Five Star Movement + How Much Time Left for the Dominant Paradigm, Six Years or Six Decades?

With Hillary being feted this morning as the likely Democratic nominee for president, it might help to cast a glance elsewhere for hope. Good news comes from Italy.  The Five Star Movement's mayoral candidate in Rome, 37-year-old lawyer Virginia Raggi, is polling ahead after the first round of voting.

At about the same time Syriza was rising in Greece, the Five Star Movement (M5S) was on the ascent in Italy. Led by comedian and blogger Beppe Grillo, the new party seemed like the best hope in 2013 for exploding the Brussels hive mind.

Then Syriza captivated the media and the political left; this, combined with M5S's underwhelming showing in 2014 elections for the European Parliament, moved the party off the front burner.

Now -- after the spectacular failure of Syriza, the diffident performance of Spain's Podemos, the rise of right-wing populism in Europe (Austria's Freedom Party is challenging May's election loss), the triumph of the corporate media behemoth over Bernie Sanders' millennials, and many other disappointments -- besides the Scottish National Party, there seems little to celebrate in terms of elections in the West, other than the Five Star Movement. The Brexit vote coming up is a big deal. But the left is split on whether to stay in the EU or go. (I say go.)

I ask people I know who pay attention to the news the following question -- "How much longer can the dominant neoliberal paradigm last?" Everyone so far has replied, "A lot longer." Tariq Ali agrees.

The basic question as I frame it is "Six or 60?" Does the corporate-dominated predatory capitalist system which is vacuuming up all the wealth to the top of the pyramid and destroying the planet survive for six years, say early to middle 2020s, or six decades, at which time many agree that the effects of climate change -- sea-level rise and acidifying oceans -- will demand a huge, paradigm-shifting coordinated response?

The reason I favor the near-term shift is I can't see how the present system lasts beyond four years. First off, the party system throughout the West is collapsing. Granted, charismatic, rejuvenating leadership championing popular policies could rise from within the discredited mainstream Christian Democrats, Labourites, Tories, Socialists and Tea Party Republicans, but there is zero evidence for this. So sooner rather than later a minor party will rise to the top and lead, successfully or not, in such a way that it will create a fissure in the dominant paradigm. If not a Brexit on June 23, then Marine Le Pen in 2017 or Alternative for Germany. An EU subservient to U.S. global hegemony becomes much harder to imagine.

Secondly, the U.S.-led warfare state cannot keep multiplying and maintaining its many theaters of conflict. The fall of Saigon led to an adjustment and correction in the way that the U.S. conducted war. There was a decade-plus pause and reset. Does the fall of Kabul lead to the same type of timeout? Unlikely. But there is a limit to what the U.S. can manage in the way of mayhem. Already the blow black from its wars in the Middle East  and North Africa is diminishing support for the major parties of Europe.

Below is a helpful primer on the Five Star Movement that appeared a couple days ago on the Europe Online web site. Having kept an eye out for M5S over the last several years, I find it accurate:

No laughing matter: Italy's comedian-led Five Star Movement

Rome (dpa) - Italy‘s Five Star Movement (M5S) is one of the most successful anti-establishment parties in Europe, whose main rallying cries are clean politics, direct democracy, euroscepticism and basic income support for all.

"We are normal citizens like you, and this normality is scary" for the establishment, Virginia Raggi, who topped a first round of elections for the Rome mayoralty on Sunday, said at her closing campaign rally last week.

Founded in 2009 by Beppe Grillo, a stand-up comedian, and Gianroberto Casaleggio, a shadowy internet consultant who died in April, the M5S shot to national prominence after taking a surprise 25 per cent of the votes in the 2013 general elections.

The movement defies left-right categorizations, and shuns alliances with other parties, which it sees as fundamentally corrupt. It is also critical of banks, big corporations, free trade agreements and wants a referendum on Italy‘s exit from the eurozone.

