Via Magellen:
‘il Boom’ is how Italians describe the ‘great transformation’ of Italy over the 1950s and 1960s when a poor country turned itself into a modern industrial powerhouse with a stable currency, the lira. During those decades, rural southern Italians flocked to the industrial north and their cheap labour helped turn Italy into an exporter of capital goods, and companies such as De’Longhi, Ferrari and Gucci into global brands. As the economy achieved world-leading growth rates (matched only by Japan), the era featured a property frenzy, a baby boom, bountiful jobs and the rise of an entrepreneurial class. Such was Italy’s rising wealth and status, the country in 1957 became one of the six founding members of the European Economic Community that later became the EU. “Italy was on fast forward,” is how one historian describes the country’s economic miracle.[1]
Italy’s progress, however, soon faltered. The country’s political system became corrupted and the rule of law patchy amid the post-war boom. The Christian Democratic Party was allowed to cement itself in power to keep out the main opposition Communist Party, albeit under an unstable republic political system designed to thwart the rise of another Benito Mussolini. The Christian Democrats let state-owned companies dominate key areas such as infrastructure and banking. The party used money earmarked for the south’s renewal to enshrine its grip there. The corruption along with low productivity, militant trade unions, suffocating bureaucracy, poor education, emigration, a fragmented banking system, an ageing population and unaffordable welfare hampered Italy’s competitiveness. As the economy stagnated from the 1970s, Rome’s main policy response was to endlessly devalue the lira – in 1970, a Deutsche mark was worth 170 lire; by 1998, it could buy 1,000 lire. Italy’s government debt at 120% of output in 1999, twice the limit allowed by the Maastricht Treaty that governed the euro, prompted the Netherlands and Germany to oppose Italy joining the common currency. Rome, while accusing the Hague of “spaghettiphobia”, pledged to fix its finances. Germany’s then chancellor Helmut Kohl chose to accept Rome’s promises instead of the warnings of compatriots and allowed Italy into the eurozone.[2]
