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Italy gave birth to the Renaissance and was where modern Europe first began emerging from feudalism. Modern banking first emerged in Italy. Italian navigators played a major role in the European outreach by Portugal and Spain. Italy itself without an Atlantic coast did not share economically in that outreach. Religious conservatism and the Counter Reformatiion retarded the scientific inquiry that had begun as part of the Renaissance. Italy divided into minor states became a prize fought over by more powerful European powers emerging as unified nation states. This included the Austrians, French, and Spanish. Italy is one of the major European countries in terms of population, but was not unified until relative late (1860s). The unified country was a relatively poor country. At a time when national wealth was still significantly impacted by agriculture, the relatively poor agricultural land in many areas of Italy were unable to support the large Italian population. Southern Italy in particular was virtualy feudal. Northern Italy, in part because of the Austrian influence was more modern with a degree of industrialization. Italians migrated abroad to both South America (especially Argentina and Brazil) and the United States seeking jobs. Many Italians stayed in America, but larger numbers took their earnings home to buy land and small shops in their home communities. Mussolini and the Fascists set out to modernize Italy after World War I and obtain colonies. There were some suceesses, but Mussolini also led Italy into World War II and the country was devestated. European integration following the War brought led to the European Union bringing Italy fully into the 20th century. Italy has prospered as part of a united Italy. At first Italian workers went to Germany seeking jobs. Expanding Italian indidtry created jobs in Italy so Italians no longer had to seek jobs abroad. Socialists and Communists commanded widespread political support. As a result, Italy created a substantial welfare state with enormous entitlements. Unlike Germany and the northern European states, however, the Italian welfare state was created with little considerartion of the ability to pay out the commitments made. Now Italy faces the sane problem as many other European countries. The Government has promissed massive social welfare entitlements that are becoming increasingly difficult to finance and are impeading economic growth. Unlike the smaller states (Greece, Portugal, and Ireland), the financial commitments of the Government are enormous streaching the capability of the EU to finance a bailout. The fiscal position of Italian banks is also being questioned.
Surely Rome is the best known of all the ancient civilization, proding a grand heritage of aechitecture, art, law, literature, and much else. However rich Rome was, its economy was fairly simple. Rome was a largely agrarian, slave-based economy. Slavery was fundamental to the Roman economy. Because Rome is the best known and best studied ancient civilization this has resulted in a misunderstanding about slavery and it role it human civiliization. Almost all ancint civilizations did not have large slave populations. The primary way of ordering society not only in ancient civiizations and even modern society, until the creatiion of the United States was the creation of a landless peasantry. Rome's major economic objective was feeding the vast number of Roman citizens and Legionaries who expanded and maintained the Empire. The Legions were also needed to obtain silver to finance the Empire and mines in Dacia ahd Spain were particularly important. Agriculture and trade were at the center of the Romn economy along with some small scale industrial production. Given the importnce of agriculture, agricultural technology affected the productivity of this key sector. Romans to a degree used a two crop rottion. Yields were, however, relatively low and necesitated vast number of slaves to gain substantial quantities. Farmers had a choice of donating surplus crops to the government or paying a monetary tax. Thus both Republican and Imperial rulers had grain which could be used to curry the favor of the large, potentially unruly urban population.
The grain could be used for both free grain distribution and to feed the legions. The system did not, however incentevize farmers to improve productivity or expand output. A higher harvests meant greater taxes.
Roman citizens grew dependent on the free grain. It also meant that large numbers of Romans feed on the state, but did nothing to support or to create economic value. The need to secure grain providing provinces was one important, of many factors that would lead to the expansion and conquests of the Roman State.
Rome after gaining control of southern Italy, imposed their system of large estates worked by slave labor to produce grain. [Zamagni] Other important provinces included: Egypt, Sicily and Tunisia in North Africa.
A very large quantity volume of trade ensued. These areas were of vital importance in the production of grain to fed Rome. Grain was shipped directly to Ostia, the principal port of Rome.
The staple crops grown by Roman republican farmers and on the great estates were the standard crops of the Mediterranean world. There were different grains, olives, and grapes. Olive oil and wine were not only important food stuffs were among the most important trade products. They were an important part of Rome's exports.