The movement‘s defining characteristic is its reliance on internet consultations among its supporters to select its candidates and political priorities, which are communicated online via Grillo‘s blog.

But critics have accused Grillo and Casaleggio of using the system arbitrarily and quashing internal dissent. Out of the 163 M5S lawmakers elected in 2013, some 37 have either been expelled or have walked out of the party.

In 2014, the M5S hoped for an electoral breakthrough in elections for the European Parliament, which did not come. It won 21 per cent of the vote, against a record 41 per cent for the ruling Democratic Party (PD).

In this month‘s local elections, the M5S led polls in Rome and came a strong second in Turin, but fared poorly in other big cities like Milan and Naples, suggesting that it still has some way to go before building a strong national base.

In the EU assembly, M5S lawmakers have formed the Europe of Freedom and Direct Democracy group with the British eurosceptic UK Independence Party (UKIP) and the German anti-immigration Alternative for Germany (AfD) party.

The death of Casaleggio, who acted as a behind-the-scenes strategist, has raised questions about the future of M5S, but plans to prepare a younger cadre of party members to take over the leadership have been under way for some time.

After saying in 2014 that he was "a bit tired," Grillo has cut down on campaigning, giving more space to the M5S‘ rising stars, such as lawmakers Alessandro Di Battista and Luigi Di Maio. Tellingly, the 67-year-old comic stayed out of Raggi‘s campaign finale in Rome.

Di Maio, a 29-year-old deputy speaker of the lower house of parliament, is seen as the most likely M5S prime ministerial candidate for the next general elections, due within the next two years. Grillo has always refused to run for office.

Massive System Failure

The political system in this country is failing. The GOP is fracturing along a Tea Party Bircher versus Rovian establishment fault. At the end of last month longtime political commentator Thomas Edsall, wrote a story, "The Republican Autopsy Report," that appeared on the New York Times "Opinionator" blog. In it he discusses a 97-page post-2012 election assessment commissioned by RNC chairman Reince Preibus:

The G.O.P. report is an extraordinary public acknowledgment of internal discord and vulnerability, which has intensified the battle between the deeply committed conservative wing and the more pragmatic, pro-business wing for control of the Republican Party. With just a few exceptions, it does not mince words. 

At the federal level, it says, the party is “marginalizing itself,” and, in the absence of major change, “it will be increasingly difficult for Republicans to win a presidential election in the near future.” Young voters are “rolling their eyes at what the party represents.” Voters’ belief that “the G.O.P. does not care about them is doing great harm.” Formerly loyal voters gathered in focus groups describe Republicans as “ ‘scary,’ ‘narrow-minded’ and ‘out of touch’ and that we were a party of ‘stuffy old men.’ ”

What's going on is the GOP establishment, which made a Faustian bargain with the Tea Party to combat the Obama tidal wave following the 2008 election, is now, with Karl Rove still the #1 strategist, attempting to eradicate the Bircher jihadists:

More broadly, the alliance between Rove and the R.N.C. does substantiate the view that establishment forces are driving the reform movement within the Republican Party, an establishment that includes much of corporate America, including the Chamber of Commerce, the Bush family and its allies, and the more moderate, traditionalist donor community. 

Conservative analysts like Timothy P. Carney of the Washington Examiner and Ramesh Ponnuru of the National Review quickly spotted the establishment tilt in the Priebus report. Carney wrote:

Republican elites tend to favor mass immigration and be ambivalent or supportive of legal abortion and gay marriage. So, shouldn’t we take it with a grain of salt when the Republican leadership puts out a document saying that the G.O.P. should change only its rhetoric on economic issues, but change its substance on social issues?

Similarly, Ponnuru wrote that the recommendations “come naturally to Republican elites” who “are more likely to favor same-sex marriage and comprehensive immigration reform on principle.” The report reflects “elite conventional wisdom perfectly, just perfectly.” 

