5 - The Lost Opportunity, 1996–2007

Summary

In 1995 Italy’s labor productivity was above that of the USA. In the following quarter-century Italian productivity almost stagnated. This long relative decline of an advanced country has no parallel in modern economic history. The slow adaptation to the second globalization and digital technology is ascribed to financial and political uncertainty. The chapter identifies the areas in which adaptation to the new global environment was too slow (education, R&D, reliance on SME, inefficient bureaucracy, and judiciary). We also emphasize social and political weaknesses resulting in the large public debt. Uncertainty held back domestic and foreign investments. A brief window of opportunity in the early 2000s showed Italy’s potential resilience, when economic decline could have been reversed.