Economy of Italy
has a highly developed social market economy. It is the third-largest national economy in the European Union, the 8th-largest economy in the world by nominal GDP, and the 12th-largest by PPP-adjusted GDP. The country has the second-largest manufacturing industry in Europe and the 7th-largest in the world. Italy has a diversified economy which is dominated by the tertiary service sector. The country is a great power, and is a founding member of the European Union, the eurozone, the Schengen Area, the OECD, the G7 and the G20; it is the eighth-largest exporter in the world, with $611 billion exported in 2021. Its primary trade partners are the other countries of the European Union, with whom it conducts about 59% of its total trade. Its largest trading partners are Germany and France, followed by the United States, Spain, the United Kingdom and Switzerland.
In the post-World War II period, Italy saw a transformation from an agricultural-based economy which had been severely affected by the consequences of the World Wars, into one of the world's most advanced nations, and a leading country in world trade and exports. According to the Human Development Index, the country enjoys a very high standard of living. According to The Economist, Italy has the world's 8th highest quality of life. Italy owns the world's third-largest gold reserve, and is the third-largest net contributor to the budget of the European Union. Furthermore, the advanced country private wealth is one of the largest in the world. In terms of private wealth, Italy ranks second, after Hong Kong, in private wealth to GDP ratio. Among OECD members, Italy has a highly efficient and strong social security system, which comprises roughly 24.4% of GDP.
Italy is the world's seventh-largest manufacturing country, characterised by a smaller number of global multinational corporations than other economies of comparable size and many dynamic small and medium-sized enterprises, notoriously clustered in several industrial districts, which are the backbone of the Italian economy. Italy is a large manufacturer and exporter of a significant variety of products. Its products include machinery, vehicles, pharmaceuticals, furniture, food and clothing. Italy has a significant trade surplus. The country is also well known for its influential and innovative business economic sector, an industrious and competitive agricultural sector, and manufacturers of creatively designed, high-quality products: including automobiles, ships, home appliances, and designer clothing. Italy is the largest hub for luxury goods in Europe and the third-largest luxury hub globally. Italy has a strong cooperative sector, with the largest share of the population employed by a cooperative in the EU.
Despite these important achievements, the country's economy today suffers from few structural and non-structural problems. Annual growth rates have often been below the EU average. Massive government spending from the 1980s onwards has produced a severe rise in public debt. In addition, Italian living standards are extremely high on average, but have a considerable North–South divide: the average GDP per capita in the much richer Northern Italy significantly exceeds the EU average, while some regions and provinces in Southern Italy are significantly below the average. In Central Italy, GDP per capita is instead average. In recent years, Italy's GDP per capita growth slowly caught-up with the eurozone average, while its employment rate also did. However, economists dispute the official figures because of the large number of informal jobs that lift the inactivity or unemployment rates. The shadow economy is highly represented in Southern Italy, while it becomes less intense as one moves north. In real economic conditions, Southern Italy almost matches Central Italy's level.
History
The Italian Renaissance was remarkable in economic development. Venice and Genoa were the trade pioneers, first as maritime republics and then as regional states, followed by Milan, Florence, and the rest of northern Italy. Reasons for their early development are for example the relative military safety of Venetian lagoons, the high population density and the institutional structure which inspired entrepreneurs. The Republic of Venice was the first real international financial center, which slowly emerged from the 9th century to its peak in the 15th century. Tradeable bonds as a commonly used type of security, were invented by the Italian city-states of the late medieval and early Renaissance periods.After 1600 Italy experienced an economic catastrophe. In 1600 Northern and Central Italy comprised one of the most advanced industrial areas of Europe. There was an exceptionally high standard of living. By 1870 Italy was an economically backward and depressed area; its industrial structure had almost collapsed, its population was too high for its resources, its economy had become primarily agricultural. Wars, political fractionalization, limited fiscal capacity and the shift of world trade to north-western Europe and the Americas were key factors.
The economic history of Italy after 1861 can be divided in three main phases: an initial period of struggle after the unification of the country, characterised by high emigration and stagnant growth; a central period of robust catch-up from the 1890s to the 1980s, interrupted by the Great Depression of the 1930s and the two world wars; and a final period of sluggish growth that has been exacerbated by a double-dip recession following the 2008 global financial crush, and from which the country is slowly reemerging only in recent years.
Age of Industrialization
Prior to unification, the economy of the many Italian statelets was overwhelmingly agrarian; however, the agricultural surplus produced what historians call a "pre-industrial" transformation in North-western Italy starting from the 1820s, that led to a diffuse, if mostly artisanal, concentration of manufacturing activities, especially in Piedmont-Sardinia under the liberal rule of the Count of Cavour.File:Alessandro Cruto Museo Scienza e Tecnologia Milano.tif|thumb|Alessandro Cruto, creator of the first practical long-lasting incandescent light bulb|224x224px
After the birth of the unified Kingdom of Italy in 1861, there was a deep consciousness in the ruling class of the new country's backwardness, given that the per capita GDP expressed in PPS terms was roughly half of that of Britain and about 25% less than that of France and Germany. During the 1860s and 1870s, the manufacturing activity was backward and small-scale, while the oversized agrarian sector was the backbone of the national economy. The country lacked large coal and iron deposits and the population was largely illiterate. In the 1880s, a severe farm crisis led to the introduction of more modern farming techniques in the Po valley, while from 1878 to 1887 protectionist policies were introduced with the aim to establish a heavy industry base. Some large steel and iron works soon clustered around areas of high hydropower potential, notably the Alpine foothills and Umbria in central Italy, while Turin and Milan led a textile, chemical, engineering and banking boom and Genoa captured civil and military shipbuilding.
However, the diffusion of industrialisation that characterised the northwestern area of the country largely excluded Venetia and, especially, the South. The resulting Italian diaspora concerned up to 26 million Italians, the most part in the years between 1880 and 1914; by many scholars, it is considered the biggest mass migration of contemporary times. During the Great War, the still frail Italian state successfully fought a modern war, being able of arming and training some 5 million recruits. But this result came at a terrible cost: by the end of the war, Italy had lost 700,000 soldiers and had a ballooning sovereign debt amounting to billions of lira.
Fascist regime (1922-1943)
Italy emerged from World War I in a poor and weakened condition. The National Fascist Party of Benito Mussolini came to power in 1922, at the end of a period of social unrest. However, once Mussolini acquired a firmer hold of power, laissez-faire and free trade were progressively abandoned in favour of government intervention and protectionism.In 1929, Italy was hit hard by the Great Depression. In order to deal with the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities, establishing the Istituto per la Ricostruzione Industriale. A number of mixed entities were formed, whose purpose was to bring together representatives of the government and of the major businesses. These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business.
This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism. At the same time, the aggressive foreign policy of Mussolini led to increasing military expenditure. After the invasion of Ethiopia, Italy intervened to support Franco's nationalists in the Spanish Civil War. By 1939, Italy had the highest percentage of state-owned enterprises after the Soviet Union.