History of Italian Economic Development

University of Coimbra Faculty of Economy Hystoria Economica Empresarial Giuseppe Formisano

Introduction First phase: Unification First World War Second phase: First postwar '20 Third phase: Crisis of 1929 Second War World Fourth phase: Second postwar Economic boom '50/'60/'70 Fifth phase: '80 '90 Sixth phase: Nowadays Appendix (???) Conclusion Bibliography

INTRODUCTION
Since the beginning of civilization's history, Italy played an important role in the development of the world. Actually Italy has 6% of UNESCO world heritage and Romans had a kingdom that unificated Europe, Asia and Africa. Although wasn't the bigger kingdom, Roman Empire was the most important of the history. They build roads, waterworks and some of the most important monument in the world. Italy was the cradle of civilization in the Renaissance and in Tuscan, especially Florence, were born the most important artists in the world. FIRST PHASE: UNIFICATION (1861) FIRST WORLD WAR (1915) Before 1861, Italy was divided in several State. As in picture, there was a few phase about unification, and in 1861 Italy was almost unificated. Indeed the real process wasn't finished, because the Papal State was under control of the Curch and the Veneto was included in the Austrian Empire. The first capital was Turin, but in 1865 it was moved to Florence. In five years there was the annexation of Veneto (1866) and of Papal State (1870). Italy was made, but was only a geographical unification; in fact there were many problems about legal system, language and above all agriculture and industrial backwardness. Moreover Italy hasn't natural resources like coal, very important for the industrialization of a country in the Second Industrial Revolution. For this, it was a follower country in the european industrial process and in addiction, its conformation and climate doesn't allows the development of a agricultural economy. 35.2% of italian territory is composed by mountain, 41.6% by hill and only 23.2% by plain. Climate is very various; it's very cold in winter (with lowest temperature about 1C) and very hot in summer (with highest temperature about 30C). However, Italy in the end of XIX century will be one of european leader in mechanic and hydro-electrical sector, tapping the strenght of water amoung Alps and Appennines. Italy's industrialization begin in 1876 when Camillo Benso Conte di Cavour,

first minister of Italy, founded the Ansaldo, a mechanical enterprise for railway equipment, and the Terni for war equipment, in particular armor plates for warships. In 1887 the Terni went to bankrupt but the State made a bailout and save it. The process of bailouts will be very important in the italian economic history. SECOND PHASE: FIRST POSTWAR '20 First World War was the most destruptive in the world history. 16 millions of people dead and 21 millions injured. In Italy there were 680.000 deads and a debt of 157 billions of lire (during those years italian PIL was about 95 billions); this debt will be balanced only 60 years later. Italian postwar was characterized by a deep crisis, especially explained by the huge debt that Italy contracted with private banks. Money was used to allow a industrial conversion, because since 1913 many industry began to make war equipment and when the war was over, they needed to reconverte their businesses. Private banks were easily admitted in industrial assests when industry didn't pay and this promoted the development of a industrial triangle amoung Genoa, Milan and Turin, where were situated most important banks. Moreover State didn't control the flow of joung people, especially from southern, to France, Germany, USA and South America. This increased the gap northern- southern Italy. In fact, in the north was starting a slow process of industrialization, instead in the south there was a migratory flow because many joung men wanted to join army in the hope of plots of land, but italian government didn't give them and when soldiers came back, they were unemployed. During those years unemployment was a worrying problem and about 3,2 millions of people were forced to emigrate. In addiction, an important role was played by the State, that during those years was the promoter of supply and regulator of demand. Unfortunately, administration of economy wasn't good, the State issued a lot of coin and prices tripled and this caused the increase of inflaction, a problem that still exists. During those years was founded a new movement: fascism, that until the end of Second World War will rule Italy. It was born officially in 23rd of March 1919, but only 2 years later it became a real party. In 9th of November 1921 italian king Vittorio Emanuele II charged Benito Mussolini, leader of fascist movement, to make a new govern. Main characteristics of policies fascism economy are:

Corporatism; The socializing of economy; Autarchy; National socialism; National syndicalism; Re-valutation of lira. Corporativism is based on class cooperation, in contrast with marxist teory of class struggle. Mussolini established 22 corporation with a law in 5th of February 1934. Fascism believed that State had to regulate all aspects of human life, even economy. The socializing of economy implicate that capitalist has to share the means of production with his worker, for example like a profit sharing. Autarchy was maybe the most important characteristic of Fascism Economy. According with autarchy principles, a Nation has to be independent of foreign markets, to avoid an excessive

reliance on others states that in case of war, should be ruinous. In fact fascist propaganda aimed to increased the use of italian goods. National socialism is an ideology that combine socialism and nationalism, to create a national-revolutionary economic and political position. National syndicalism is strongly linked to corporatism, in fact in according with this, the State needs a dividision of workers in corporation to coordinate statal economy. Mussolini believed that italians had to consume only italian goods and created a lot of state monopolies (such as about life insurance, telefonic services and others) to control strongly economic life of peoples. To allow the creation of monopolies and big national industries (Edison, Pirelli, Fiat and some one) was reduced the free competition, with a consequent increase of prices. About revalutation of lira Mussolini wanted to make italian coin one of most important in the world, but after that he had to balance exchange rate with dollar and pound. This operation was called quota 90 because the final aim was to make exchange rate beetwen lira and pound at 90. In 1925 United Kingdom decided to come back to gold standard and this caused many deflazionistic policies; in that year italian exchange rate with pound was 120, but in the next year it increased at 153,68. Giuseppe Volpi, finance minister since 1925 until 1928, decreased domestic demand and salaries, make credit restrictions and set some important rules for the retailers. At June of 1927, exchange rate was 88,09; the operation quota 90 made a success, but the consequences affected retail prices, instead it not affected industrial system.