In January, I pointed out that “If the conservative movement continues on its downward trajectory, the American business community, which has the most to lose from Republican failure, will be the key force arguing for moderation.” 

That moment has come. The Priebus report and Rove’s Conservative Victory Project together mark a significant escalation in the battle between the center and the right over the soul of the Republican Party. What has yet to be determined is whether they are fighting over a patient who can be quickly resuscitated or a patient with a chronic but not fatal illness — or a corpse. 

The very bluntness of the Growth and Opportunity report reflects the seriousness of the moment the Republican Party faces: increasing difficulty holding on to its House majority; weakening prospects of regaining control of the Senate; and the threat of unending Democratic control of the White House.

For the Democrats it appears that it is TINA ("There Is No Alternative") to Obamaism, which after much hope and longing on the part of a progressive majority in this country seems to be nothing more than Clintonism. Obama's failure to get a gun control measure out of the Senate along with his proposal to chop Social Security benefits presage an impotence -- a mere six months after his landslide reelection -- that can only grow more pronounced. The AFL-CIO is rapidly shrinking and looking to overhaul its organizing model. How many times have we heard that before? So there is no hope there. Occupy Wall Street, barring another economic meltdown, is unlikely to recapture its former glory.

I was looking to Cyprus to show us a way forward by voluntarily rejecting the euro. We need courage, experimentation. But in the last couple of weeks there is no indication that this will happen. So for now it appears that our best bet is Beppe Grillo's Five Star Movement. Rachel Donadio has an excellent story, "President of Italy Nominates Center-Left Official as Premier," in today's paper about the latest political developments in Italy. Luigi Bersani resigned the leadership of the Democratic Party after two months of unsuccessfully attempting to form a government and getting his presidential candidates to succeed President Giorgio Napolitano. With no resolution on the horizon, the 87-year-old Napolitano agreed to serve another term and was reelected. Now, as Donadio reports,

After months of political paralysis capped by a week of turmoil, President Giorgio Napolitano on Wednesday named Enrico Letta, a high-ranking official in the center-left Democratic Party, to form a broad coalition government to try to steer Italy out of political chaos and its worst recession since World War II. 

And former Prime Minister Silvio Berlusconi, the great survivor of Italian politics, emerged as a kingmaker by default, having outlasted most of his adversaries. 

“It’s undeniable that this is a victory for Berlusconi,” said Giovanni Orsina, the deputy director of the School of Government at Luiss Guido Carli University in Rome. “He got what he asked for, from Napolitano’s re-election to a political government with broad, bipartisan support.”

Like the current Greek government, a three-party coalition in which historical enemies on the left and right have joined together out of fear of extinction and a lack of viable alternatives, Mr. Letta is potentially the last gasp of a political cycle that in Italy began in the early 1990s with the collapse of the postwar political order and the rise of Mr. Berlusconi.

The party system is collapsing. Television is said to have led to the erosion of political organization in the United States. Now TV is being replaced by the Internet. Life is migrating online. Is this good or bad? Judging from the stasis of the status quo one can only conclude that so far it's not good. We might be at the point where there is so much information available that we are paralyzed -- the "dream machine" that Jean-Francois Lyotard predicted in his seminal La Condition postmoderne: Rapport sur le savoir (The Postmodern Condition: A Report on Knowledge) (1979).

We Need New Political Formations

Today's Economic Scene column by Eduardo Porter, "From Mexico, Some Lessons for Europe," looks at Europe's allegiance to austerity and compares it to Mexico's attempt to deal with its sovereign debt problems in the 1980s. Porter was a college student in Mexico City at the time. 

Tweak a few of the details and Mexico in the 1980s looks a lot like most Southern European countries today. In Mexico’s case, runaway government spending in the 1970s, fueled by high oil prices and greased by foreign debt, threatened to bankrupt the country after the Fed sharply raised interest rates to curb rampant inflation in the United States, increasing Mexico’s interest payments even as oil prices crashed to earth. 

