This Forum was given the title "Economy and Open Society". The expression "open society" comes from Karl Popper and I assume that the organizers of the Forum intended to place the forum discussions in the wake of his thought. A fascinating aspect of Popper's intellectual work is his idea of error. One can say that most of his thinking is founded on the positive value of error, and on the mechanisms through which error can be corrected. His theory of scientific knowledge is based on 'falsifiability': that proposition is scientific that can be demonstrated to be false. His concept of politics is founded on the same idea: democracy is the regime in which people can get rid of a bad or unwanted government in a bloodless, peaceful manner; it is not the regime which assures the best government, it is the one which provides the means for changing a government judged not good. So, in economics too Popper's idea is that the market is the most efficient and civil mechanism for correcting errors, in this case errors of economic judgment. For the three great categories of human activity and associated life - knowledge, power and, we could say, the faculty to possess or to produce - Popper proposes the same basic idea: the construction of associated life founded on the acceptance of the fact that errors can be made, and that it would be very dangerous to try to build a society on the opposite premise, that of infallibility. This is, in my opinion, the most fascinating element in Popper's thought.
The juxtaposition of economy and politics is quite old, and refers to the relations (I make again reference to the three human activities mentioned above) between the economic and the political activity. The category of the first is wealth, the pursuit of a particular interest, that kind of miracle, as Adam Smith explained, by which if everyone is free to pursue one's particular interest within a system of rules, a surplus of collective well-being is generated: passions, if well guided, turn into virtues. Politics is the sphere of power and general interests.
The key point is then the relation between general and particular interest. This is the very concrete theme that we must face when we operate in one or the other field: economy and politics. I would pose the question in these terms: What part shall general interest play for those who operate for a particular interest, that is, in the world of enterprise?
No doubt, an entrepreneur's ethics consist first of all in doing his job properly. I remember an interesting sentence in E. Olmi's film The profession of arms, where the condottiere Giovanni Delle Bande Nere says, immodestly: "If I had chosen to be a priest, I would have become Pope". Meaning: my ethics is to be a good condottiere, hence my duty is to kill, fight and defeat the enemy; if I had done another job, I would have attained excellence in that one too. The entrepreneur's ethics implies the pursuit of a particular interest.
Three answers can be given to the question, i.e. which part shall general interest play for those who operate for a particular interest?
The first is: no part. I do not agree with this answer. If general interest is a matter for specialists, i.e. for those who work in that special sector that is general interest, then society is ruined. Paul Claudel once said: "La tolerance? il y a des maisons pour ça"1. Some argue that there are people who are entrusted with general interest, and the others should not care. I don't think so. On the contrary, I always said and wrote that everybody has the duty to care for general interest, and in particular those who are part of the leading class, i.e. those whose actions and whose judgements have a wider range of influence than the field they operate in. In his essay on the Italian customs, the poet Leopardi tackles this issue, and calls "narrow society" what I just called the leading class: entrepreneurs, managers, judges, journalists, professors, artists, people who have reached a position of responsibility in their field. I do not believe that, for Popper, the open society is a society where 'there are houses for tolerance'.
A second possible answer is: general interest shall prevail over the particular interest in the action of an individual. I view this position as dangerous. Some tragic events of the 20th century are indeed rooted in the idea that there is a general interest, in the name of which a tyrannical regime is justified. There ensues that society, instead of being open, is choked by the oppression of a general interest that, in the end, nobody knows which it is, who chooses it, and how it is chosen.
The economists would say that those two answers are the corner solutions: no room or a systematic pre-eminence. The most convincing answer in my opinion is: the right space. I am aware that this indication is difficult to put in practice, requires to examine things case by case, and poses problems of conscience; but ultimately this is our task as citizens, and I do not believe that difficulty should be considered a disgrace. General interest is not the interest of a few who are entrusted with it, confined - like tolerance - in a dedicated house called, with a certain disdain, the Palace; it is a part of the interest in each of us, as a person, as an entrepreneur, as well as intellectual, art critic, trade union leader, teacher and so on.
The two worlds, politics and economy, are not strangers to one other, like two solar systems whose gravitational forces have non-interfering fields. If general interest is to have the right space, the right part, and if, on the other hand, in a free economy, the particular interest must be respected by those operating in the institutions for general interest, then these two worlds must speak to each other, and must do so by being aware of their tasks and respecting their interlocutor's. They have to speak to each other, as they used to say in the old days, as willing adults, among whom nothing illegal is committed: they talk and afterwards everybody takes their responsibility; it is right, or better yet a duty, that each explains to the other, with force and determination, his reasons for the interests he is pursuing in the first place, respecting the other sphere of interests that society requires to the same degree.
