COLUMN ONE : Where All Roads Lead to Scandal : A corruption miasma leaves Italy searching its conscience--questioning the wink-and-nod selective obedience to the law that is a linchpin of daily life.

Is there something rotten in the state of Italy? Why are red traffic lights just suggestions and “no parking” signs universally ignored? How come one of the world’s most Catholic countries has the world’s lowest birthrate? What sort of conspiracy did it take to enable the nation’s most-wanted Mafia boss to elude capture for two decades on a small island?

Their nation is enmeshed in a corruption scandal so deep, a crisis of conscience so all-encompassing, that Italians are asking discomfiting, Hamlet-like questions about their rich but flawed society.

As cell doors slam daily on inmates culled from Italy’s business and political elite, the answers are as unseemly as the questions are belated. In recent months, Italians have painfully come to realize that massive corruption, extortion and blackmail, like their cousins kickback and bribe, have long dwelt in the boardrooms of Italy’s biggest corporations and in the cloakrooms of greedy political parties.

That recognition, reinforced in the past week by the arrest on kickback charges of almost the entire board of the huge state energy conglomerate, is fueling enormous pressure for radical political and social change.

An enraged public demands that tarnished old-line national leaders abandon their grip on power. Never again, reformers shout, must arrogant, all-powerful political parties run Italy like a fiefdom.

The popular revolt challenges the tacit foundation of public life in Italy for the past 50 years: While ruling politicians espoused a Catholic-rooted ideology, they also believed that even a corrupt democracy was better than communism. And anything was better than bygone monarchy or the fascism that made the trains run on time but led Italy to disaster.

Now, 50 years of entrenched anti-Communist democracy have come to an end. Public mistrust of both the political parties and the system itself is a reformer’s rallying cry.

“What people are saying now is ‘No more utopias.’ Not Catholic. Not Communist. We are witnessing the secularization of Italy,” said Domenico de Masi, a sociologist at Rome’s La Sapienza University.

The quest for change is by now relentless. The goal is to somehow forge a modern and honest democracy in Italy for the first time--a democracy built not on Cold War ideology, cronyism or corruption but on merit and performance.

A major first step will come in a referendum next month to reform Italy’s electoral laws, which have been the cause of weak and short-lived coalition governments and fragmented Parliaments.

What exact path of reform Italy follows after the referendum is anybody’s guess.

“These are revolutionary times. The call is to overthrow the political, economic and cultural system. But the risk is of dismantlement without a coherent successor,” said Francesco D’Onfrio, a member of Parliament for the besieged Christian Democrats, the party that has dominated government in postwar Italy and is now in precipitous moral and electoral decline.

Remember how, over the years, it seemed that every few months an Italian government was falling again? Well, it never happened. A musical chairs of ministers, yes. An alternation of power of the sort that occurs in the United States when a Democratic President replaces a Republican? Never.

Because in Italy, the only real alternative to governments dominated by churchy Christian Democracts and supported by their Socialist allies was the largest Communist Party in the West. A Communist government at the heart of the North Atlantic Treaty Organization and at the doorstep of the Vatican was anathema to the Italian Establishment and the United States.

As new arrests, accusations and exhortations consume official Rome and the financial center, Milan, it is worth remembering that Italy is one of only two industrial democracies to have been ruled by the same political machines since World War II. In the other one, Japan, busy anti-corruption police were counting one political powerbroker’s cache of gold bars last week. In Italy, investigating magistrates find that cash-stuffed briefcases and Swiss bank accounts are more the fashion.

Over the past year, virtually every major Italian political party and many of the country’s most prestigious companies have been tarred by a bottomless, tangled-as-spaghetti scandal that swallowed trillions of taxpayer lire--billions of dollars.

For decades, the parties were routinely and generously financed by illegal kickbacks for public contracts and boosted by jobs-for-votes deals. In some regions of Sicily, there is no end to the forest rangers on public payrolls, but hardly any trees.

Payoffs, called tangenti , were standard operating procedure at virtually every level in virtually every city. Last week, the jailed president of the state’s ENI energy company told magistrates in Milan how he had been obliged to pay a 4-billion-lire ($2.5-million) kickback to the Socialist Party so that ENI’s engineering company would get the contract to build turbines for a power plant being built by ENEL, the state electricity authority.

According to those who have confessed already to gritty Milan magistrates, about $3 billion to $4 billion a year passed from state enterprises to political parties. The money complemented official state funding to finance the vast, affluent bureaucracies that are hallmarks of Italian political parties.

Naturally--it’s only human nature--billions of payoff lire generated by this cozy arrangement also wound up in the designer pockets of party officials.

“The corruption is just coming to light, but it has always been a terrible system: If you wanted a public contract, you had to deal with a politician and give him a cut,” said Ugo Stille, former editor of the newspaper Corriere della Sera in Milan.

So far, dynamo Milan has been hit worst by the scandal. Chief among the accused is the Socialist Party, which has dominated political affairs in Milan for decades. Former Prime Minister Bettino Craxi has lost his post as party leader and is accused of 41 counts of bribery and corruption. Craxi says the charges are a political vendetta.

In the year since the scandal broke, the municipal leadership of Milan, like that of Rome, Turin, Naples and around 20 other Italian cities, has been decapitated by corruption inquiries.