Similarly, money poured into Spain and Greece when investors persuaded themselves that the bonds of all members of the euro zone should be as safe as Germany’s, the region’s most creditworthy country. In Greece, this allowed a government spending binge. In Spain it ignited a housing bubble. Both countries were left with an unbearable burden when the world economy hit a wall, creditors took flight and the money stopped.

In the five-plus years it took me to get a degree (Mexican degrees take longer) the Mexican economy contracted about 2 percent. By the time I got my graduate degree two years later, gross domestic product per person was 8 percent less than it was in 1982. Yet despite the enforced austerity, Mexico’s foreign debt in 1988 still amounted to 56.5 percent of Mexico’s economic output, more than it had six years before. 

This must sound familiar to Europe’s unemployed. If anything it’s far worse there. The Greek economy has shrunk more than a fifth over the last five years. Government debt amounts to about 170 percent of the economy; it was 100 percent when the crisis started. The economies of Ireland, Portugal, Spain and Italy are smaller, too, than they were five years ago. Their debt burden is heavier. And still, European leaders insist that more of the same must be the solution.

Porter says that Brady Bonds helped solve the Latin America debt crisis, but then he questions the applicability of a similar solution in Europe's case:

What can Europe learn from this experience? Proponents of austerity will probably note that the harsh years planted some of the seeds of Mexico’s recovery. Bankers will remark that Mexico’s absolute debt reduction package was small — much less than the 50 percent or so already granted to Greece. Economists will note that Mexico had a degree of freedom that no member of the euro area has: it could devalue its currency to gain export competitiveness. 

Nonetheless, the Brady plan was a crucial ingredient. It not only reduced Mexico’s interest costs, it also produced a jolt of confidence that pushed down domestic interest rates and buoyed the peso — reducing the burden of foreign debt. It prompted flight capital to return to the country and set off an investment boom.

The cold war, Porter argues, was a critical ingredient in getting the nations to agree to debt restructuring. Leaders in the West were afraid of Mexico tilting socialist.

The only hope of that we have today is for a genuine transformation in our politics. Occupy Wall Street for a month or two in the fall of 2011 fulfilled this hope. Political parties are captured by business-as-usual money; we need a clean sweep. Then, as a result of a police crackdown and the presidential election of 2012, Occupy evaporated seemingly overnight. Now, from what I can tell, our best hope for a political reboot is Italy's Five Star Movement.

Rachel Donadio has a story this morning, "Upstart Party in Italy ‘Occupies’ a Parliament That Is Already Paralyzed," about the continuing gridlock in Rome. The parties can't form a government and soon there will be an election to select a new president:

The pressure is rising because the seven-year term of Italy’s 87-year-old president, Giorgio Napolitano, ends in May, and his replacement must be elected with a two-thirds majority of the same divided Parliament.

Italy’s Constitution forbids a president to dissolve Parliament and call new elections in the final six months of his term. 

The presidency has traditionally been a largely symbolic office, but Mr. Napolitano has become a bulwark against political instability. Last month, he named a committee of 10 politicians, experts and technocrats and asked it to produce a list of issues on which the squabbling parties could find consensus. They are expected to issue their findings this week.

On Tuesday, some of the Five Star Movement lawmakers “occupied” the Senate, meaning they remained in their seats after the day’s session. The group said they would stay until midnight to protest a decision by the presidents of the Lower House and Senate not to form permanent committees until Parliament forms a government. 

They passed the time by reading aloud from a legal code. 

Mr. Grillo, who does not serve in Parliament but runs the Five Star Movement with what critics say is an autocratic hand, accused the two parliamentary leaders of having carried out “a coup” by blocking the creation of committees.

