Italian Economic Development from the Unification of Italy to the Present Day

Recent developments in the Italian economy have taken the country into an international position of primary importance. With a gross national product of over 600 billion dollars (roughly one thousand dollars pro capite), in 1987 Italy has become the fifth economic power, preceded by USA, Japan, Germany and France, but ahead of Great Britain, compared to which this country now has a higher rate of general development and decreasing inflation.

At the time of Unification (1861), the state of the country's economy was far different. In certain central and northern regions (Piedmont, Lombardy and Tuscany), industrial enterprise and commerce as well as agriculture, based on efficient modern structures and a high availability of capital, were reasonably well developed. The central southern regions were, howeve r, characterized by generally backward agricultural systems, especially the latifundia (vast estates and few landowners), while industry, based on state enterprise, was given internal tax protection. The introduction of a free trade system throughout the country, together with adoption of the Piedmont tax system and excise tariffs, contributed to widen the economic and social disparities between North and South, already seen in the former States on the penin sula.

On the whole, however, the economy of the new nation was based essentially on exploitation of land resources, with agriculture providing most of the income. The principal crops included cereals, olives, vines, mulberry bushes and fruit trees, with some fi brous plants such as hemp and flax. Livestock consisted mainly of sheep, horses and pack animals. The industrial sector was still fairly modest and infrastructures (roads and railways) inadequate. The first real impetus came in the twenty years following unification, with the construction of some 6,000 km of new railways to augment the 1,500 km already existing in the former States.

Abolition of the free trade system (1878) and the introduction of excise tariffs enabled national industries, including the traditional textiles sector (notably cotton mills), chemicals, engineering and metalworking (the first modern steel works was built at Terni in 1884) to expand for a decade at a considerable rate (roughly 8% a year), while agricultural problems were beginning to add to the existing migration from the overpopulated regions. After the grave financi al crisis of the 1890s, ending in restructurization of the banking system (1893), economic development continued with renewed vigour, initially at an average rate of 4% (during the early part of this century) later rising to 7.5%, stimulating agriculture, which still provided employment for half the active population. Expansion (marked by a break even in the balance of payments, stabilization of the lira and remittances from emigrants) slowed in the years immediately preceding the First World War, partly as a result of an unfavourable international situation in the making since 1907.

The considerable productive effort expended during the First World War enabled large industrial companies in the engineering and metalworking sectors (ILVA, FIAT, Ansaldo, etc.) to expand both in capacity and size, though the negative effects of the war w ere felt for several years (heavy public debt and inevitable inflational trends; recurrent industrial action by the workers, hit by increasing unemployment and deprived of an outlet in emigration). Between 1921 and 1926, with the rise and consolidation of fascism, the national economy began again to expand at an average annual rate of 4%, both in industry and agriculture, enabling the public debt to be cancelled (1926), while the banks increased their participation in industrial shareholdings.

During the twenty years of fascism, political economy was mainly oriented towards revitalising agriculture, and this was facilitated by large-scale land reclamation and a vast supply of labour. Industry itself, hit by the crisis which ruined the economy o f other countries between 1927 and 1934 and which in Italy caused a sharp rise in unemployment and a drop in pro capite income (especially in agriculture) received new productive stimulus in the five years (1935-40) preceding the Second World War (achievi ng an average rise in production of 4.5-7.5% per annum. National industry was aided in this by the Constitution (1933) of IRI, a financial holding company which officially inaugurated its activities by undertaking new initiatives. The Second World War and its disastrous outcome caused further collapse of the national economy, followed by that of the political institutions.

At the end of the war, economic recovery in Italy, like that of other European countries, was financed initially by American aid (the Marshall Plan) and later by membership of international organizations such as the OECD and ECSC which also allowed the co untry, through special tariff concessions, to obtain raw material supplies and gave it the possibility of developing effective relations with foreign countries. With the country practically rebuilt in the first five years after the war, the 1951 census in dicated that agriculture was still a fundamental factor in the country's economy, involving almost half the working population (44%), though accounting for only a quarter (24%) of the gross national product (this census also indicated that 29% of the popu lation was engaged in industry, and 27% in the service sector, the gross national product being respectively 36% and 40%).

Orientation of political economy towards privileging the more dynamically productive industrial and service sectors, brought about drastic changes in the agricultural sector, already characterized by chronically low production.

The period of greatest economic expansion, which lasted for over a decade (1951-1963) with industrial output rising at a rate of 6% per annum, led to correspondingly radical transformation of Italian life and society, due to the considerable flow of popul ation from the Southern regions and more backward areas of the North towards countries in Central and Western Europe as well as the industrialized parts of Italy (the Milan-Turin-Genoa triangle), in this way accentuating the imbalance between North and South.

The exacerbation of the Southern Italy question, already keenly felt in the decades before unification of the country, led to the institution of the Cassa per il Mezzogiorno as an instrument for coordination of industrial intervention in the southern regi ons, providing them with adequate infrastructures and modifying the latifundia system by the introduction of appropriate land reforms, while land reclamation provided new agricultural zones on coastal plains in the North and South.

The next twenty years (1964-84) were characterized initially by alternating phases of economic expansion and recession, caused by industrial disputes, while the overall structure underwent further change with massive State intervention in the direct manag ement of industrial activities (especially by IRI and ENI, which monopolized the engineering and petrochemical industries) and also of energy production, which was nationalized. This led to a sudden and wholesale liberation of capital, which led to the fo rmation of mixed industrial enterprises in widely varying sectors; through cross-investment in shareholdings, the way was opened to multinational companies, and this contributed to an increase in the international nature and dependence of the national eco nomy. In particular, the years between 1975 and 1984, characterized by the serious state of world economy caused by soaring oil prices, left Italy racked by inflation and unemployment (which rose to 2 million) while internal and external migration ceased and national income dropped significantly.

From 1975 onwards, the balance of trade which had always registered only slight variations, slumped into debt that has been relieved only in recent years in concomitance with the drop in oil prices and the fall in the value of the dollar. Restructurizatio n of agriculture continued, however, almost without interruption.

At the 1981 census, the percentage engaged in the primary sector had dropped to 13% of the active population, as against 37% engaged in industry and 50% in the service sector. The contributions of these three sectors to the national gross product were res pectively 6%, 41% and 53%. The situation has now been further consolidated, according to the following table:

from which the progressive economic trend is towards the production of services, and the renewal of industrial productivity taking advantage of recent reorganization and technological innovation can be deduced.