Italy and Its Economic System

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Looking at Italy as a whole, it has a very impressive economic system, explaining its high rankings of being the third largest economy in the Eurozone, and ninth largest economy worldwide. Italy is also the country that founded the European Union as well as the Eurozone. Although they have a great reputation as a country, and a stable economy, especially considering the population growth, I am more interested in the economic globalization aspect of it. Although facing various issues, as every country does, Globalization has positively affected the fashion industry in Italy.

Globalization helps businesses and organizations operate on an international scale. The three types that mainly focused on are political globalization, social globalization, and economic globalization. According to mbsenaitaly.weebly.com, economic globalization has effected the country of Italy in three major ways; Italy has a high impact on foods as well as other projects necessary to manufacture goods, sixty percent of their trades come from within European countries alone, and the high amount of debt Italy has accumulated solely because of trade. Globalization is most productive when involving other industries and organizations across the globe.

I learned that when involved in making or manufacturing something, say a jacket for example, it is much cheaper for every one to just contribute their part in the process of making that item, rather than one country do all of the work. When other places around the globe are involved in this process, it is easier to distribute the finished product to different places around the world. There would be much less conflict and issues if each country did not depend on each other for successful production, but unfortunately for places like Italy, they do. Since sixty percent of all of Italy’s trades come from Europe, the country would be negatively affected economically, if any other country in Europe was not in good economic standing.

One of the most demanded items to be manufactured, produced and distributed from Italy is footwear. The Italian shoe market is extremely successful and well known. According to Italy and the IMF. (n.d.) , Gucci is listed as number nine of their list of top 100 most valuable fashion brands having a $9.63 b brand value. A statistic on Italian shoe production from statista.com, also shows the amount of pairs of shoes exported by the Italian Shoes Industry to the European Union was over 125 million within one year.

This is a substantial difference, especially when compared to other places the same study was on. A few examples from the statistic are the differences between the EU, North America, the Middle East, and North Africa. The amount of shoes exported from North America was over thirteen million, the Middle East had about four million, and North Africa had one million pairs of shoes exported. There is no question that The European Union overshadows the other competitors, but that does not mean that everything else in the country is as successful. It was previously stated that Italy has a stable economy, but one of their major issues is dealing with debt.

About forty years ago, Italy’s economy was doing quite horribly. The problems of terrorism, ongoing protests, the oil crisis in 1979, and other obstacles made this hole seem nearly impossible to get out of. There was also an incident involving FIAT (Fabbrica Italiana Automobili Torino), which is a very well known Italian corporation that manufactures trucks and automobiles that plays a major role in Italy’s economy; they laid off over twenty thousand workers. It was not until the middle of the 1980s where things started looking up. Northern Italy was getting a lot of attention because of its contributions to getting the country on its feet. The price of oil had decreased, and there was talk among the Italian citizens of a “new economic miracle”, but of course, there was still a significant amount of work to do to start seeing improvements.

Some of the problems this country has struggled with did not go away. Budget deficits still remained an issue, and by 1989, the national debt exceeded the annual GDP. In 1992, their system of “extraordinary incentives” had been abolished, and there had been a reduction in welfare payments, which affected a number of poor Italian citizens. Southern Italy on the other hand was doing very well, mostly because of illegal activity involving the black market. There was a lot of “unofficial” business being done in small firms, and entrepreneurship also played a huge role in the success of the south as well. Another issue they are facing is the youth unemployment rate growing to a shocking amount. It peaked in 2014 at 42.7 percent, and then went down to 34.7 percent in 2017. (Youth unemployment in Italy and Russia: Aggregate trends and individual determinants. (n.d.). The more kids unemployed makes it difficult for the lower class to get a head start in making money for themselves or their families needs, and leaves the impoverished stuck in the same spot, while also having to with the welfare reduction.

