Contemporary Italy

Politics, Economy and Society Since 1945

Donald Sassoon

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9780582214286
• eBook ISBN: 9781317893776
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This popular text provides a detailed study of the social and economic structures that underpin the Italian political system. Thoroughly updated, the second edition covers the 1994 election results and the rise of Berlusconi's Forza Italia, the impact of European integration and the anti-corruption campaign of the early 90s.

Part one

The economy

Chapter 1

Economic reconstruction, 1945–1950

From the end of 1945 to 1950 there were in Italy five coalition governments, all led by Alcide De Gasperi, leader of the main party, the Christian Democratic Party (DC). The first three included the parties of the left, that is the PCI and the PSI as well as the minor parties of the centre. The fourth De Gasperi government (May 1947) signalled a turning-point in the history of Italian governments. As the Cold War broke out the left was expelled from the ruling coalition (as the communists were in France) and Italy was henceforth governed by the DC and its centrist allies until the early 1960s. The year 1947 was also a major turning-point in economic policy.

It is generally agreed that the kind of economic decisions taken by the various governments in this period were of momentous importance for the subsequent course of Italian history. The decisions to be taken centred essentially on two points:

1 The relation between the Italian economy and the international economy.

2 The relation between the Italian state and the economy.

The first decision regarded the extent to which the Italian economy should be integrated with the international economic system. In practice the room for manoeuvre in this field was very limited. With hindsight, Italy had no choice. The main economic constraint was the scarcity of raw materials: no oil, no iron, no coal. The country needed to import most of the primary products required for economic growth. To resort to protectionism in the conditions of the post-war economy would have entailed economic stagnation. There was an additional political constraint: Europe, and later the world, was being divided into two spheres of influence, the American and the Soviet. Italy was clearly in the American sphere and American pressures for free trade were extremely strong. Finally, there was an ideological element in favour of free trade. The revulsion against fascism as a political system spilled over into a rejection of fascist economic policy which included protectionism – widely regarded as its principal pillar.

The decision to ‘choose’ to open up the Italian economy to the international market is of importance for the following reasons: to open an economy means that one has to find appropriate trading partners, that means potential customers. Thus one has to gear one’s production to their demands, and hence towards exporting the goods they will buy. Thus certain priorities must be established, certain industries must be favoured and certain economic interests will prevail at the expense of others. These choices will determine a particular class structure and the eventual incidence of a certain kind of labour, i.e. skilled or unskilled, male or female, southern or northern, etc. Besides, the choice of partners (again in the specific circumstances of the postwar period) was also ‘forced’ on Italy by the international situation.¹ The states of Eastern and Central Europe could not be Italy’s trading partners because they had effectively contracted out of the international capitalist economy. Nor could these trading partners be those countries we now call of the Third World because their markets were then relatively small and dominated either by the USA (Latin America), or by the UK and France (Asia and Africa) or by all three (the Middle East). Hence Italy’s trading partners could only be the countries of Western Europe and North America. It was thus not surprising that the decision to enter the world market entailed membership of the Atlantic Alliance and, later, of all the European economic organizations including the EEC. Of course, some countries thrived in this international economy without becoming either a member of NATO or of the EEC. But Italy could not opt for the neutral foreign policy which had protected Sweden from the ravages of the Second World War or which had been virtually imposed on Austria. Nor could Italy, devoid of an empire and commonwealth, stand relatively aloof from Europe as Britain believed it could do.

None of the political forces in government at the time (and those included, until 1947, the socialists and the communists) were opposed to an opening up of the Italian economy. There were differences on the extent of trade liberalization but none on the principle of free trade. Giving priority to exports, as was eventually done, was to accept that economic development would be determined by external circumstances (i.e. the demand for imports of Western Europe and North America). It also meant that certain sectors of the Italian economy, such as agriculture, would have to be sacrificed. To put it crudely, instead of making Fiat cars for the European market (or eventually, washing machines or clothing) some of the resources available could have been directed towards making tractors for the agricultural sector. This could have expanded Italian food production which would have reduced Italy’s need to import food. However, there were only two ways to revitalize the agricultural sector.² The first would have been to encourage the concentration of agricultural lands and their modernization along capitalist lines. This, however, would have caused the expulsion of considerable numbers of agricultural labourers from the countryside. In the conditions of 1945–50 this would have entailed a dramatic increase in unemployment and would have been politically dangerous for the DC which relied on the consistent support of the peasantry. The other way, favoured by the left, would have been to ensure the creation of agricultural cooperatives helped by the state. This, however, would have considerably weakened the historical alliance between northern industrial entrepreneurs and southern landlord interests, and this too would have been politically dangerous for the DC. It is also not certain at all that the success of cooperatives in the North-East and the Centre of the country could have been replicated in the South whose rural traditions were markedly different.

It must be added that at no time did the left present a concrete alternative plan for the reconstruction of the Italian economy. This too must be seen as a contributing factor to their setbacks, namely, their expulsion from the ruling coalition in 1947 and their electoral defeat in 1948.

