Fascism was a dictatorial regime that left its negative mark on the country’s culture, society and legislation, but it did not interrupt the process of industrialization, which was resumed immediately after the restoration of democracy, although the general conditions of Italy and the rest of Europe at the end of the Second World War were dismal. This chapter charts the evolution of the Italian economy in the period 1946–2016. I have broken down the period into five phases:

• 1. Reconstruction (1946–51). The birth of the republic and the integration of Italy within the international economy; administration of the Marshall Plan;

• 2. The economic miracle (1952–73). A period of rapid modernization;

• 3. The return of instability (1974–92). Economic growth continues, albeit more slowly; a period of political gridlock and the accumulation of a large amount of public debt; niche firms prosper;

• 4. Incomplete reforms (1993–2007). Continuing political turmoil and persistent high public debt levels; participation in the Eurozone places Italy on an slow and volatile economic path, despite the many reforms enacted and the resilience of Italian industry;

• 5. Italy and the global economic crisis (2008–16). One of the worst performers during the world financial crisis.

This chapter will familiarize the reader with the key events, both domestic and international, that have affected the Italian economy, while Chapters 3–5 will focus in detail on the macroeconomic, microeconomic and social analyses, providing quantitative illustrations.

RECONSTRUCTION, 1946–51

Major political and institutional changes took place in Italy immediately after the Second World War. A referendum was held on 2 June 1946 on whether to retain the monarchy, which had not supported democracy in Italy, or to introduce a republic. Support for a republic prevailed, however with a narrow margin of only 54 per cent of the votes. And for the first time women could exercise their right to vote, which had been acquired by decree during the war. The transition from monarchy to republic was peaceful and on 13 June the king left for Portugal. On the same day the referendum was held, Italians voted for 556 representatives of the newly created Constitutional Assembly, which, over 18 months, drafted the new constitution that came into force on 1 January 1948.