Mixed Market Economies, Lobbying and Corruption: The Infiltration of Organised Crime in the Italian System

Thursday, 2 July 2015: 2:15 PM-3:45 PM
TW2.1.02 (Tower Two)
Carmelo Provenzano, University Kore of Enna, Palermo, Italy
Mixed Market Economies, Lobbying and Corruption: The infiltration of Organised Crime in the Italian System


Italy is one of the countries belonging to Mixed Market Economies (MMEs) and it is characterised by a populist democracy where every group that participates in the political system represents a “special interest”. Corporations, unions and other groups have veto power over the state and can demand compensation for state intervention. “Levels of direct state intervention, via company ownership, for example, have been heavily reduced in European MMEs in recent years. But there has been a reluctance to abandon the protection of national firms from foreign predators. The role of the state as a compensator ‘of first resort’ is also still strong, depending on the access of vested interests to policymaking power.” (Molina and Rhodes, 2007, 227).

In a mixed economy, the state functions as a redistribution mechanism and relies on mechanisms such as ‘protection’ and ‘state intervention’ as well as “compensation”.  Each group attempts to use the political system to extract benefits for its members at the expense of everyone else.

“As economic actors fail to coordinate themselves, but are sufficiently organized, they will invest their capital in political lobbying” (Hassel, 2014, p.10)

In other terms, interventionism generates a general vicious cycle where each group hires lobbyist in order to extract special privileges from other neutral groups. In particular, Blokand defines lobbying as “promoting the interests by exerting pressure on decision makers” (Blokland, 2006). Some researchers neutrally state that lobbying is giving information with the aim to have some impact on the decision making process (Pauw et al., 1998, 130). The power of Lobby is exercised by activities that aim at creating rules or policies or changing those rules or policies.

Furthermore, in the countries belonging to MMEs, at the top of the political system and at lower levels of the bureaucracy and state apparatus the corruption is endemic.

The phenomenon of corruption reduces the effectiveness of the government and undermines civilian faith in public institutions, legal security and the rule of law.

Corruption emerges in both legal and illegal activities and it is part of continuum of conflicts of interest. According to some scholars the abolition of state intervention in economic life and the process of privatization may reduce corruption (Rose-Ackerman, 1999).  Furthermore, the anti-corruption strategies may be based on the diminution of corrupt incentives and on extension of the market system (Hodgson and Jiang, 2007, 1048).

Other scholars argue instead that market regulation may also create opportunities for corruption. In particular they argue that “analysts should focus on the creation of rules –both formal and informal – that govern markets, how those rules are the products of political projects and how those rules create opportunities for white-collar crime and corporate corruption”. (Tillman, 2009, 74). The phenomenon of corruption may not be reduced by the deregulation, because other harmful activities such as lobbying can create a much higher risk. Corruption may occur in the political, bureaucratic or private sphere, with a criminal intention and a misuse of power. Lobbying is a legal and widely accepted mechanism of influencing power, however the lack of transparency may allow that the results of lobbying could be against the interests of the public at large (Dobvsek, 2009). Many attempts to build a more transparent system at the Italian level have failed.

Furthermore, Italian history has been characterised by mafia strength and by economic actors seeking compensation and protection, rather than to engage in seeking new forms of competitiveness. In other terms, criminal organisations (as criminal lobbies) have been traditionally present in southern Italy, have exerted their territorial strong control trough an extortion-protection mechanism and have accumulated social capital and trust relationships with politico-administrative and entrepreneurial actors.

Gambetta (1993) has argued that the supply of protection provided by Mafia meet a demand caused by the lack of trust in the state. Furthermore, by analysing the Mafia from period of the unification of Italy during the latter half of the nineteenth century until the end of the twentieth century, Gambetta has claimed that “Landowners, herdsmen, olive and orange growers, peasants, entrepreneurs, politicians, doctors, shopkeepers, purse snatchers, smugglers, drug traffickers, arms dealers: all of them have at one point or another been protected” (Gambetta, 1993:54). The so-called pizzo is a payment exacted by the racketeers as a kind of tax paid to the mafia organisation in control of the territory where economic agents operates. Furthermore criminal groups may create sufficiently strong rules in the local and global market and they manage several illicit and licit businesses (Dalla Chiesa, 2012; Sciarrone 2011). The penetration in the local areas of criminal enterprises (Arlacchi 1986) supported by violent criminal groups of the local underworld does not represent the only mafia-style method of income accumulation. Organised crime may also involve members of the overworld and it may combine managerial skills and institutional connections in order to develop their business. The illegitimate use of force and corruption and the legitimate use of managerial competence and relationships may be combined through the division of labour and specialisation. For example, ‘Ndrangheta, succeeded in increasing its economic gains in Northern Italy through an efficient division between members who dealt with illicit affairs and those who laundered profits through legal investments” (Varese, 2011: 31-64). The concept of criminal enterprise used in this paper in a relatively broad sense is that of a formal economic entity operating in the legitimate economy, influenced or managed by criminal groups, using both licit or illicit methods and resources to increase their power, profit or other benefits.  

This paper attempts to analyse how mafia regulates, social political and economic relationships, it generates corruptions, and how it influences the entire Italian system.  The Italian marked mixed economy is characterised by may grey areas, where political system was permeable to the pressure and interests of the mafia and legal economic actors establish agreement with criminal groups.