Chapter 15

Chapter 15 - Chapter 17 Political Economy and Development...

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Chapter 17 – Political Economy and Development of Italy Italy’s late development saw considerable state intervention in the economy by the 1870s. Fascism then reinforced and expanded heavy industry’s close relationship with the state, leaving huge portions of the economy in public hands by the end of World War II. By the 1980s, problems common to all advanced societies were aggravated by the colonization of great chunks of the state- owned parts of the economy by the Christian Democrats (DC) and its Socialist allies. o They increasingly used public enterprises to award contracts to their cronies, and to siphon off funds or collect kickbacks for the purpose of lining their parties’ treasuries. Italy’s development was also notable for an unusually large number of small enterprises. o Left largely to their own devices, they often proved to be the most dynamic elements in the economy. o However, as the global economy has evolved, some of their qualities have proven to be liabilities in a competitive world market. The Post Settlement and Beyond The republic inherited weak internal markets and a lopsided industrial structure that favored heavy industry. It also had the largest public sector among the Western economies. o An advantage is that the challenge of postwar reconstruction could never have been met by reliance on free- market forces alone. State and Economy from Reconstruction to Crisis Despite its interventionism and high degree of public ownership of the economy, Italy’s economic policies were fragmented and uncoordinated, although they soon produced impressive results. At the end of World War II, laissez- faire ideas were a minority in Italy. Wartime devastation, the Resistance, and Italian capitalism’s compromised position under fascism initially favored the workers’ movement. However, after the expulsion of Communists and Socialists from the government in 1947, Italy’s recovery was built on low wages, a large surplus labor pool, and limited social spending. In the late 1940s, the United States launched the Marshall Plan to set Western European capitalism back on its feet. Italy would eventually receive $ 1.3 billion. The State and Private Sectors Italy’s huge state holdings, as banking powers that were inherited from fascism, were initially used in farsighted fashion. Over the protests of both protected oligopolies and free marketers, huge sums were invested in key industries such as steel and chemicals. Managers were allowed to reinvest dividends from state- held stocks, with the result that Italy’s industrial infrastructure was greatly strengthened. Public sector initiatives meshed well with the most dynamic parts of the private sector. By the 1960s, led by Fiat, aggressive export-oriented firms were churning out low-priced goods for
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This note was uploaded on 03/03/2011 for the course POLI 212 taught by Professor Meadwell during the Spring '08 term at McGill.

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Chapter 15 - Chapter 17 Political Economy and Development...

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