Dominant theories have been known to stand for some time after overwhelmingly disconﬁrming evidence against them is discovered. Galileo is not the ﬁrst scientist to have discovered this unfortunate fact, though he is often credited with the most memorably disgruntled riposte to it. After being forced to recant his theory that the earth revolved around the sun, he is alleged to have mumbled to himself ‘Eppure, si muove’ (And yet, it still moves) – the earth, that is, against the expectations of the dominant geocentric theory of Galileo’s time. What is striking about the pattern of concentrated share ownership in
Italy is not that it moved between 1996 and 2005, but that it did not. Just as the fact of the earth’s movement belied dominant theories of geocentrism, so does the stability of Italian patient capital directly contradict currently prominent theories of political economy about the mechanisms of
institutional change in advanced capitalism (Roe 2003; Gourevitch and Shinn 2005). This article will review clear evidence that shows the stability of this system despite the emergence of a strong Italian transparency coalition among workers, shareowners, and government technocrats (Deeg 2005; Gourevitch and Shinn 2005); despite drastic changes in the quality of laws protecting minority shareholders, enacted by a centre-left coalition that governed Italy continuously between 1996 and 2001 (Cioﬃ and Ho¨pner 2004; cf. La Porta et al. 1998); and despite the ability of these party and bureaucratic leaders to exert signiﬁcant inﬂuence on the character of corporate ownership through a large-scale privatisation process (Deeg 2005; cf. Tiberghien 2007). During the last decade the Italian political economy experienced a perfect storm of the factors that should destabilise domestic systems of patient capital, if the theories currently endorsed by political scientists are correct. Italian stable shareholding weathered that storm in much better health than did those theories. The failure of the dominant political approaches to explain stability in the
Italian political economy itself requires an explanation. Part of that explanation, I will contend, lies in the systematic underestimation of the power of large shareholders and the managers they support to resist stateled attempts to promote institutional change. Political scientists have fallen back on three complementary explanatory stories to construct theories of change for systems of ﬁnance and corporate governance.1 A new coalition pushes through legislation to disrupt the existing system (Gourevitch and Shinn 2005); a new government driven by partisan objectives pushes through legislation to disrupt the existing system (Cioﬃ and Ho¨pner 2006); or a set of government bureaucrats directs the regulatory or privatisation processes so as to disrupt the existing system (Deeg 2005). All of the major political explanations focus on the importance of seizing the reins of the state and eﬀecting change through the formal channels of state policymaking. These approaches either ignore or downplay the power resources of those
who actually own large blocks of shares and want to maintain their inﬂuence in the economy, a group known as blockholders. Seizing control of the legislative apparatus and making new laws that regulate ﬁnancial disclosure does not automatically disempower managers and blockholders. So long as their perception is that the existing system works for them, they have no reason to change it. To the extent that the law changes, we would expect large shareowners in this situation to seek alternative ways of exercising continued disproportionate control of their companies, and the managers of these companies to do the same thing. To the extent that privatisation or other shocks dilute the direct power of large blockholders, we would expect them to seek alternative instruments to maintain their voting power over companies. If they are able to use such measures to insulate themselves from politically mandated change, political scientists may need to recognise that the failure of their theories of institutional
change in the Italian case has broader signiﬁcance. Even in a world of global equity markets, domestic rules of the game are often determined outside of parliament. The ﬁrst part of this article reviews recent work on the Italian political
economy along with broader comparative work in the political economy of ﬁnance and corporate governance that deals with the Italian case (see also De Cecco 2007). The second section evaluates the major reforms undertaken in the second half of the 1990s – privatisation and the Draghi Law – both in their content and in their subsequent eﬀects on the structure of Italian capitalism. In the third part of the article, I consider the impact of two signiﬁcant scandals – at Parmalat and at the Bank of Italy – on the formal and informal rules governing the Italian political economy. The fourth section assesses the ﬁndings of the Italian case in comparative perspective and proposes avenues of future research for better understanding the political resources of blockholders.