The Roman Empire over time decveloped a huge urban population. This was especially true of Rome itself, but also included other important cities on the Peninsula. These populations were fed by large estates in the south worked with slave labor as well as massive imports. Small-scale industry and artisan activities developed in Rome and the other cities, but overall Rime was not very productive. Much of the population lived on the grain dole. The collapse of the Roman Empire (5th century AD) changed this economic dynamic. Urban populations collapsed and people had to go back to the land. The urban population was not very productive in the first plce. Along with the Empire, the distribution systems also collapsed. People had to grow their own food or be closer to food sources. This mean living in rural areas. As aesult, early medieval Italy became an overwhelmingly agrarian society. With the collapse of the Empire, the state authority imposing slavery also disappeared. Slaves abnd the fiormner urban popuklation became tenants. A few skilled specialist slaves still remained for a time. Italy was not, however, unlike France a rich farming area. Thus the economy dud not have the strength that it had during the Empire. As the medieval period continued, over time the European economy began to develop. And as this happened , Italy's geographic location acted ton bring about an economic recovery. The rise of Islam and subsequently the Ottoman Empire had isolated Europe from the East, but as the European economy developed and trade quickened. Europeans after the Crusades began demanding luxuries from the East arrivihng over the Silk Road and subsequently the Spice Route. And they largely had to come through Italy. Thus trade made the developing Italian city states rich byv the late-Meedieval period. And thus wealth led directly to the Renaisance.
Italy gave birth to the Renaissance and was where modern Europe first began emerging from feudalism. The trade in Easern goods demanded by the countries of northern Europe was a primary factor in the development of the Renaissance. Historians and economists have a range of opinions about the inception of the Renaissance. [Malanima] A critical point of disagreement is the terrible Black Death plagues tht swept Europe (14th century). All sources agree that the quickening of commerce in Europe greatly benefited the city states of Italy. Italian city states like Venuce abd Genoa capable of projecting naval power became enormously rich.
Modern banking first emerged in Italy.
The ecomomy of Italy had been emensly aided by geograpy. Trade routes from the East China, Indiua, and Africa) fed into Europe through the Mediterranean. The silk road led to the Black Sea. And because sea transit was imeasuarably more efficient tranaportation than land transit, the rest of trbsit was by sea. Thesame dynamuc was ar oklay withIndia abd Africa. Abd because Italy juts out into the Mediterarranean it was the natural terminus. The northern cities profited the most, becuse they were closer to the rest of Europe. But all this changed when Vasco de Gama rounded the Cape of Good Hope and opened the oceanic routes to the East (1498). This fundamentally changed notbonky Eurooean, but world economics. The ecomoic vitality of Europe changed from the south and Mediterannean to the northern and western countries that profited from the both the matitime trade eith the East and colonization of the Americas. Italian navigators played a major role in the European outreach by Portugal and Spain. Italy itself without an Atlantic coast did not share economically in that outreach as trade and the locus of wealth shifted west abnd north. Trade with the East shifted first to Portugal and Spain and then to the more northerly powers (England, France, and the Netherlands). As a result, cut off from this trade and increasingly dependent on the agrarian ouput from poor soils, the economy of Italy began a long decline. A factor here was new crops. The crop that Eurioeans wanted was wheat and other grains which were used for bread, a major part of the diet. Whear was developed in the Niddle East with a sunny, rather dry climate. In all of Eyrioe, Italy and Spaon were the closest to that climate. Norther Europe had a kess sunnt and wetter climate. This means that that crop yields were lower and there were ever crop failures. At a time that agticulture was the mainstay of the economy, this meant that it was Italy that was realtively more productive. The introduction of the Ma href="/eco/agr/agr-pot.html">Andean potato to European agriculture changed this relationship. Now norther European farmers could harvest crops with higher yields and sustain larger populations. Northern Europe could feed lather pipulations, the Italians had diffivulty meaning that economic conditions declined.
Religious conservatism and the Counter Reformatiion retarded the scientific inquiry that had begun as part of the Renaissance. Italy divided into minor states became a prize fought over by more powerful European powers emerging as unified nation states. This included the Austrians, French, and Spanish.
