The Growth of the Italian Economy 1820-1960

Published by EH.NET (September 2002)

Jon Cohen and Giovanni Federico, The Growth of the Italian Economy

1820-1960. Cambridge: Cambridge University Press, 2001. viii + 133 pp. $13

(paperback), ISBN: 0-521-66692-9.

Reviewed for EH.NET by Brian A’Hearn, Department of Economics, Franklin &

Marshall College.

Italian economic history is a tremendous success story. Who would have bet in

1861 that a backward, peripheral, resource-impoverished new nation would be

transformed in a few generations into one of the world’s largest, wealthiest

industrial economies? Yet this success story is little known, at least in the

English-speaking world. Likely reasons for this are not far to seek: Italian

historical statistics are not great; Italy’s economic miracle was less

impressive than those of Japan or Germany; Italian scholarship derives from a

different academic culture than the Anglo-Saxon tradition; and innovation and

efficiency do not jibe with widespread stereotypes about Italy. Yet the field

of Italian economic history is anything but torpid. In this volume Cohen and

Federico demonstrate that it is very much alive and full of promise.

In keeping with the goals of the New Studies in Economic and Social History

series, this is a work more of historiography than history. It is organized

thematically, with chapters on measurement, models of growth, agriculture,

industry and services, macroeconomic policy and performance, and the economic

miracle from 1945 to 1960. Each chapter quickly summarizes the main historical

interpretations at the root of current research programs and controversies,

then reviews recent progress, right up to the very latest contributions. There

are numerous publications from the year 2000 in the bibliography, and over half

its 300-plus entries date from 1990 or later. About two thirds of the

bibliography, itself of course one of the book’s main contributions, are

Italian language publications. Thus, the book makes accessible to non-Italians

a large and evolving body of literature.

Four major themes are emphasized by the authors in their conclusions. First,

the older view that Italian growth proceeded in fits and starts before 1950 is

based on shaky statistical foundations. Recent work suggests a smoother growth

path and earlier structural change in terms of output shares, though it

confirms the limits of convergence toward richer neighbors along with a likely

divergence within Italy during this period. Second, earlier perceptions of

dismal performance in agriculture have largely been overturned: aggregate

output statistics were simply wrong; innovations not adopted were not

appropriate to the Italian resource environment; institutions and attitudes

were not completely averse to investment or technical change; and low labor

productivity resulted simply from a very low land/labor ratio. Third, revision

is required for several staple hypotheses about Italian industry: scale

economies were not likely binding constraints; capital scarcity may yet have

been, as German-style mixed banks did not play the decisive role attributed to

them by Gerschenkron; large firms were less dominant than previously thought,

and small firms less backward; and the effects of tariff protection and state

promotion of a military-industrial complex remain difficult to assess, but have

probably been exaggerated by both proponents and critics. Finally,

methodological advances are improving the debate on macroeconomic policy and

performance. External constraints are no longer seen to have operated via the

trade balance, but through changes in capital flows and adherence to a fixed

exchange rate regime. For the post World War II period, the net effects of the

state’s complex intervention in the economy remain uncertain, but a majority

view is emerging of a growth process driven by high rates of investment, in

turn sustained by a stable policy environment, slow wage growth, and

international openness.

Strengths of the book are its brevity, the lively, incisive writing, and the

authors’ willingness to take a stand. (They like cliometrics. They do not like

ideological preconceptions or vague theorizing.) All of this makes the book an

easy and enjoyable read. Of course, there are also costs to the concise format,

thematic organization, and focus on historiography. There is a notable scarcity

of basic information on events and institutions, and it is episodically

disclosed. This probably limits the book’s usefulness as an introduction to

Italian economic history. But this was never the authors’ intent. For the

reader with basic background knowledge of Italy, the book is an invaluable

guide to the current state of the art. It is even better for readers seeking a

research topic. The authors explicitly point out numerous areas where further

research is needed, is feasible, and promises important results. (I marked at

least fifteen, counting the sticky notes protruding from my copy of the book.)

These recommendations, together with the masterful literature review and

bibliography, make the book a virtual do it yourself kit for producing a

research agenda in Italian economic history. I only wish I could have

encountered this book ten years earlier.

Brian A’Hearn teaches economics at Franklin and Marshall College. Recent

publications include “More International Evidence on the Historical Properties

of Business Cycles,” Journal of Monetary Economics 47, pp. 321-346

(April 2001), with Ulrich Woitek; and “Could Southern Italians Cooperate?

Banche Popolari in the Mezzogiorno,” Journal of Economic History 60, pp.

67-93 (March 2000). Current research interests include the role of the banking

system in Italian regional divergence, living standards in northern Italy

before the unification, and the role of human capital in Italian economic

growth.