The last paragraph of Donadio's story is not encouraging:

Mr. Bersani [leader of the center-left Democratic Party] has so far failed in his efforts to try to persuade some of the Five Star lawmakers, all of them first-time politicians, to support a center-left coalition. But as time passes, the movement appears to be splintering and may not vote as a bloc.

New political formations are hard to hold together. Grillo is smart to keep the Five Star Movement in motion doing actions like its occupation of the Senate. My experience with the Green Party coming out of the 2000 presidential election is that we did not do enough actions to keep people focused and engaged. We spent our time in a tedious bylaws revision process which lasted months, created division and killed any flame. So far the Five Star Movement seems to be avoiding these mistakes. The best thing for the Five Star Movement would be new elections as soon as possible.

Austerity in Italy and Rise of the Five Star Movement

Austerity's destructiveness is brightly illuminated in today's story, "On the Brink in Italy," by Liz Alderman; usually a faithful apologist for neoliberalism, her devotion is beginning to fray at the edges. Alderman looks at Temeca, a woodworking factory in Guidonia owned by the Tedeschi family, to see how austerity, implemented by Mario Monti (trounced in the recent elections), is working for the Italian people. The answer? It's not:

Since a government austerity plan designed to shield Italy from Europe’s debt crisis took hold last year, the economy has tumbled into one of worst recessions of any euro zone country, and Mr. Tedeschi’s orders have all but dried up. His company, Temeca, is still in business. For now. 

But among Italy’s estimated six million companies, businesses of all sizes have been going belly up at the rate of 1,000 a day over the last year, especially among the small and midsize companies that represent the backbone of Italy’s 1.5 trillion euro, or $2 trillion, economy.

One in two small companies cannot pay its employees on time, according to CGIA di Mestre, a research institute. With layoffs surging, unemployment rose to 11.7 percent in January. Youth unemployment has jumped to 38.7 percent. 

The austerity program was intended to reduce the risk of a debt crisis and ensure the backing of the European Central Bank, but instead it left the country with no growth. And without growth, Italy will have a harder time paying down its 2 trillion euros ($2.6 trillion) in debt, one of the largest debt burdens in the euro zone.

Tedeschi was forced to lay off workers:

“When I had to fire those people, I cried,” he said, sitting in his small office under a picture of Mother Teresa as his wife, Annarita Neroni, and his son, Lorenzo, looked on. Mr. Tedeschi said several members of a local trade group took their own lives last year when they could no longer maintain their business. 

“This is a moment where if you stay alone in this situation,” he said, “you will wind up by shooting yourself.” 

Mr. Tedeschi’s wife said the family stopped drawing salaries more than a year ago to make payroll for the remaining workers. Disillusioned with the economy’s rapid erosion under Mr. Monti, the family voted for the anti-establishment Five Star movement, led by the comedian turned activist Beppe Grillo, in the February elections, even though they knew it might lead to chaos. 

“It’s a form of protest,” Lorenzo Tedeschi said, adding that he had been drawn by Mr. Grillo’s plan to cut billions of euros in corruption and wasteful spending. “We need to start from scratch in this country, and he gives us hope that there is a chance to make things equal.”

It's been a great story so far. Alderman has marshaled the facts and woven them in a compelling way with the real-life story of the Tedeschi family business. But with the mention of Grillo she can't contain herself. Responding to Lorenzo Tedeschi's sentiment that a vote for the Five Star Movement is a vote for a chance at equality, Alderman replies,

That may be tough, given that the discord Mr. Grillo created is likely to delay a recovery. Few people believe that official forecasts of a return to mild growth this year will materialize.

As if Grillo created the discord; as if things were proceeding smoothly until he arrived on the scene; and now, well, there goes the recovery that the heroic Monti steadfastly engineered. Why can't people accept destitution and marginalization if, as European Union president Jose Manuel Barroso asserts in a letter to EU leaders, "Steadfast implementation of reforms is beginning to deliver results in terms of current accounts and regaining competitiveness." Can't they see that a sense of self-worth and a modicum of personal security are tangential to the great god Competitiveness?

