Introduction

In his pioneering work on the development of the Mezzogiorno, Hollis Chenery (1962) highlighted the fact that despite massive capital inflows the accomplishments of the Southern Italian economy had been in many respects disappointing and, at any rate, had not matched the performance of the North. Thirty years later, Chenery's judgment is not really open to dispute. Almost half a century of development policy, fostering largescale transfer of income and capital to Southern Italy, has failed to narrow in any significant manner the output gap between North and south (Table 7.1).

To be sure, today's South is no longer poor: in per capita GDP, it fares no worse than the North in 1970 or Spain today; it is considerably better off than Ireland, Portugal and Greece (Table 7.2). In forty years it has undergone significant change, as witnessed by the fall in the share of agricultural employment from 49 to 16 per cent; local manufacturing has unambiguously taken off along the Adriatic coast and around Naples.

However, the fact remains that convergence has not been achieved, nor is it anywhere in sight. Investment has been high, but productivity in both the public and the private sectors has lagged behind. As a result, 36 per cent of the Italian population lives in a region that has become heavily dependent on public subsidies. This condition has become the source of increasing political strain, since socially painful central government budget cuts have become necessary to redress the public finances.