In a recent article ("Justice on trial - Why it is so hard to convict anybody in Italy", 17 March 2007) The Economist provides an "insight into the surreal world of Italian justice. (...) The statute of limitations (...) makes it almost impossible for prosecutors to convict anybody of white collar crimes".

The Economist argues correctly that the end of a trial because of the statute of limitations has recently become an even more probable solution because of the legislation introduced by Mr. Berlusconi in order to defend himself in court.

In addition, the Economist says, a partial amnesty introduced by the Prodi government complicated things even further.

In conclusion, "A report by a body overseeing the judiciary concluded last year that over 90% of trials in the next five years could be pointless".

If, on the one hand, The Economist's description of the surreal world of the Italian justice is perfectly correct, on the other hand I believe that this cannot be separated from an analysis of the surreal world of Italian law. In fact, these are different sides of the same world, and it would be hard to understand the former without analysing the latter.

This article aims at answering three questions: 1) are there some profound reasons that can explain this "surreal world of Italian justice"? 2) why is it convenient for the majority to maintain this surreal world as it is or, worse, to make it even more surreal? 3) what would happen if, ceteris paribus, the "surreal world" of Italian justice became a "normal world"?


The surreal world of Italian law

In my opinion, the answer to these questions is based on the fact that, in Italy, a series of state-generated obstacles is suffocating the perspectives of the country and of the individuals. These obstacles are well known: bureaucracy, corruption, super proliferation of legislation, excessively restrictive legislation, next-to-slavery global effective tax rates, use of public powers to promote private agendas, vested interest networks. What is less known is their magnitude, but this is not the place to analyse it.

Let us focus on legislation only, that is on proliferation of legislation and on how much restrictive legislation is. In particular we can call "excessive legislation" that which, because of its over abundance and its excessively restrictive contents, violates individual freedom beyond the point that is generally accepted.

In a state of excessive legislation, the most natural elements of a free life, such as the principle of private property and that of freedom of contract, are partially or totally negated on a formal level. They cannot be negated, of course, at a real level, and this is the origin of the notorious double layer system of Italian law: a nominal layer which is rarely respected (even by the same authorities who design it) because excessively restrictive, and a real layer which is more regularly respected but is illegal.

Excessive legislation has, among others, the effect of increasing the acts it aims to contain, that is it increases the number illegal acts.


The Laffer curve

Something very similar is described, in economics, by the Laffer curve: if governments increase tax rates beyond a certain level, the resulting effect is an overall decrease of tax-generated cash flow for the government: this because, beyond a certain level, incentives such as those to evade taxes or to re-locate the business abroad increase and the incentives to start a business, or to excel, decrease. Little by little, with some moments of apparent cyclical revival, a country slows down, the spirit of the individuals atrophies, the dependence from the public sector increase until the nation "is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd" (Alexis de Tocqueville, Democracy in America, 1848, Vol 2, p. 319).

I believe that the Laffer curve is a common-sense principle which seems to be valid in many different fields: from medicine to physics: rain contributes to harvest-production, flood contributes to harvest-destruction. And it is valid, of course, as we have seen, also in social sciences.

So we can call "Laffer curve of justice" the application of this general principle in the field of law: if we measure on the y-axis the legal behaviours and on the x-axis the level of coercion, this curve says that an over abundant/excessively restrictive legislation can produce effects opposite to those desired. The closer a legislation is to the highest point of the curve (point B), the closer it is to common sense, and to freedom; vice versa, the closer  a legislation is to the lowest point of the curve on the right (point C), the closer it is to command, or tyranny; the closer a legislation is to the lowest point of the curve on the left (point A), the closer it is to anarchy.



In other words, beyond a certain level, legislation tends to make common sense illegal and therefore to mix up truly illegal behaviours and behaviours based on common sense which are illegal only because of excessive legislation. This produces a mistrust in justice and in the legal system as a whole. As a consequence, beyond that point, incentives to commit illegal behaviours increase and incentives to commit legal behaviours decrease. Worse than that, the glue that keeps together a country tends to disappear.


Who benefits from legislation in point C?

In a "democracy", it is said, if the majority of the people were damaged by excessive legislation in point C, they could vote for other representatives to bring legislation back towards point B. Why is this not happening? Because, in fact, in the short term, it is in nobody's interest.

Unlike point C, point B requires that abstract principles limit commands, and not vice versa. And an abstract principle is valid always and it is intertwined with other related abstract principles.

Mr. Rossi, on the one hand, is quite unnerved by the fact that he is not allowed to make the externalities-free use he prefers of his private property, or to fully use his knowledge for his own purposes. On the other hand, however, he enjoys the fact that the company he works for cannot fire him under any circumstances, and that his son is renting a flat for a length of time decided by the state and that, even after this state-decided contract is expired, he can decide to stay for an undefined length of time, paying the same rent, and leaving more or less when he decides to do so.

Deep inside, Mr. Rossi knows that private property is non-separable and non-distinguishable from the freedom of contract: if he was granted the right to make the externalities-free use that he wishes of his private property, this would mean that his contract with his company, and his son's contract with his landlord, would be also freely determined, because private property implies other abstract principles such as the freedom of contract. So he prefers to maintain his job, his son's apartment, and solve his private property problems "in other ways".

By placing the political debate on the level of interests, rather than on that of principles, modern tyranny has managed to create a mass of men who, in order to defend their mixed and contrasting particular privileges, have given up freedom.


A normal justice in point C: what would happen?

If legislation is in point C, this means that many individuals are potentially "illegal". The "surreal world" of Italian justice The Economist refers to (increase of the statute of limitations, regular amnesties, general slowness of the Italian justice) seems to be a safety net functional to maintaining this double layer system: nominal law is at point C but, because the world of Italian justice is "surreal", in fact this brings it closer to point B.

If the "surreal world of Italian law remained as it is (legislation is at point C: individual freedom is extremely limited) and the "surreal world of Italian justice" was replaced by a "normal world" (no amnesties, no excessive statute of limitations, efficient justice), Mr. Rossi would end up in jail for the common-sense use that he has made of his private property. From one day to the other, jails would be literally exploding. A huge part of the country would be convicted for a series of crimes, a significant part of which would have been generated or induced by excessive legislation itself.

A "normal world of justice" in point C would create something which could be provocatively defined as "revolution": a mass-led pressure for a change of power of such proportions that the current political leadership would be wiped away.

Thus, the "surreal world" of Italian justice is functional to maintaining the deal between the mass-man and today's "democratic politician", to protect the contrasting particular interests of all the different parties, to keep in power the political leadership, to destroy the spirit of individuals and any perspective of excellence or of long term growth.

In other words, the function of this "surreal world" of Italian justice is to give only the illusion of freedom, but to prevent it from establishing itself, because of the costs and responsibilities that this would imply.


Conclusion

In conclusion, I believe that The Economist is right in describing the "surreal world of Italian justice". But in my opinion this description is incomplete (and therefore may give a false idea) if it is not accompanied by a parallel description of the "surreal world of Italian law".

Probably it is not possible to understand one without the other. And I do not believe that it is possible, or even advisable, to improve the former before revolutionising the latter. In other words, I do not think that it is possible to combine true democracy and individual freedom with legislation at point C.



© Institut Hayek, 2007

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