International Sources of the Collapse of Rent-Seeking Regimes: Hypotheses Drawn from the Italian Case1

This paper examines the collapse of the Italian postwar party system in 1992, and documents that international economic factors contributed signi ̄cantly to the end of Christian Democratic hegemony. The paper speculates that the reason may be that the prospect of European monetary integration changed the preferences of important social groups in Italy so that they came to favor a change of regime in order to obtain signi ̄cant changes in public policy. The paper proposes three channels of transmission from the international environment to domestic political change: an electoral channel, a party channel, and an interest group channel. I examine the ̄rst with a statistical analysis of the impact of trade openness on the extent of the DC vote loss in 1992, documenting that trade openness was a signi ̄cant determinant of the DC's change in vote share across Italy's electoral districts. Likewise, I show that the share of votes going to the Northern League was signi ̄cantly related to exposure to international trade. Preliminary evidence for the importance of the other two channels is also presented. Italian business interests, represented both by the country's major management association and by the Italian Republican Party, withdrew their support of the existing political regime in 1991, because of the DC's lack of credibility in assuring Italian entry into EMU. This withdrawal of support was critical in opening the way for subsequent judicial inquiries against members of the governing parties, which ultimately led to their demise. Writing in 1987, Joseph LaPalombara expressed what was arguably the thendominant interpretation when he characterized the Italian political system as a wellfunctioning, stable democracy (LaPalombara 1987). The collapse of what came to be called Italy's \ ̄rst republic" only ̄ve years later caught observers o® guard, much as the disintegration of the Soviet Union surprised US academics, many of whom had become accustomed to depicting the USSR as a stable, relatively well functioning political system. When longstanding political equilibria are upset, in short, many tend to be caught by surprise. This paper studies the sources of Italian political change in 1992, and the reasons for the demise of the political equilibrium represented by that country's postwar regime. I focus on the international economic sources of political change, which have been largely ignored in previous studies. Three speci ̄c channels by which the changing international economic environment a®ected the preferences and strategies of domestic political actors are investigated: an electoral channel, a party channel, and an interest group channel. To study the ̄rst, I examine mass voting behavior. For the second, I look at the causes and consequences of the withdrawal from the government coalition of a small political party closely tied to the interests of big business; and for the third, I investigate public statements and policy positions of Italy's major interest association representing business. The current paper presents preliminary results from a larger, still ongoing research project. The larger study from which this paper is drawn concerns the determinants, workings, and demise of bad government (de ̄ned below). The project studies how bad government develops even in democratic political settings, where electoral competition should in principle render elected political o±cials accountable to citizens. The present paper investigates a single instance in which bad government was, after many years, brought down, but the argument for the international determinants of the collapse of a single-party dominant democracy is potentially general and there is some evidence that it may extend to other cases, most notably the Japanese (Rosenbluth 1996) and the Mexican (Diaz-Cayeros, Magaloni, and Weingast 2000a; Diaz-Cayeros, Magaloni, and Weingast 2000b). The paper is organized as follows. The ̄rst section discusses the theoretical underpinnings of the present analysis, and describes important characteristics of Italy's postwar political regime prior to its 1994 collapse. The second section details the logic underlying the argument that international sources of change may have been responsible for the regime's collapse, and o®ers speci ̄c hypotheses for the Italian case. The following three sections evaluate the evidence linking international sources of change to the electoral, the party, and interest group channel, respectively. These materials are presented out of chronological order; temporally, the party and interest group channels were a®ected before mass electoral change occurred. I present the electoral evidence ̄rst, because it is typically identi ̄ed in the literature as the main cause of the downfall of the preexisting regime. I argue that electoral change is a