Happy 150th Anniversary, Italy

Institutions and Economic Performance Since 1861

Bibliographic Data

ID16771767
AuthorsPaolo Di Martino (0000-0002-9030-9014, corresponding author), Michelangelo Vasta (0000-0002-8683-8095)
Year2015
Volume16
Issue2
Pages291-312
Publication date2015-01-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEnterprise & Society (JOURNAL)
Journal identifiersISSN: 1467-2227 • E-ISSN: 1467-2235
PublisherCambridge University Press (CUP) (PUBLISHER)
DOI10.1353/ens.2015.0032
OpenAlexW4233682563
LanguageEN
Citations received8

Happy 150th Anniversary, Italy?Institutions and Economic Performance Since 1861 Paolo Di Martino (bio) and Michelangelo Vasta (bio) The 150th anniversary of Italian unification, celebrated in 2011, took place in the middle of a dramatic economic and political crisis. During that year, the economic downturn that followed the international banking crash of 2008–2009 almost led to the collapse of Italian public finances, and in November 2011, Prime Minister Silvio Berlusconi resigned after months of political instability. The 2011 events, however, were the culmination of a trend started at least two decades earlier.1 Indeed, during the 1990s and 2000s, the rate of growth of Italian gross domestic product (GDP) had been less than 1 percent (0.97 percent) per year, half of the average (2.25 percent) of the four largest countries of the European Union (France, Germany, Spain, and the UK). If we consider the first eleven years of the new century, the situation appears even worse: Italy’s rate of growth has been 0.4 percent per year, whereas Germany, France, the UK, and Spain have grown at least almost three time faster: 1.15 percent, 1.17 percent, 1.63 percent, and 1.98 percent, respectively.2 Furthermore, the Italian economic decline was not confined to growth; the same gloomy picture appears when looking at other areas [End Page 291] of the economy—for example international trade. In 2007, Italy had a share of 4 percent of the total of world trade, almost 40 percent less than 15 years earlier. Moreover, its export specialization has become more and more oriented toward low-technology traditional goods in sectors with the slowest rates of growth in world markets.3 Italy has also shown weak performance in science and technology, with scarce attention given to technical education, limited capacity to invest in research and development (R&D) activities and, as a consequence, very weak patenting performance, concentrated mainly in fields far from the world’s technological frontier.4 The evident state of economic decline, paralleled by deep political crisis,5 that characterized the 1990s and the 2000s raises a fundamental question for economic and business historians: does this phase represent a temporary slowing down in the journey Dalla periferia al centro (from the periphery to the core), analyzed in Zamagni’s influential book,6 or is Italy going back to what Cipolla defined as its “career as an underdeveloped area within Europe,”7 which started at the beginning of the eighteenth century after it lost its leading role in the world economy?8 A quantitative analysis of long-term trends sheds some light on this question. Recent data comparing various Western countries to the economic frontier (the United States) show that the relative position of Italy has hardly changed over time. Italy never really converged—not only to the frontier, but also to the average of the core European countries.9 However, it is noteworthy that historians’ attitudes, implicitly or explicitly, are strongly influenced by the circumstances in which they operate. Thus, it is perhaps not surprising that authors writing in the 1990s, at the end of the mini-boom of the 1980s, talked about convergence toward the core and looked for the long-term roots of success.10 However, academic works published in the mid- to late 2000s take a much more negative stance on Italy’s performance, and look for [End Page 292] the origins of its weaknesses.11 These are usually identified in the limitations imposed to market mechanisms after World War II, and in the unwillingness and/or inability of political forces to correct these problems for reasons of electoral convenience.12 Although not entirely incompatible with this view, this article provides a different interpretation, suggesting that since unification, Italy had followed a model of economic development characterized by poor formal institutions. Following North, we use the word “institutions” to indicate the explicit and codified “rules of the game” and their enforcement.13 The institutions on which we focus are the ones usually analyzed by business historians, and concern areas such as bankruptcy law, balance sheet regulation, tax compliance, and firms’ governance. Our argument is that inefficient or poorly enforced institutions created incentives for

Demographic economics · Economic growth · Economic history · Economic policy · Economics · Economy · European union · Gross domestic product · Keynesian economics · Political instability · Political science · Politics · Prime minister · Recession · Economic Growth and Productivity · Italy: Economic History and Contemporary Issues · Law

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