On Italian Economic Development: What the Long-term Says About the Short-term

In most of the literature on Italian economic development it is generally claimed that it was during the times of Giolitti that Italy came to be a rapidly industrializing country. In this paper we show that Italian economic development increasingly gained in speed during the first half a century after Unity. There are five breaking points that can be taken as “structural”, moments when the GDP growth trajectory changes and the economy enters a new phase. The first phase goes from 1861 to 1913, with its steady growth process, characterized by an acceleration in the last fifteen years. The second phase includes the two World Wars and the twenty-year period in between, from 1914 to 1946, with the ups and downs of the post-war rebound and the Great Depression. The third phase coincides with the post-war growth, from 1947 to the mid-Seventies, when the end of the Bretton Woods system, the first oil “shock” and the buildup of social tensions in Italy brought it to an end. It was in seven thousand days, during that phase, that Italy was able to converge to the other advanced economies’ growth path. Between 1975 and 2001 a fourth phase takes place, characterized by “productive decentralization”, “competitive devaluations”, and a slower growth rate, albeit in line with that of the other main economies. Italy undergoes the years of the “productivity slowdown” exploiting the margins on the cost side, without fundamentally changing its economic structure, with low investment and innovation rates. Between 1999 and 2001 the signs of a further phase start to materialize. Italian capitalism adapts with a jobless growth of its export sector and a non-productive employment growth for the rest of its firms. While industry keeps losing ground, the service sector continues to expand. And yet, it is more and more temporary, part-time, and precarious employment that grow. The lesson is that “nothing is forever”: nothing guarantees that even if we implemented all the “reforms” that we were told we would go back to on the old growth paths. Today we are on a track which is a declining table, and we would have to change too many things, this is what the long term says.