This book offers an interpretation of Italy’s decline, which began two decades before the Great Recession. It argues that its deeper roots lie in the political economy of growth. This interpretation is illustrated through a discussion of Italy’s political and economic history since its unification, in 1861. The emphasis is placed on the country’s convergence to the productivity frontier and TFP performance, and on the evolution of its social order and institutions. The lens through which its history is reviewed, to illuminate the origins and evolution of the current constraints to growth, is drawn from institutional economics and Schumpeterian growth theory. It is exemplified by analysing two alternative reactions to the insufficient provision of public goods: an opportunistic one—employing tax evasion, corruption, or clientelism as means to appropriate private goods—and one based on enforcing political accountability. From the perspective of ordinary citizens and firms such social dilemmas can typically be modelled as coordination games, which have multiple equilibria. Self-interested rationality can thus lead to a spiral, in which several mutually reinforcing vicious circles lead society onto an inefficient equilibrium characterized by low political accountability and weak rule of law. The book follows the gradual setting in of this spiral, despite an ambitious attempt at institutional reform, in 1962–4, and its resumption after a severe endogenous shock, in 1992–4. It concludes that innovative ideas can overcome the constraints posed by that spiral, and ease the country’s shift onto a fairer and more efficient equilibrium.
Andrea Capussela è visiting fellow alla london School of economics. In passato ha ricoperto incarichi che gli hanno consentito di acquisire conoscenza dei meccanismi politico- istituzionali che caratterizzano diversi sistemi economici, in termini sia di sviluppo che di declino. in particolare, ha guidato l’Ufficio per gli affari economici e fiscali della missione di supervisione internazionale del Kosovo; è stato successivamente consigliere del Ministro dell’economia della Moldavia e vice primo ministro a nome dell’Ue.
This chapter reviews the evolution of Italy’s social order between the political unification of the peninsula, achieved in 1861, and the end of Fascism, in 1943. It follows the country’s convergence to Europe’s early industrializers, which accelerated near the end of the nineteenth century and was assisted by appropriate institutional reforms. In the presence of a large anti-systemic opposition the country’s social order opened up only modestly and hesitantly, however, and in the early 1920s its elites preferred Fascism to democratization. Under this regime the progress made by political institutions during the liberal period was reversed, convergence slowed down markedly, and the divergence of the South from the rest of Italy peaked. The chapter underlines the essential continuity of the country’s social order and elites between the liberal epoch and Fascism.
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