Term Paper on Italy A Study In Economic Development

(First 2 Pages)

Introduction
The Italian economy has seen rapid developments over time. The developments that have taken place in the recent past in the Italian economy have taken the country into an international position of primary importance. In 1987 Italy became the fifth economic power, preceded by USA, Japan, Germany and France, but ahead of Great Britain, compared to which this country now has a higher rate of general development and decreasing inflation.
 

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History:
The history of the country can be traced at the time of Unification (1861), when the state of the country's economy was far different.  At the beginning certain central and northern regions were reasonably well developed considering efficient modern structures and a high availability of capital. The country was however put on a neutral tract by the adoption of the Piedmont tax system and excise tariffs, which contributed to widen the economic and social disparities between North and South, already seen in the former States on the peninsula.
 

At that time the economy of the new nation was based essentially on exploitation of land resources, with agriculture providing most of the income. The principal crops included provided the bulk of the revenue:
• Cereals,
• Olives,
• Vines,
• Mulberry bushes and
• Fruit trees.
 

Certain fibrous plants such as hemp and flax also provided a source of revenue. Traditional livestock consisting mainly of sheep, horses and pack animals, was also present thereby contributing to the development of revenue and sources of revenue. The main development avenue, namely the industrial sector was still fairly modest and infrastructures (roads and railways) inadequate, requiring major input of resources to strengthen it and enable it for future development. With the advent of time, some 6,000 km of new railways were added.

With time, the abolition of the free trade system, which took place in 1878, and the introduction of excise tariffs enabled national industries to expand for a decade at a considerable rate (roughly 8% a year). At the same time the country was plagued by agricultural problems, which were stemming from migration from the overpopulated regions.

 
In 1890s, ending in restructuring of the banking system (1893) was a financial crisis. This crisis helped in forming the basis of a smooth financial system in the country. However all along this time, that is at the turn of the last century, economic development continued with renewed vigor, initially at an average rate of 4%, and then at a rate of 7.5%. This activity helped in invigorating agriculture a profession, which still provided employment for half the active population. The economy then took a turn with the advent of the World War. With the advent of the War, considerable productive effort was expended which translated in large industrial companies in the engineering and metalworking sectors. This however was not the only picture. Several drawbacks of the war such as heavy public debt, steep inflation trends, and industrial action by the workers who were hit by increasing unemployment translated in loss of morale for several years.

As a result, between 1921 and 1926, the economy saw a new way to grow, which was namely under the patronage and consolidation of fascism. The average annual rate of 4%, both in industry and agriculture was present in those years, whereas banks increased their participation in industrial shareholdings.

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