Italy is one of the major European countries in terms of population, but was not unified until relative late (1860s). The North (Piedmont) absorbed the southern Kingsom of Naples, a Bourbon monarchy, after a short and relatively bloodless wary Garibaldi--the Risorgimento. Piedmontese primeminister Camillo Cavour is often seen as the architect of Italian unification. He achieved unification in part by bribing southern generals. Cavour is said to have remarked, "Gentlemen, if we had done for ourselves what we have done for Italy, what great scoundrels we should be." Unified Italy was a relatively poor country, compared to the countries of northern Europe. National wealth was still significantly affected by agriculture, although
industrial development was remaking the European ecinomy. The relatively poor agricultural land in many areas of Italy were unable to support the large Italian population. Southern Italy in particular was virtualy feudal. Northern Italy, in part because of the Austrian influence was more modern with a degree of industrialization. Unification instead of improving the economy of the south, made conditions worse. A large-scale peasant rebellion to the Piedmont takeover was highly destructive (1860-61). The South was already the poorest part of Italy (in percapita terms). the Northwest�triangle (Turin, Milan, and Genoa) exoerenced a period of rapid growth
and industrialization, lurching ahead of the rest of the country, especially the south (1880s). The south only fell further behind the rest of the country. This dichtomy was not reversed by Mussolini and the Fascists. According to one economic historian, the southern economy hit rock bottom after World War II. [Zamagni]
By the time the southern economy was at its lowest point, the northern output per person was three times that of the south. The post-War policies of Italy, especially European unification helped to transform the South although this would take some time.
Italy in the 19th century was one of the poorest countries in Europe. While the industrial revolution began to change northern Italy, economic conditions were still almost feudal in southern Italy and Sicily. The difference between northern and southern Italy was that northern Italy had been goverened by the Austrians (and the French for a brief era during the French Revolution). Southern Italy was ruled by the Spanisgh Hapsburgs. Poor agragrian practices and the land and climate also affected crop yields in southern Italy. Italian emmigration began in the north. Many of these early immigrants went to neighboring European countries and to South America, especially Argentina, Brazil, and Uruguay. Later emigration began in even greater numbers from the south. Italians in the second half of the 19th century began a mass exodus to countries with more promising economic opportunites. Southern Italy was almost entirely an agricultural economy, but crop yields were low and few peasants owned land. The primary destination was the United States, but thwere was also emigration to South America (especially Argentina and Brazil). The subression of the peaant rebellion in the south was a factor here. Naples became the gateway to the America. Many Italians stayed in America, but larger numbers took their earnings home to buy land and small shops in their home communities. Many emigrants and boased of their success, which generated even more emigration. The Italian Government also promoted emmigration, seeing it as a way of improving economic conditions. Emigration was only one response to the economic conditions and over population. The other was colonization.
American World War I food aid Italy Figure 1.--This photo was taken in Avellino (a town near Naples in the south) during World War I. It shows peoples liming up to receive American-supplied food, probably soup and bred. (Notice the pots and pales for the soup.) The War was fought in the north, but southern Italy was still affected because so many men were conscripted. The word covered by the flag could be "Cucina" (kitchen). So the whole sign would be: Croce Rossa Americana / Cucina economica (American Red Cross / Cheap kitchen). This could be an inexpensive (or more likely free) food distribution center. We do not yet have details on the American food assistance program in Italy. Italy was still a poor country when it entered World War I. The Government receoived commitments from Britain and France for financial assistance and military equipment. The demands of the War, however, dwarfed the Allied aid. Italy was a still largely agricultural country and Italian farms were not very productive. The poor economic conditions is is why large numbers of Italians were forced to emigrate. (Itallians were one of the major immigrant groups coming to America in the late-19th and early-20th century.) The weak Italian economy was severely stressed by the War. One major problem was that men were the primary family bread wearners. When the Government called up the serves and expanded conscription, this left many families without incomes. To make matters worse, the diversion of agricultural laborers to the Army, affected farm ptodiction. As a result, food prices rose. Inflation became a very serious problem. If the father was killed or badly injured the family was imppverished. Stipeds to soldiers were very low. Middle and Upper class families could generally make do. Poor families which barely survived in the best of times found themselves in very difficult circumstances. Food aid from America was very important in preventing malnutrition. The Italian attitude toward the war was very different than the other beligerant countries. There was nothing like the wave of patriotism that swept over the other beligerants when the War broke out or in America when the United States entered the War. Italy was bitterly divided and the heavy losses only deepned the division in public opinion. The divisions in civilian society were reflected in the Army that Italy fielded for the War. Many Italian peasants and workers saw the state as a represive institution. There were serious disorders in major cities. Anti-war disturbances paralized Milan (May 1917). Bread riots broke out in working-class neighborhoods (August 1917). Army troops took 4 days to quell the riots An estimated 50 demonstrators and 10 soldiers were killed. The war was also unpopular among the men concripted for the War. Not only did many of the conscripts have no commitment to the War, but their provisionn and care was inadequate. Almost one million workers in arms and munitions factories were subjected to military discipline. Nearly 0.5 million Italians resited conscription in one way or another and another 0.3 million committed acts of indiscipline during their military service and this does not count the 0.3 million who actually deserted. By the end of the War, an estimated 1 million Italians faced military tribunals. A post-War amnesty prevented wide-scale juduicial action.