I could present a few cases where the problem of a correct relationship between politics and economy, between general and particular interest, recently presented itself in concrete terms in the exercise of my function. There are big joint-stock companies, some wholly private, others wholly public, others with a mixed property, which have one element in common: for the sector they operate in, or for their size, or for other reasons, their activity and their property arrangement may, under certain circumstances, be of special significance in the light of general interest. I believe that it is not only a right, but also a duty, for the government to make up its mind about the "ifs" and "whats" of such a general interest, and eventually take it upon itself to represent it in appropriate forms.
In my present function I found myself in the situation of both defending the reasons of the companies (i.e. of economy) from the intrusion of politics, and having to protect the reasons of politics (i.e. of general interest) from the intrusion of economy: two gravitational systems whose force fields have some points in common.
I would like to stress a key point, to which I have not heard any reference made in recent debates. In its fundamental aspects, the question of a correct relationship between politics and economy in the occurrences of big companies presents itself in very similar terms whatever the property arrangement of a company. Obviously, when the State is the controlling shareholder, the Government has instruments that it does not have when the control is in private hands. But in both cases the State must operate in the interest of the enterprise as such. In my opinion it would not act with fairness if it impoverished the company in the name of the public good, or if, on the contrary, it artificially kept a losing company alive, by providing it with resources taken away from the taxpayers. In any case, this practice is forbidden by the rules of the Treaty of Rome.
Finally, speaking of general interest, the problem gets even more complex if we ask ourselves what the meaning of that adjective is. Depending on the matter one is dealing with, and the public responsibility one is vested with, that adjective may in fact be referred to a City, a Region, the State, the European Union, the world (think of the WTO). Each of these domains is the place of interests that can rightly be called general. The general interest, then, is in turn a mix of different general interests; and often the same interest is 'general' if seen from below and 'particular' if seen from above. The elements of that mix are not ordered nor coordinated with each other, except in a clearly federal order that does not exist today on the Italian scale, nor on the European, nor, even less so, on the planetary level.
One could think that, while general interest is a mix hard to grasp, particular interest is easy to define, as it applies to a single, unitary, well-delimited subject, like an individual or a company. This too is perhaps an illusion, because an individual is part of a family, a company has many shareholders and stakeholders. Moreover, a particular subject operates in an imperfect world, where other subjects exist and interact with him. Democracy (in the case of politics) and the market (in the case of economy) do not organize human collective life so perfectly as to assure that their rules can solve any doubt on "what to do", and prevent any mistake. On the contrary, according to Popper, they are regimes founded precisely on the premise that error is, as I said in the beginning, in the very nature of human action, and thus requires methods for correcting it, not for eradicating it.
I will take an example from my present experience. I do have strong European convictions and not-less-strong convictions on the matter of markets. I dedicated a large part of my active life to the attempt to contribute to the construction of a united Europe and to the creation of markets where they were not present. Today, the general interest I have chosen to serve is that of my own country, exactly like a mayor must pursue the interest of his own city.
Well, it is not a simple task to operate in line with both the European and the market principles, because at present Europe often forces me to reduce, not increase, the openness to the market of companies and practices operating in our country. In applying today the EU directive on takeover bids, the dilemma is whether to leave as it is the Italian law, which is more open to the market than the European - with the consequence of generating a significant asymmetry between a possible takeover bid against Italian companies and a takeover bid against competitor companies in other countries -, or to reduce the level of openness to the market of Italian law in order to abide to a European directive. An utter absurdity. Another example: the principle of keeping separate the distribution networks and their distributed good or service (electricity, gas, railroad traffic and so on) is applied in the EU in an incomplete fashion, that does not prevent a national quasi-monopolist from exploiting the possession of a network to its own advantage. Italy opened itself to Europe more than some neighboring countries did, and in doing so it has exposed Italian companies to the competition of other companies to which their country of origin guarantees advantages that they do not have. Another absurdity, and I could give more examples of the same kind.
In conclusion, why is simplicity a merit? Because the world is complicated, and our mind looks for order. We tend to order because the world appears to us as disordered. Disordered economy, disordered politics. If we pretend to bring order to the world, to make it simple, we make a mistake, the very same mistake denounced by the great figures of liberal thinking of the 20th century: Popper, Einaudi, Hayek, Robbins and others. The market is chaotic, it is always unbalanced and dominated by what the economists call rumors. The same thing can be said of political life. If we neglect this fact, if our analyses depict the world as naturally ordered, and only perturbed by some mistakes we may make, then we go from simplicity into a simplistic view.
1 In French, lit. "Tolerance? There are houses for that"; but it is a play on words in French, because 'Maison de tolerance' means 'a legal brothel'
* The article is the second part of a lecture given in Milan (Italy) on May 11, 2007, in a Forum organized by Bocconi-Corriere della Sera. The author is presently the Minister of Economy and Finance of the Italian government.