By Alec Hogg
Not long ago, investing was mostly about spotting a quality company and locking your shares in the bottom drawer. That was before the world’s leaders started creating money out of thin air. Now all the old rules are there to be broken.
As articulated in some detail yesterday, the nattily named Quantitative Easing has changed everything. As we reflect on the populist waving sweeping through the world, it feels like lessons learned in the build-up to World War Two have been thrown in the dumpster.
___STEADY_PAYWALL___
Increasingly those in civilised countries are reverting to a similar refrain. Things have worked out so badly, voters are embracing change at any cost. Including the high-risk approach of replacing the professionals with amateurs, believing they can hardly do worse.
On Sunday, the Italians are poised to officially join the anti-establishment chorus. They are set to abdicate the responsibility for governing the nation to a stand-up comedian who made his name taking swings at politicians.
Beppe Grillo, a 68 year old with Richard Branson facial hair and a penchant for emotive language, is increasingly fancying himself as his country’s next Premier.
His 5 Star political (M5S) movement that started as a “cyber utopia” party elected its office bearers online, and has become the lightning rod for resistance to Sunday’s Referendum. Italians are being asked to endorse constitutional reforms that narrowly passed through the Italian Parliament.
M5S believe the proposed changes, which will sweep out a third of the Italian Constitution and kill off one of two equal bodies of Parliament, do not go far enough.
Grillo and his colleagues are campaigning for a No Vote to force a general election where it will campaign for a mandate to tell the European Union to shove it – ending its debt repayment schedule and “renegotiating” Italy’s $2.1-trillion in national borrowings.
The anti-establishment party has come a long way in the four years since Grillo swam the two miles between Sicily and the Italian mainland to raise awareness about the M5S cause. A year after he took to the waves, the party secured 91 in Italy’s 630 seat Parliament. Momentum continues to grow. Earlier this year its candidate swept into the Rome Mayor’s office with a staggering 70% of the vote.
Although this all seems far away for South Africans, the Italian experience offers numerous parallels. Both countries suffer from an economy stagnant for years, GDP per capita on the slide and porous borders have seen a growing wave of illegal immigrants – 85% of Italy’s 200 000 a year come from African countries.
Italians, sick of endemic corruption, a stalled economy and bad governance, gave the establishment a last chance in 2014 when installing then 39-year-old Matteo Renzi as Prime Minister.
I was impressed with the Italian leader when among a small group that spent an hour with him in Davos a couple years back. Renzi repeated his promise that he was there to do a job and then leave – so he had no fears of the political consequences in breaking up the bureaucracy, overhauling the judiciary and freeing up small business to get the economy going again.
His biggest challenge, Renzi confided, was driving through constitutional change enacted in 1948 by gun-shy legislators determined to avoid a repeat of Mussolini’s fascism. Italy’s well-intentioned but unworkable twin, equal structures – a Chamber and a Senate – has made passing of laws virtually impossible.
Last year Renzi enjoyed considerable success. After he muscled through legislation to make it easier for businesses to hire and fire employees and slashed payroll taxes, the country created a staggering 580 000 new jobs in 2015. That helped the Italian economy grow for the first time since 2011.
But memories are short. Even those obvious improvements now look unlikely to save him from the anti-establishment forces sweeping the world.
As we entered 2016 it was inconceivable that Italy’s young, media savvy and popular Prime Minister would be usurped by a man almost twice his age who strikes one as a brash version of Trevor Noah. Then again, it would have been equally ridiculous then to consider an American President urging the UK to make right wing icon Nigel Farage its US Ambassador.
To whom the spoils of the anti-establishment in South Africa?
Both opposition leaders Mmusi Maimane and Julius Malema are less than half the age of the man currently running the place, offering Renzi-like appeal. But when it comes to benefitting from this anti-establishment wave, he who wears the red beret possesses a clear advantage.
Not so long ago, most South Africans regarded Malema just like Italians viewed Grillo – as a national joke. On Sunday, the descendants of Julius Caesar are poised to show they think he can’t be worse than the incumbents.
That will add the fresh uncertainty of massive debt “renegotiations” to an already volatile investment environment. Italian banks, already teetering, could be pushed over the precipice. In this interconnected world, that will have a knock on effect in ways we couldn’t consider right now. Expect the unexpected.
