, the United Kingdom has a debt level of 89 percent of GDP, while Germany’s public debt is only about 70 percent of GDP. Italy’s unemployment rate of 11 percent and youth unemployment (15- to 24 year-olds) of nearly 40 percent makes it one of the most ailing economies in the West.

Italy’s demographic crisis also contributes to its relative economic instability. A recent report from Eurostat revealed that it has the highest proportion of elderly people in the European Union. 6.5 percent of Italians are over the age of 80, compared with just 3.1 percent in Ireland. The high number of Italian pensioners has undoubtedly put a strain on its national healthcare service.

Additionally, Italy has a fertility rate of just 1.37, compared to the EU average of 1.6. In 2015, only 488,000 babies were born in Italy, the lowest number of children born since the country’s unification in 1861. This low fertility rate has contributed with the lack of young workers available to contribute to its nearly bankrupt welfare system.

The frail economic conditions in Italy have had enormous political implications. As in the U.S. and UK, an anti-elitist sentiment has been growing in Italy. Many factions of the Italian public feel alienated by politicians, who they see as advocates for the wealthy. Others have blamed the EU’s austerity measures for high youth unemployment and lack of growth. Italy used to be one of the most pro-EU nations in Europe, but the lethargic economy is among the factors that have boosted the recent popularity of anti-EU groups.

In order to increase his power to implement stabilizing economic reforms, Prime Minister Matteo Renzi, a member of the center-left Democratic Party, has called for a constitutional referendum on December 4. A rejection of the referendum would be seen as a rebuke against the EU and could threaten the stability of the Euro. A “no” vote would further legitimize the Euroskeptic, anti-globalist Five Star Movement (Il Movimento Cinque Stelle). Desmond Lachman of AEI argues: “the last thing that a troubled Italian economy now needs is a renewed period of political uncertainty that a ‘no’ vote [the] referendum would about certainly usher in.” If the referendum fails to pass, Renzi has pledged to resign.