Introduction: Italy’s Decline, the Existing Interpretations, and Our Hypothesis

This chapter summarizes the main analyses of Italy’s economic decline, discusses their limitations, and sketches the interpretation offered in this book. The discussion is set in the framework of Schumpeterian growth theory. It moves from the observation that during the 1980s Italy’s TFP performance began to diverge from that of its peers, andG that growth has been stagnant since the early 1990s. The existing interpretations identify the proximate causes of the country’s decline, not its deeper ones, nor do they satisfactorily explain why an unprecedented wave of structural reforms failed to reverse it. This chapter advances the hypothesis, explored in the book, that its deeper causes lie in the political economy of growth, for innovation and economic creative destruction can be hindered if political creative destruction is limited and the ensuing systemic constraints undermine institutional reform.