"Federal Reserve Has Done a Good Job Lifting the Market"

Read Nelson Schwartz's frontpage article today, "Recovery in U.S. Is Lifting Profits, but Not Adding Jobs." After quoting a Bank of America Merrill Lynch executive who dismisses the likely impact of the sequester on corporate profits by saying, "the market wants more austerity," Schwartz outlines our new, post-meltdown economy:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays. 

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation. 

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

Businesses are socking away productivity gains as profit. Workers are laid off rather than seeing a wage bump. Check out this naked capitalism post from Saturday, a Real News Network interview with Dr. Heiner Flassbeck of Hamburg University. Flassbeck is talking about the negative impact of the sequester on employment and wages. But what really struck me were the graphs accompanying the interview showing the huge productivity gains over the years with an almost complete stagnation in wages. The promise of twentieth century capitalism was that workers would share in productivity gains. This promise has been repeatedly broken for the last three decades. Capitalism is a failure for the 99%.

The last three paragraphs of his story Schwartz explains the phenomenon of the skyrocketing stock market:

The Federal Reserve has also played a crucial role in propelling the stock market higher, economists and strategists say, even if that was not the intent of policy makers. The Fed has made reducing unemployment a top priority, but in practice its policy of keeping rates very low and buying up the safest assets to stimulate the economy means investors are willing to take on more risk in search of better returns, hence the buoyancy on Wall Street amid the austerity in Washington and gloom on Main Street. 

Of the broader market’s 13 percent rise in 2012, about half was a result of the Fed’s actions, Mr. Harris of Bank of America Merrill Lynch estimates.

“The Federal Reserve has done a good job stimulating financial conditions and lifting the market,” he said. “It’s been less successful in stimulating job growth.”

For a dire prediction of what will happen in the next couple of months check out Chris Martenson's post on the Counterpunch web site this past weekend, "Warning: Stocks Likely to Crater from Here":

The summary here is that if stocks do indeed retreat from here, a triple-top failure will deliver quite a punishing blow to the current efforts to repair the public’s trust in the stock market as a place to send their hard-earned savings to grow. It would be quite difficult to engineer a run at a fourth top, given the importance of retail participation in providing fuel for the rise of stocks – especially given that the boomers are retiring at the rate of 10,000 per day and drawing upon their investments instead of adding to them.

The younger generation(s) have been the main victims of the high unemployment and general wage stagnation that have been the hallmarks of the Great Recession. It is not likely that they will be able to save and invest at a rate equal to the boomer’s withdrawals, creating one more equity headwind for the Fed to overcome.

I think this is right. I think if there is a significant drop in the market then due to structural issues of our new economy -- unemployment, massive student debt, boomers leaving the workforce -- it will be difficult to mount another quick run to the top. I think that a significant drop in the market will be sparked when a large nation, like Italy, leaves the eurozone. If you read Liz Alderman and Elisabetta Povoledo's frontpage article on Beppe Grillo and his Five Star Movement, I think you'll come away, as I did, thinking that Grillo is a formidable politician. The question is does he really want Italy to scrap the euro. I think he does; I think he sees that it's the only way out of the widening gyre of Brussels-Berlin mandated austerity.

The Austerity War

We're in the middle of a war. The war is between capital and labor. But what's strange about this war is that capital has lost faith in capitalism, at least the kind of modern capitalism of Keynesian economics as practiced in the twentieth century. How else to explain this lust for austerity, for steep cuts in government spending, while there is still high unemployment and low and slow growth? The only thing that makes sense is that the 1%, the plutocrats who control the Republican Party, no longer believe that capitalism can deliver high and persistent growth; so they're engaged in a smash and grab. The idea is to destroy the post-war Keynesian capitalist system as soon as possible and suck up all the resources; then hope that twenty-first-century technology can lock everything down in a way that was not possible for the robber barons of the nineteenth century.

