It's something of common sense that markets are, generally speaking, apolitical, and seek economically viable assets to invest in. Sometimes under this model, which is widely used in the financial press, markets do unpredictable and bizarre things.
Take the case of Italy. The Financial Times of London ran an article on Thursday about Silvio Berlusconi - Prime Minister and quasi-dictator of the center-right People of Liberty Party - and his tenuous grip to power. Berlusconi has a political rap sheet longer than most lifelong criminals (between ownership of the largest media company, ties to the mafia, sex scandals galore, charges of general political corruption, and ties to a secret society devoted to the establishment of a more authoritarian government in Italy. Between his own problems, and his close ties to other authoritarian regimes around the region, one should think that the downfall of Berlusconi could be only seen as a victory for the liberal cause.
Naturally, the markets disagree, or at the least, do not care about such trivialties. As the FT reports, the 51st vote of confidence facing Berlusconi yesterday (in which he barely escaped ouster) has driven the markets to "punish" the "resulting paralysis in decision-making by driving up Italy's borrowing costs to levels that are unsustainable in the long term without substantial European support." What kind of support? See my earlier thoughts on Christopher Alessi's comments to the CFR regarding European "fiscal integration" and its implications for sovereign decisions to preserve a social democratic state.
Later in the article Erik Nielsen of Unicredit (an Italian financial company of considerable size and influence) noted with some puzzle that while "Italy surely has a number of problems ... I fail to understand why the market continues to underestimate fundamentals and policy measures which have already been taken in Rome." Thus, the article concludes, unfavorable investor attitudes towards Italy vis-a-vis favorable attitudes towards the UK (with a somewhat more stable conservative leadership in the midst of an agenda involving the privatization of NHS) must be the result of markets being "truly out of tune with reality."
The reader, attempting to read with some degree of a critical eye, is left to wonder whether markets truly are crazy, or whether, perhaps, markets are engaging in something of a political crusade. Why might Britain be considered different politically? Without claiming to be any expert on Italian or British politics, what little I know is that Britain has had a far more thorough period of neoliberalization under Conservative (and then, ironically perhaps, Labour) leadership than Italy. An alternative way to view this phenomenon is through the lens of the on-going neoliberal war against economic egalitarianism, the public sector, and the social-democratic state in Europe.
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