As we shall see later, Italy derived considerable benefit from export-led growth: both production and productivity increased, leading to the period of sustained growth known popularly as the ‘economic miracle’ of 1958–63. However, there were also serious negative factors. The examination of these leads us directly to a consideration of the so-called dualism of the Italian economy.

The concept of ‘dualism’ is used in different ways by various specialists of economic development. We shall use it in the sense in which it is normally understood in Italy, that is as synonymous with ‘imbalance’ or ‘disequilibrium’. Historically, there are three kinds of dualism in Italy:³

1 Regional dualism, that is dualism between economically prosperous regions and those which are economically backward. In the Italian context this can be seen in terms of the gap between the industrial North and the agricultural South.

2 Industrial dualism, that is dualism between advanced, modern and highly productive sectors of industry and those which are not.

3 Dualism in the labour market, that is dualism between the labour force employed in relatively well-paid, stable jobs and that employed in badly paid, marginal and precarious occupations.

The evidence indicates that the opening up of the Italian economy increased rather than reduced all three kinds of dualism at least up until 1961 and probably (though here there is less agreement) until today. Export firms, overwhelmingly located in the North, came to use, increasingly, southern labour withdrawing it from agriculture thus exacerbating territorial dualism; they grew at a faster rate and had to adopt modern methods because they were competing in the international market (industrial dualism) and their workers were better paid and their jobs were more secure (dualism in the labour market).

Of course there are many countries which exhibit ‘dualistic’ features in their economic system. These features are difficult to quantify and comparative data in this field are notoriously unreliable. A study by Williamson attempted to quantify territorial dualism for a group of twenty-four countries in the period 1949–61.⁴ Of the countries examined the one with the biggest regional variation was Brazil with an index of 0.700, while at the other end there was New Zealand with 0.063. The average was 0.299. Italy ranked sixth with 0.360, thus exhibiting a more marked dualism than India, Ireland and virtually all industrialized countries.

The opening up of the economy was not the only major problem facing the Italian political system. There was also the question of the relation between the state and the economy. In its crudest form the choice was perceived as being between a planned economy and a laissez-faire regime. In practice it was not so clear-cut. The PCI, for instance, was not in favour of a planned economy. That party and its leader, Palmiro Togliatti, were developing a political strategy which did not take Soviet communism as its principal reference point. They took it for granted that Italy was not ripe for a socialist transformation partly because, as they were committed to the principle of a democratic transformation, they realized that there was not the necessary consensus, and partly because Italy’s presence in the US sphere of influence made it impossible. Thus Togliatti, in August 1945, declared that even if the communists were in power on their own they would call on private enterprise for the task of reconstruction. He also added that – in existing circumstances – central planning was utopian; what was needed were, at most, ‘elements of planning’, i.e. limited state intervention in key sectors.⁵ Only the left-wing faction of the PSI called for a national plan, but it encountered no support.

The true debate thus was not between ‘central planners’ and neo-liberals but rather between the latter and the supporters of what later would be called Keynesian macroeconomic intervention. At the time Keynes was virtually unknown in Italy. Most leading economists were neo-liberals whose belief in the beneficial spontaneous development of market forces was deeply rooted. Historically, the neo-liberals had been an important force in Italian economic culture, but the Italian State had always been interventionist. After 1945 economic liberalism gained considerable influence in economic affairs, though it never became dominant. What were the reasons for their relative success? In part this was a reaction against the dirigisme of the Fascist State which had set up a state-holding system and nationalized the banks. In the post-fascist climate the equation liberty = liberalism had strong currency even among left-wing intellectuals. Another reason was that neo-liberal were in virtual control of the economy. Though the communists and the socialists controlled (until 1947) the Ministries of Finance, Trade, Labour and Agriculture, the neo-liberals controlled the Treasury and, even more importantly, the Bank of Italy which, since the 1936 reform of the banking system, had become the key institution of the entire financial system.⁶ In July 1947, after the expulsion of the left from the government, Luigi Einaudi, the foremost champion of economic liberalism, moved from the Bank of Italy to the Ministry of the Budget where he was able to pursue the deflationary policies he had been advocating. It is remarkable that – at the time – the strongest Italian political party, the DC, kept out of economic affairs preferring to allow the small Liberal Party and its political representatives, such as Luigi Einaudi, to dominate economic affairs. As De Gasperi explained to a communist minister who was urging him to adopt more radical policies:

It is not our millions of voters who can give the State the thousands of millions and the economic power necessary for tackling the situation. Apart from our parties, there is in Italy a fourth party which may not have many supporters but which is ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of tables
• List of abbreviations
• Preface to the Second Edition
• Acknowledgements
• Introduction
• PART ONE THE ECONOMY
• PART TWO SOCIETY
• PART THREE POLITICS
• Bibliography of works cited
• Index