Let's recall the last two years. First, we had the debt-ceiling crisis in the summer of 2011. Markets crashed, Standard and Poor's downgraded U.S. debt, and Obama signed off on huge government spending reductions while kicking the can of additional cuts down the road. Then in the fall of 2011 you had a big push back in the form of Occupy Wall Street which spread around the globe before sputtering out in the winter, giving way to the 2012 presidential campaign. Obama ran as a stalwart defender of post-war social democracy, and he won a historic election. He took that win into negotiations with the GOP on the fiscal cliff  and came away with a win; not a resounding victory, but a win. The 10% across-the-board reductions in federal spending that are a hold over from the summer 2011 debt-ceiling standoff got delayed until now. And that's where we are.

Binyamin Applebaum does a nice job in a frontpage story today of explaining how significant our current embrace of austerity is:

The federal government, the nation’s largest consumer and investor, is cutting back at a pace exceeded in the last half-century only by the military demobilizations after the Vietnam War and the cold war. 

And the turn toward austerity is set to accelerate on Friday if the mandatory federal spending cuts known as sequestration start to take effect as scheduled. Those cuts would join an earlier round of deficit reduction measures passed in 2011 and the wind-down of wars in Iraq and Afghanistan that already have reduced the federal government’s contribution to the nation’s gross domestic product by almost 7 percent in the last two years. 

The cuts may be felt more deeply because state and local governments — which expanded rapidly during earlier rounds of federal reductions in the 1970s and the 1990s, offsetting much of the impact — have also been cutting back. 

Federal, state and local governments now employ 500,000 fewer workers than they did on the eve of the recession in 2007, the longest and deepest decline in total government employment since the aftermath of World War II.

Yesterday in Senate hearings Bernanke had to defend the Federal Reserve's policy of quantitative easing against sniping from some Fed officials and Republicans. This from a story by Binyamin Applebaum that appears on the business page today:

Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors, wrote that the testimony amounted to a “robust defense” of the aggressive efforts by the Federal Open Market Committee that “gives no ground to those within and without the F.O.M.C. who think asset purchases will soon need to be curtailed.” 

The reception on Capitol Hill was frostier, as several Republican senators challenged Mr. Bernanke’s assertion that the purchases were producing clear economic benefits, and questioned the potential costs. Senator Bob Corker, a Tennessee Republican, drew Mr. Bernanke into an unusually sharp exchange. 

Mr. Corker, asserting that low interest rates were “throwing seniors under the bus,” by reducing returns on some kinds of investments, asked Mr. Bernanke, “Do you all ever talk about the longer-term degrading effect of these policies?” 

“One thing we talk about is unemployment,” Mr. Bernanke responded. He added that the best way to increase interest rates was to increase growth. 

Mr. Corker then accused Mr. Bernanke of insufficient concern about potential inflation, saying, “I don’t think there’s any question that you would be the biggest dove since World War II,” using the term “dove” to denote a Fed official who is more concerned about unemployment than higher inflation. 

Mr. Bernanke, clearly piqued, responded, “You call me a dove, but my inflation record is the best of any chairman in the postwar period.”

And for a flavor of the direction that we are headed in check out the postmortem on Italy's election by Liz Alderman and Jack Ewing:

Few experts anticipated the depth of anger displayed by Italian voters over the austerity that Mr. Monti, the technocrat beloved by other European leaders but resented at home for pushing tax increases and spending cuts, represented. The electorate chose two men convicted of crimes — Mr. Berlusconi and Mr. Grillo — over the one Italian leader in whom the rest of Europe had put great faith. 

Mr. Monti initially resisted Ms. Merkel’s harsh austerity prescription, warning that it would stifle growth. But he nonetheless pushed a number of measures that reflected the Merkelian view that prudent finances were the fastest way to reduce Italy’s staggering debt and restore its reputation with international investors. In the end, Ms. Merkel’s embrace played a big part in Mr. Monti’s undoing. 