Taxation was another ongoing issue that took place during this time. Italians paid more taxes compared to most Western Europeans, as corruption and inefficiency got to be more common, the negative feelings of disapproval and frustration turned into more aggressive actions into the 1990s. The mafia took over Sicily with drug smuggling and other various illegal activities which led to numerous deaths and destruction of houses as well as villas in natural parks located in Sicily and Rome. This had an affect on not only the economy, but the citizens’ level of trust when purchasing goods. Unfortunately, the country did not take this seriously enough until about 1996, when a lot of the damage was already in place.

Over the years, America and Europe have had innumerable exchanges. They always had issues with things like international trade and how to exchange products for prices. Agreeing on the amount that the product is worth as well as how much the tax will be is just one of the differences that we have had with them. We have now come to a conclusion and agreed on the proper tax on trade items that are shipped to places like Italy, England, and the rest of Europe. A crisis that had an impact in the 2000’s was The Great Recession. This was a huge financial crisis that was described as the worst economic downturn in history since the Great Depression. A few causes of this was financial firms taking on far too many risks and making reckless decisions, toxic mortgages, and failure in financial regulation. It took several years to recover from this downfall. Some successful strategies included financial institutions and households paying off debts, and restrained government spending. Slowly but surely, the crisis was being fixed, and things were starting to go back to normal.

“This recent crisis is significantly challenging Italian industrial districts, as well as globalization. This has led to deep transformations in their internationalization, innovation and organization strategies, increasing global competition in the early 2000s and the world economic recession of 2008–2009” Globalization, Recession and the Internationalization of Industrial Districts: Experiences from the Italian Industry. (n.d.) Something that benefitted many European citizens was “The Common Market” transforming itself into The Universal European Market. At the end of World War II, the “Marshall Plan” was introduced, which was a plan created by Americans to help rebuild the demolished parts of Western Europe by donating twelve million dollars. This is one of the causes that has transformed Europe from “welfare capitalism”, a type of Keynesianism, to “modern capitalism”.

According to author Antonella Ceccagno, “The three major global shifts in the fashion industry are: The rise of low labor cost competitors, the restructuring of the distribution chain, and the emergence of a global fast fashion” Ceccagno, A. (1970, January 01). Globalization and Its Impact on the Italian Fashion Industry). Something that came to a surprise to me was how much the industrial revolutions reflected in the evolution of the fashion industry, The industrial revolution began in the late 1700’s located in Britain. At first, it started off in family homes using basic machinery and hand tools.

One thing led to another, things started slowly getting more efficient, iron and textile industries, the steam engine came into play, and eventually, systems of communication, transportation, and and banking started to improve. The more improvements happening, meant more goods were being manufactured. “As demand for British goods increased, merchants needed more cost-effective methods of production, which led to the rise of mechanization and the factory system.” (n.d.).

How did the industrial revolutions reflect in the evolution of the fashion industry? To narrow it all down, there were two important phenomenons that were the sources of the great developments of this time. The use of coal and iron, and the revolution of steel and electricity.

“Improvements of the agricultural techniques and practices turned out in a very big increase of production for many areas, supply as foods and raw materials, more efficient industry resulting more profits, the commerce started to boost, foreign and domestic distances were shortened, these are some of the main advances that the first industrial revolution brought up” (Montagna, 2006).

According to Frings (2005), “some of the main inventions were to improve the fashion industry.” The industrial revolution essentially gave people a sense of fashion. When John Kay’s flying shuttle came out; which was an invention to make weaving easier. This particular “machine” could weave much more and much wider fabrics than anyone from that time period was used to. After the sewing machine was invented in 1829, originally for the making of army uniforms, it eventually moved onto the clothes of the people who could afford it, they then started developing different styles. Then, thanks to the industrial revolution, it did not take long for the middle class to start being able to afford and purchase the same kinds of clothes as the wealthy.

Italy, from an economic perspective, has gone through Euro crisis, The Great Recession, along with other various obstacles. They are still facing the consequences of some of their errors in the past such as debt. However, they have also had many impressive changes over the years. One example being the youth unemployment rate making a substantial improvement in only a few years, and the fashion industry benefitted greatly from globalization as well as industrialization.


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Cite this paper

Italy and Its Economic System. (2021, Dec 26). Retrieved from https://samploon.com/italy-and-its-economic-system/

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