Mussolini and the Fascists set out to modernize Italy after World War I and obtain colonies. There were some sucesses, but the overall economy did not make major progress. Mussolini's economic vision sshowing his Socialist origins was the Corporate State--essentially a managed ecconomy with extensive central planning. Some in America were impressed, seeking a Depression era alternative to free market capitalism. Little by little, Mussolini nationalized major industries. His policies kept unemployment down, but they also meant that Italian companies did not become competutive, paying taxes and creating high paying jobs.
Mussolini in the end led led Italy into World War II. The country did not have the industrial capacity to wage modern war. The country and its economy was devestated as the Allies landed in the south and drove the Germans north. the German Army retreated out of northern Italy, Fascism came to an inglorious end. Mussolini and his mistress were captured by partisans fighters. They were shot and hung upside down. Hitler saw the images shortly before shooting himself. The amount of currency in circulation rose 18 times (1938-45). Strict price controls prevented the expansion of the money supply price cfromn causing infltion. manifested in higher prices.
The economic doctrine of the Corporate State (Stato Corporativo) was formulated in the Labor Charter (Carta del Lavoro) was approved by the Fascist Great Council on April 21, 1927. The most important economist that collaborated with the Fascist regime was Alberto Beneduce (1877-1944). He was born in Caserta, near Naples, As a young man he joined the Socialist Party and became a deputy in Parliament. After 1922 he strictly collaborate with the Regime, but never joined the Fascist Party. He guided the Italian economy from 1926 and in the time of the Great Depression. Beneduce's concept of the Corporate State was influential among American New Dealers. That influence can best be seen in the National Recovery Act (NRA). The NRA blue eagle was seen in stores and businesses throughout the United States in the early years of the New Deal. The NRA was, however, struck down by the Supreme Court. Historians and ecomists differ about the Fascism corporate experience. Most contend that the experience miscarried because of the authoritarian nature of the Fascist regime. Here it is often difficult to separate antipathy to Fascism from purely economic assessments. We are unsure about unemolyment and industrial production trends in the 1930s. One reader suggests that the state bureaucracy was a problem. Mussolini invasion of Ethiopia (1935) brought about an international embargo, but not all countries complied. Mussolini's subsequent decession to join Germany in World War II (June 1940) oroved and unmitigated disaster. The Italian people who had not fulkly recovered from the Depression were plunged into poverty by the cost of the War and the military reverses which followed.
Italy was the birthplace of Fascism with its aggressive policies idealizing war. Mussolini and his Fascist Party seized power (1923). He promopted the corporate state, meaning that all economic control was centered in the governmen which then managed all economic sectors and elements. This did not kead to substantial ecomomic growt are brining southern Italy into the economic mainstream. It would be Italy that that would first follow Japan ionto aggression with the invasion of Ethiopia (1935). Ulimately, Mussolini nd the Fascists had a major problem. Mussolini talked about 8 millio bayonerts while war would be decided by inditry and not bayonets wielding soldiers. An Italy simply did not hve the manufcturing caspability to take on major powers. This would lead to devestaion during World War II.
Italy like much of Wesrtern Europe after the difficult immediate post-War years experienced an economic boom, often described as an economic miracle. The most famous of these ecionomic miracles was the one in Germany. But the same occurred in the Low Countries and France as well. The one major exceoption was Britain.
Mussolini and the Germans left a devestated country in their wake. Government officials faced an enormous challenge. Italy did not have important natural resources such as coal and iron. Its agricultural land not very productive. The trahnsportation system was destoyed in the War. Huge numbers of houses and apartment buildings were destroyed. Inflation quickly became a problem. The Banca d'Italia issue large summs of paper money. There also was a reaction to the removal of Fascist era wage and price control.
Italy did not choose carry out a currency as was done in West Germany (causing the Soviets to blockade West Berlin) to create a hard currency. Italian monetary authorities decided to tmpen down inflation by restricting bank lending They imposed a 25 percent reserve ratio on the banks. This absorbed the excess liquidity of the banking system. The Government prohibited Treasury borrowing from the Central Bank without specific authorization.