“The fact that Merkel was so involved and interested in our elections — her support was very negative for Monti’s fate,” said Tito Boeri, an economist at Bocconi University. “There is no doubt that in the Italian campaigns and vote there was a clear message against Europe.” 

Since the euro zone crisis began in 2010, European voters have generally shown remarkable forbearance in the face of recession, soaring unemployment, tax increases and cutbacks in government services. Ireland, Spain, the Netherlands, Greece and, last week, Cyprus chose centrist governments that offered the best chance of staying in the euro zone. 

Italy may just be being Italy. But this latest vote may be a sign that Europeans are reaching the limit of their patience. Experts said the developments here served as a warning that a new round of economically driven political turmoil could confront the Spanish prime minister, Mariano Rajoy, and France’s president, François Hollande. Both have grudgingly adopted austerity to keep the euro crisis at bay, despite recessions and rising unemployment. 

Italy, for its part, is mired in a recession that so far has lasted a year and a half. The economy is expected to contract further before improving — largely, many Italians say, because of a host of tax increases and spending cuts that Mr. Monti put in place. 

And like other countries, Italy is finding that austerity is making it harder, rather than easier, to stoke the growth needed to reduce the mountain of debt that set off the euro zone’s crisis in the first place. Its gross debt is expected to peak above 128 percent of gross domestic product this year — the highest level in the euro zone after Greece, and up from 126 percent last year.

Either austerity goes or the euro zone starts to disintegrate. There is more electoral freedom in Europe's multi-party parliamentary system than we have here. Syriza is likely to win the next election in Greece. In the United States, Obama has to step up. If he does not, if he becomes Clintonian in his second term, we'll see a big push for a third party that will equal or surpass the Nader-LaDuke challenge of 2000.

Austerity Suffers Defeat at the Polls in Italy

It's hard to believe that the results of Italy's election yesterday caused a 200-point drop in the Dow, as is being reported in a story today by Rachel Donadio, "Split Vote in Italy Brings Political Deadlock." This outcome, underperformance by the Democratic Party of Pier Luigi Bersani along with continuing support for Berlusconi's People of Liberty Party, has been predicted for months. The wild card was the Five Star Movement of comedian (and blogger!) Beppe Grillo. And, as Donadio writes,

The outstanding success of the elections was the Five-Star Movement of comedian Beppe Grillo, which led a grass-roots and Web-based campaign and won more votes than any other party, with about 25 percent of the ballot. The group drew support from a powerful protest vote as Italians from both right and left — and the wealthier north and poorer south — were drawn to Mr. Grillo’s opposition to austerity measures and appeal to oust the existing political order. It has indicated that it is not inclined to form a governing alliance with Mr. Bersani or Mr. Berlusconi.

The big loser? Mario Monti, who Paul Krugman referred to in his column yesterday, "Austerity, Italian-Style," as "the proconsul installed by Germany to enforce fiscal austerity on an already ailing economy." According to Donadio,

The election offered a stinging defeat for Mr. Monti, the caretaker prime minister, a newly minted politician whose lackluster civic movement appeared to win around 10 percent in both houses. “Grillo had a devastating success; the rest of the situation is very unclear,” said Stefano Folli, a political columnist for the daily business newspaper Il Sole 24 Ore. 

“No doubt Italy has an imperfect political culture, but this election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” said Simon Tilford, the chief economist of the Center for European Reform, a London research institute. 

“People have been warning that if they adhere to this policy there will be a political cost, there will be backlash,” he added. “It couldn’t have taken place in a more pivotal country.”

We don't often get an outbreak of democracy. And without a doubt the grand coalition of Bersani and Berlusconi will be a disappointment. But Beppe Grillo's political movement is a hopeful development. Austerity will not be beaten back with one election, but it lost a battle yesterday in Italy.