If anyone belongs to Italy's tight group of power brokers -- in Italian, the salotto buono -- it is Carlo DeBenedetti. He briefly ran the Fiat industrial conglomerate before a falling-out with the controlling Agnelli family, whose members he knew from childhood. As the head of Olivetti, he made a bold if unsuccessful run at IBM in Europe but used the remnants of the company to make a fortune during the heady days of telecom privatization. Today, his "group" includes a media empire of newspapers and radio stations, a giant auto-parts company and an energy division.

But sitting in his small, unmarked headquarters on a narrow side street here in Italy's capital of finance and fashion, the 70-year-old DeBenedetti speaks of a "perverse and unwritten alliance" among politicians, financiers and company owners. This alliance, he says, is slowly destroying Italy, enriching its members while undermining the nation's economy through excessive debt, protectionism, serial devaluations and shortsighted "concessions" to unions -- concessions that Italian workers are paying for in the form of meager take-home pay, high unemployment and deteriorating public infrastructure.

"There have been 52 postwar governments, but in truth they have all been the same," said DeBenedetti of the oligarchy's enduring power.

There was a quiet anger and genuine sadness in DeBenedetti's assessment of his beloved country, the very same sentiments that I had heard the day before while visiting an old family friend, Luciano Barbera, in the nearby hill town of Biella. It is there that the Barbera family produces some of the finest and most expensive wool fabrics in the world, with the yarn washed with sparkling clean mountain water, allowed to "rest" for months in cool cellars like the finest Barolo, and woven by expert craftsmen using the latest machinery.

But over an alfresco lunch of stuffed blossoms and zucchini flan, Barbera questioned how long he could keep things going at his mill. It wasn't just the overpriced euro and the crushing social charges this time, or even the influx of cheaper imports. What was really eating away at him now was that his fellow company owners, the biggest names in Italian fashion, were selling out their workers and their industry by allowing the "Made in Italy" label to be applied to clothing made in Eastern Europe, from fabric made in China. As he saw it, the establishment had quietly decided to cash in one of the country's crown jewels -- a reputation for exquisite design and quality workmanship developed over centuries -- for a few years of extra profit until consumers finally caught on to the scam.

Although their experiences are quite different, these two successful businessmen have concluded that the secretive and often corrupt quality of Italy's power structure is suffocating the country's economy, denying it the oxygen of new ideas and talent and the discipline of market feedback. The bankruptcy of its politics now threatens to bankrupt the country, with many Italians concluding long ago that their best hope is to grab as much as they can for themselves before the ship goes down. There is no better metric of their cynicism than the extent of black market activity, which is now roughly estimated at between one-quarter and one-third of Italian economy.

Italian voters thought they had found a new path when they elected Silvio Berlusconi as prime minister, a self-made and plain-spoken media tycoon who dared to tell Italians the truth and challenge the establishment. But in the four years since, Berlusconi has frittered away his political capital protecting himself and his business interests while failing miserably to reform the economy. Alitalia, Fiat and any number of major enterprises are being bailed out once again, while state monopolies have morphed into privatized monopolies that benefit only a privileged few. Banks, which have incestuous ties to major businesses, have been shielded from foreign takeovers while the establishment looks for other ways to prevent newly minted real estate tycoons from buying control of investment houses and leading newspapers. And unions continue to threaten strikes to squash any attempts to merge companies, reduce taxes, reform the pension or unemployment system or even eliminate one "religious" holiday from the lengthy calendar of vacation days.

But the problem has less to do with strong unions than weak government.

"Berlusconi sold a dream to Italians: 'I became rich and I'll give each of you the same possibility,' " said DeBenedetti, who's been butting heads with the prime minister for years. "But he didn't deliver, and now it has boomeranged on him. People now don't believe in anything."

While Italy is the extreme example, the economic "crisis" throughout Western Europe is largely a political crisis, the result of political systems that have proved incapable of generating bold leaders, willing followers and badly needed economic reforms. To varying degrees, these countries suffer from fragmented party systems, a docile media and voters who have never fully accepted their responsibility for self-government or fully grasped that it is they who are the source of government money and power.

"Too many subjects, too few citizens," explained Enrico Salza, chairman of Sanpaolo IMI, sitting the ornate palazzo that serves as headquarters of Italy's third-largest bank. Salza was referring to his native Turin, once a royal capital. But he could just as well have been speaking of the present-day democracies of Italy, France and Germany.