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Tuesday, March 05, 2013 8:48 PM

"Grillonomics" Is a Mess

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I asked reader "AC" who is from Italy but now lives in France for some comments on "Grillonomics".

She replies ...

Hello Mish,

Your translation seems correct.

It's quite astonishing is that a serious newspaper like Les Echos reports this story. It is far from clear and proven that Stiglitz has collaborated to any significant extent on the program of M5S. Some newspapers reported a formal denial from Stiglitz.

What is true is that Stiglitz has been writing a few posts (2 or 3) on Grillo's blog, but just that. The main "ideologists" of Grillonomics seem to be Italian economist Mauro Gallegati, Alberto Bagnai (an economics professor in Pescara) and Loretta Napoleoni.

Beppe Grillo's economic program is quite a mess. Grillo provides no details on where the money for all the expenditure he wants will come from.

M5S wants free Internet, abolition of several taxes, citizenship income, revoking reforms that have made the job market more flexible, and nationalization of banks. Some things he seeks are pro-market, some others not at all. He seeks many tax cuts (a good thing) but he does not specify enough cuts elsewhere to balance.

Succinctly, his economic program is a real mess.

Grillo's campaign against the "cascade of holdings" refers to a typical Italian situation where few people get control of huge companies via control of preferred shares of intermediate companies. Italian capitalism is frequently made of "capitalists without capital".



Italian Cascade Control Explained

A search for "Italian Cascade Control" led me to Corporate governance: the Italian Story, a 63 page document that explains the cascade process is one in which companies issue "preference shares without voting rights ... Nearly all the major corporations of the country have grown in a similar manner".

Italian regulation allows the issuance of various types of stocks: a) normal or “ordinary” stocks, with full voting rights; b) stocks with limited voting rights but privileged as concerns the distribution of dividends; and c) stocks without voting rights but privileged as concerns the distribution of dividends and reimbursement. The only limitation is that the sum of b and c cannot exceed 50% of the whole capital.

Mike "Mish" Shedlock

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