Italy: Simultaneous Crisis of Democracy, Innovation and Economic Efficiency

Abstract

This chapter examines Italy as simultaneously a case of crisis of democracy, innovation and efficiency, to understand how a major Western economy turned into an economic laggard in only three decades and how to reverse the trend. The analysis interrogates Italy also as a laboratory of the decline of the West and of the European Union (EU), with its increasing inequality, decreasing social mobility and lack of innovation. The chapter analyses Italy in the years after World War II, when it emerged from the devastations of two decades of Fascist dictatorship, produced the “Italian economic miracle” of the reconstruction and the “industrial district” model, consolidated its democratic institutions and anchored itself into the Western sphere of international relations. Until the 1990s, with the collapse of Italy’s party system, the accentuated personalization of politics and a growing split within the electorate, shaking Italy’s institutional structure and putting a break on growth that started a trend of loss of human capital fleeing abroad. Multiple top-down attempts at reforms have failed to aggregate and incorporate knowledge holders’ inputs, while currently populist movements even question innovation-driven changes. The chapter empirically shows how a twenty-first-century “renaissance” reversing these trends is likely to be based on innovation-driven change originating from the grass roots, Italy’s networks of model cities, unions of municipalities and town associations. In closing, the chapter argues that to succeed such strategy prospect needs to be framed by national and EU policies.