Titans of Italian industry more accustomed to gossiping between acts at La Scala now swap miseries among more garden-variety criminals and the ubiquitous rats at Milan’s San Vittore Prison.

Three Cabinet ministers have resigned, and one-quarter of Parliament is under suspicion. In the flux, the 9-month-old coalition government of Prime Minister Giuliano Amato is a limping scarecrow. As Amato himself freely concedes, it hasn’t fallen over yet mostly because there is no alternative.

Why did it happen?

“Perhaps we are generally more corrupt than other places. It may have something to do with the fact that we are a Catholic country and corruption is not a major sin,” said Gianfranco Pasquino, a political scientist at the University of Bologna and a former leftist senator.

One element that helped to institutionalize corruption, analysts say, is the wink-and-nod selective obedience that is one of the unwritten but most hallowed linchpins of Italian law and life. Nominally Catholic Italians, for example, invariably marry in church and baptize their children while at the same time almost universally ignoring Vatican injunctions against artificial birth control.

Italian postwar politics failed to produce any alternation of power, thus allowing ever-growing corruption, Pasquino said: “There grew up a feeling of impunity, that you could steal without being caught. This, in turn, encouraged others to steal for their parties--and themselves.”

Remember too that while Italy is one of the world’s oldest civilizations, a politically united Italy is nearly a century younger than the United States and that the Republic of Italy is less than 50 years old. Politicians now being harassed by dogged magistrates and angry voters were born when Italy was still a monarchy.

Italians sometimes complain that their young nation still lacks a full sense of national identity. But at least one thread has yoked diverse peoples on the peninsula for centuries. It is the unshakable conviction that the state--be it personified by Popes, kings, dukes, multihued invaders or sallow Roman politicians--is the enemy. “To rob the king is no sin,” an old proverb says.

In Italy, there is law--and there is life. Ne’er the twain. . . . Walk down any major city street: shops open when they shouldn’t be; merchants not giving receipts they should; cars parked on sidewalks; illegal immigrants washing the windshields of immigration inspectors at traffic lights; police busily unseeing infractions on every corner.

“Italians think that stealing for themselves is worse than stealing for their party, which in other societies would be regarded as more serious because it is an assault against democracy,” sociologist De Masi said.

In the new Italian republic that emerged from the aftermath of war, the fight for power was sharp and intense between a Catholic party, the Christian Democrats, and the Communist Party, which got the sort of financial and moral support from Moscow that the Christian Democrats welcomed from the Vatican and the CIA.

The Christian Democrats won, and there began a system of never-ending weak coalition governments that divided everything into party allotments, called lottizzazione.

Italy matured as an industrial power run not so much by a series of unchanging governments as by deep-rooted and immobile political parties.

They commanded the greatest concentration of state industry in the West, and they divided power and wealth into the allotments: state-controlled industries, banks, health, broadcasting. To this day, RAI 1, the state’s television’s first channel, is Christian Democratic. RAI 2 is Socialist. RAI 3 is staffed by faithful of the former Communist Party.

The parties have assured their financial strength through a reliable flow of under-the-table payoffs.

Italians accustomed to the venality of life in the everyday lane had a pretty good idea there was big-time corruption around most major party leaders. Still, the greed already revealed has exceeded almost all estimates.

The system kept the Communists out of power, and by the mid-’80s, when they no longer represented a threat, it was even possible to allow them to sup at the same payoff table. Then disaster struck Italy’s master anti-Communists: The Berlin Wall fell.

“Among West European democracies, Italy has been most directly affected by the Soviet collapse,” D’Onfrio said.

As the ideological tension went out of the system, business leaders who were the principal source of the payoffs chafed. How could they remain competitive with the rest of Europe if contracts had to be bought with payoffs? In February, 1992, a small business in Milan rebelled against the kickback system. The owner went to the police and made his payoff wearing a wire. So began tangentopoli --bribe city.

By now, Italian voters too have had enough of government as a closed shop, a party-ocracy.

If Italy is the fifth- or sixth-largest economy in the world, people ask, why should it tolerate scandalous public services and a hellish bureaucracy? Or a fragmented Parliament where national interest is habitually subordinated to self-interest? Why does the Mafia flourish as a parallel criminal state beyond control of the Italian state?

As Italy seeks solutions to such vexing questions, there is no shortage of would-be reformers who, jostling for center stage, mark a sea change in the so-long-stagnant Italian political ocean.

Sicilians parade in the streets against the Mafia, and there is a new anti-Mafia political party led by former Palermo Mayor Leoluca Orlando, who seeks national endorsement for sweeping reform.

Thousands in northern Italy flock to the banner of Umberto Bossi, a bumptious, Rome-hating populist who wants greater regional autonomy so that the north will no longer be forced to underwrite the excesses of a backward and corrupt south.

Tens of thousands heed the call of maverick Christian Democrat Mario Segni, who has engineered the national referendum April 18 to impose overdue electoral reform.

The referendum will presage early elections, by fall at the latest.

Even without knowing who will win, it is already clear that the next Italian election will write the epitaph for political parties weaned on Cold War tensions and killed by the corruption they bred.