The new Italian Government inherited from the Fascist Government large industrial concens thathad been nationalized as part of Mussolin's Corporate State policies. As a result, the state oened the following assetts:
shipbuilding (80 percent), oig iron (60 percent), railroad rolling stock (40 percent), and other industrial holdings. The L'Instituto per la Ricostruzione (IRI) operated as a holding company for these nationalized state enterprises. The company had initially been created to protect the interest of depositors in failing banks. The Government refocused operations to deal with communications, electricity, shipping, shipbuilding, steel and engineering. The Government used IRI to prevent failing state-owned business from laying off workers and adding to the unemployment problem (late-1940s).
European integration was an important part of the Italian and wider European success story. heUnited States tied Marshall Plan aid to regional cooperation (1948). This and the Frabco-Germnan raprochment set in motion an integration process. Regional integration beginning with the European Coal and Steel Community (1951) and leading ultimately to the European Union finally brought Italy into the 20th century, including southern Italy. Italy prospered as part of a united Europe. The first real benefit was creating good paying jobs for Italian workers. Many Italian workers went to West Germany where the Economic Miracle first took hold. The money they sent home became a major impetus in jump starting the Italian economy, including industrial expansion that created jobs in Italy itself. At first Italian compaies had the advantage of relatively low wage rates. Italian companies also benefitted from access to a greatly enlarged market whichb included far more affluent consumers than the Italian market offered. Italy had aubstantial population, but large numbers of opeople, particulkarly in the south, lived largely outside the money economy. Another huge assett was that the American military guantee through NATO allowed Italy to limit military spending.
The rapid development of the Italian economy after World War II was a major success story. It probably saved Italy from turning to the Communists and following Eastern Europe into the Soviet Empire. The immediate post-War economic reconstruction was followed by spectacular economic growth (1950-63). Increases in the gross domestic product (GDP) totaled an impressive 5.9 percent annually, peaking at aphenomenal 8.3 percent (1961). Italians refer to the 1958-63 period as Italy�s Economic Miracle with phenomenal industrial exoansion. The growth in Italian industrial output peaked at over 10 percent annually at this time. Only Japan and West Germany reported higher numbers. And Italy experience practically full employment, very unusual in Italian economic history.
Socialists and Communists commanded widespread political support. As a result, Italy created a substantial welfare state with enormous entitlements. Unlike Germany and the northern European states, however, the Italian welfare state was created with little considerartion of the ability to pay out the commitments made. Now Italy faces the sane problem as many other European countries. The Government has promissed massive social welfare entitlements that are becoming increasingly difficult to finance and are impeading economic growth. Unlike the smaller states (Greece, Portugal, and Ireland), the financial commitments of the Government are enormous streaching the capability of the EU to finance a bailout. The fiscal position of Italian banks is also being questioned.
Like almost all other contrires, the Italain economy was based on agriculture. Even so during the Roman era, Italy had to imprt grains to feed its urban population, especially Rome. Rome wasan oulier among ancivilzatiins where for the most part, the land was worked by a landless peaantry. Rome and Greece were were rare soceities in which slaves were a substantial part of the labor force. Agiculture during the medieval era was affected by the heavy use of the land and the depletion of the soil. This would lead to large scvale migration to the United States and other countries. The European Renaissance and the creation of modern Europe began in Italy generating the banking sector as well as artisan industries like glass making, there were also advances in metalurgy.
Even so Italy was one of the slowest counries to industrialize among the major European countries. Northern Italy, however, ,ade rel progress while southern Italy remain almost feudal and largely dependent o agriculture. This did not change until after World War II when Italy began a program of land reform. Overall, Italy This did not materiall change until after Wrld War II with the American Marshall Plan and the German Economic Miracle leading to the Italian Economic Miracle. Italian industry is especially strong in metallurgy, chemicals, and engineering. Industry is adversely impacted by a weak minning sector duev to a lack of raw material. Manufacturing has bee
aided by the automobile induistry both low cost (Fiat) and high end (Ferarai). Italy like most of Europe has a weak energy sector, onev iof the weakest in Europe. Utaly has to imprt some 80 percent of its industry. ces. More than four-fifths of Italy’s energy requirements are imported. Unkile most of Europe, Italy has retained an imortant textile sector, in oart because of the fashion industry. Services, particularly tourism, are a very important sector. Italy is a major tourist destuination. Italy benefits from a strong entrepreneurial pirit. Liberal trade policies after the War enabled manufacturing exports to expand at an impressive. The country is hurt by a large cumbersome bureaucracy. Some goverbnment srvices like the postal service are not reliable. A population that is distrustful of government and resits paying taxes also creates taxes. . . .
Malanima, Paolo. "The Italian Renaissance Economy". (1250-1600)*
Zamagni. Vera. Economic History of Italy 1860-1990
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