here we have italy known for pizza pasta and sports cars italy sounds like a great country
the italian economy is unfortunately the opposite it is known as the sick man of europe italy and
greece are the only eurozone countries that are poorer today than they were 20 years ago if the
italian economy had grown over the last 20 years like the 20 years before that each italian would
have an extra 75 000 euros in 1992 the italian economy was richer than the uk's it is now the
other way around with gdp per capita being about ten thousand dollars higher in the uk than it is
in italy in the 90s italy's economy grew by 38 over the last decade it's grew by only 2.5
so what has gone wrong in the italian economy that's what we're going to cover and if you'd
like to support the channel please hit that like button and get your thoughts down below
italy was heavily involved in the second world war once the war had finished the italian economy
started to grow quickly alongside japan and west germany italy set about rebuilding its economy
after much of its infrastructure had been destroyed it also received martial plan money
from the united states to help convince them that communism was not the way to go for the
italian economy it was a war on the other side of the world that was far more beneficial than
aid from america ever was the korean war started in 1950 and it was the first time
capitalism and communism went head-to-head italy was not directly involved in the war it central
made but not much else the war did help to kick start the italian economy however america asked
italy to manufacture military equipment to help support the south koreans america got its supplies
and a new capitalist ally in italy italy got some money and factories which could then be repurposed
in the future for non-military goods in addition italy was a founding member of the european common
market in 1957. this helped to boost trade and investment across different countries at the time
italy was basically europe's china so the italian economy benefited massively from this export boom
the italian economy was growing at roughly six percent per year in the 50s and 60s only germany
and japan were doing better unfortunately like all good things the italian economic miracle
came to an end the next period for the italian economy is known as the years of lead and they
lasted until the mid-80s the hot awesome strikes in 1969 kicked this off the italian economy before
this had been going from strength to strength industry was booming and the government had set
up social welfare programs with the newly found tax revenue wages had also started to rise pretty
quickly as well whenever an economy goes through a large development cycle like italy it is natural
that some workers will get larger wage rises than others we see this today with china which
has shanghai but then lots of countryside towns and villages this led to some italian workers
questioning whether capitalism was really working for them communism was on the rise and the idea
of a workers paradise appealed to some the result was a series of strikes starting in
1969 these strikes started out as your standard protest over pair and working conditions like
many strikes though it got hijacked by far left groups that wanted to overhaul the italian economy
these people weren't interested in negotiating better jobs for italian workers they wanted the
italian economy to become a communist one and to work closely with the soviet union
if you know your history you'll know that the far left and far right have often battled one another
to control the country but the reality is the consequences of either are generally very similar
with the far left hijacking the strikes the far-right got involved and they came out fighting
this created decades of social unrest within italy investors are not interested in places
with high levels of social unrest it creates unstable conditions for businesses the last thing
you want as an investor is seeing your business getting smashed up because of political opponents
the problems for italy didn't stop there however the 1973 oil crisis hit the italian economy hard
this helped to usher in pretty much the worst economic situation a country can find itself in
outside of war the italian economy was dealing with stagflation the phillips curve is a model
which shows the relationship between unemployment and inflation as unemployment decreases you expect
inflation to rise this is because you have people with more money to spend which pushes up demand
when the demand for good or service increases the price goes up just think of hand wash in march
2020 stagflation is when this relationship breaks down it is when you experience high inflation and
high unemployment if you were to ask an economic policymaker what they fear most this would
probably be it the reason for that is there is no simple fix if you have high unemployment you make
reforms that boost economic growth if you have high inflation you try and cool off the economy
but what do you do when you have both if you have any ideas get them down below because
i'm sure policymakers would love to hear them this was the reality for the italian
economy until the 1980s unemployment had gone up dramatically especially youth unemployment
inflation continued to run high due to high oil prices and the value of the italian lira collapsed
to end this period of stagflation the government introduced a series of difficult reforms to get
the italian economy back on track firstly monetary policy was changed meaning that money printing was
reduced and the central bank became independent from the government the idea behind this
was it would create more trust in the italian economy which would lead to increased investment
secondly the government cracked down on the far left and far-right groups that had caused so
much unrest since 1969. thirdly wage increases were reduced which helped to prevent inflation
from spiraling out of control this helped create the italian economy that we noted
when people think of italy they think of luxury brands in cars and fashion italy was once again
the china of europe china imports things like silver and turns it into electrical equipment
italy imported things like leather and turned it into really expensive handbags these value-add
industries are very profitable for an economy it's taking materials which on their own might be worth
50 euros and selling them for a thousand euros the luxury brand's business is worth billions of
dollars a year and it created the italian economy which during the 90s looked to be heading towards
powerhouse status not only did the brands themselves sell for a fortune but it creates
an entire luxury experience around a city for italy this was milan the colosseum helped bring
tourists to rome and fashion help bring tourists to milan italy still has the luxury brands but the
italian economy today is no richer than it was in the late 90s not all of this is italy's fault of
course it's had to deal with the global financial crisis the eurozone crisis brexit and now covered
but a large part is italy's fault or rather the government's fault earlier this year italy's
prime minister resigned making with a super mario draghi to step in this in itself isn't necessarily
a problem the problem is that this is the 69th italian government since the second world war
brexit made uk politics look slightly mad with elections in 2015 2017 and 2019 but compared to
italian politics that's stability the issue with changing governments so often is that it reduces
investor confidence in the country and when there are so many other choices with regards
to where you can invest your money it means the italian economy is hit significantly harder the
largest hindrance on the italian economy though is undoubtedly how difficult it is to do business
the world bank's ease of doing business index places italy at 58th this puts it behind other
business paradises such as belarus and kenya the index ranks economies on a series of metrics
and on some italy is as low as 128. if you're an entrepreneur who wants to start a business get
finance for your idea and pay taxes because it's gone really well italy wouldn't be your choice
like greece italy is really bad at collecting taxes it has complicated laws and pretty much
a voluntary pay-as-you-go system this is partly why italy was so heavily involved in
the eurozone crisis the amount of regulation within the italian economy is also horrific
it has an ingrained attitude of we've always done it this way which means bad regulations stay in
the law books and new ones continue to get added and then there's the common agricultural policy
agriculture is largely present in the south of the country this is where a lot of grapes olives and
lemons are grown the common agricultural policy acts as a subsidy for unproductive businesses
so these italian family farmers could just go on collecting money whilst not competing properly
the new government led by mario draghi is keen to turn the italian economy around as we head
into the recovery the government wants to focus on digitalisation research and development and
education this all sounds good but the question is will the italian government be able to do it
over to you then what do you think of the italian economy do you think it can become
a powerhouse once again let me know your thoughts in the comment section down below
if you enjoyed this video please support the channel by hitting that like and subscribe button
thank you very much for watching and i'll see you in the next video