Three decades of italian economic change: Unremitting decline

The article begins by retracing Italian economic developments from 1971 to 2001, a period marked by macroeconomic instability due to both external causes (the crisis of the fixed exchange rate system of Bretton Woods and the transition to floating rates, the oil shocks of 1974 and 1979) and domestic causes (labour conflict, political instability, the progressive degeneration of the public finances). Italian enterprises responded to economic disequilibria,wage pressures and the rigidity of the labour market by decentralizing the production process, which diminished the size of firms and shifted industrial activity from the North-West of Italy to the North-East and the South. These trends are documented in the Italian industrial censuses conducted from1971 to 2001. Over these thirty years we find a contraction of industry,especially manufacturing, and a growth in services. Recent trends in services show that this sector has not yet realized the full potential for innovation implicit in the spread of the new information and communications technologies. The article concludes with a brief discussion of possible ways of reversing the tendencies of the past three decades, halting the industrial decline and relaunching Italian enterprise.