The Intervento Straordinario, its successor policies and the political economy of regional development in the Mezzogiorno: an anatomy of failure

The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
7
In this perspective, the main objective of this disertation is to explore the impact of this 
policy regimes, we shall: 
• Examine critically the extend to which improved regional performance is achieved 
before and after the failure of the Intervento Straordinario.  
• Analyse those factors, which explain the evolution of approaches to the regional 
question in the Mezzogiorno. These include disillusion with central government as a 
result of political scandal and corruption, the problem of underdevelopment in 
southern Italy, and popular support for institutional change, embracing regional reform. 
• Examine the extent to which there were successful practices in determining regional 
development in Mezzogiorno in Apulia with European, national and regional initiatives. 
Italy is a noteworthy representative of the North - South Gap, not only because of the 
Mezzogiorno, but also because it can be considered part of the southern portion of this 
economic gap within the European Union.  
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
8
Chapter 1 
HISTORICAL AND ECONOMIC 
DEVELOPMENT IN POST-WAR PERIOD 
THE PRE INDUSTRIALISATION PERIOD  
 
The aim of this chapter is to pay attention to the particular historical and economic 
background of the South Italy, which is called the Mezzogiorno, includes the provinces of 
Abruzzo, Basilicata, Basso Lazio, Calabria, Campania, Molise, Puglia, Sardinia, and Sicily. 
Basically, it consists of the southern region of Italy below Rome since the post war period.  
Two major problems can be introduced when speaking of the reasons for the lagging 
behind of the Mezzogiorno. One, this area "remained for so long an agrarian society based on 
landlords, with a large majority of ladles peasants and a limited exposure to marketable production and 
consumption, [and two,] ... how to explain the fact that the disruption of the agrarian regime, the integration 
of the region into an economic area highly exposed and responsive to market pressures, and a phase 
characterised by radical socio-economic change ... did not lead to one of the usual variants of industrial free-
market societies" (Mingione, 313). 
The roots of the problem in the Mezzogiorno are both pysical and historical. On the one 
hand, the south lacks natural resources in the form of coal or hydro-elettric power, though 
oil is found in Sicily; its lans surface is mountainous and arid, and the agricultural 
possibilities are limited; because the terrain, communications are poor and to improve them 
is an expensive job. History has exacerbated the problem: up to unification in the 1860s the 
Kingdom of Naples remained basically feudal, and thereafter the policy of protection 
encoureged the maintenance of inefficient agriculture at the same time as it permitted the 
infant industry of the north to growth. 
In the postwar period , too, the South's loss has been the North's gain: the costant flow 
of the labour northwards allowed nothern industry to increase its productivity faster than 
the average wage rate. But the South itself remained massively under-represented in 
modern industry, especially the critical growth sectors of engineering and chemicals. Most 
disturbingly, the Mezzogiorno failed to develop concentrations of large scale industry that 
could exploit economies of scale and inter-industry linkages. 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
9
Fascism and the Second World War had left as legacy an autarkic economic system, the 
agricultural sector was excessively concentrtated on cereal production; and the indutrial 
structure was dominated by traditional type of production in food processing and textile 
while modern sectors (steel and chemical for istance) were small. The United States 
untertook to give considerable financial aid to the war torn economies of Europe. In Italy 
the influence of the United States was considerable importance in the development of state 
intervention in the South. In the 1950s the Italian State made a much more decisive 
attempt to develop the Southern economy. During this period a number of the land reform 
laws were passed and "Enti di Riforma" (Reform Agencies) set up an, even more important 
from the point of view of the long term economic development, there estabished  the Cassa 
per il Mezzogiorno (Fund for the South), a semi-autonomous government agency to oversee 
and co-ordinate the South's economic development. The function of the Cassa was clear 
from its title, namely to undertake 'extraordinary interventions' over and above what 
normal government Ministries could achieve. In the intentions of the legislators the Cassa 
was to be a public body with its own legal status, largely independent of the civil service. 
Yet it was made responsible to the Minister for the Mezzogiorno and subject to 
government control. 
The Cassa per il Mezzogiorno, established with Law 646/1950 and by subsequent Law 
949/1959, originally had a heavily agricultural emphasis associated with the  land reform 
movement; it was to help the break-up of the traditional large estates of the region, and 
their improvement among the peasants, by investment both in agricultural improvement 
and in better trasportation. But in the course of the 1950s it became apparent that a border-
based strategy was needed, and emphasis shifted to industrial development through 
industrial credit a low rates (partly through specially created State funds), subsidies for 
industrial investment in buildings and plants , tax concessions, and even the taking of share 
in the equity of private firms. 
The Cassa's efforts to develop the South can be divided into three main phases: 1950-57 
when the emphasis was on modernising agriculture and building infrastructure related 
primarily to agriculture; 1957-71 when industry was singled out (Law 634 of 1957) as the 
sector that needed to receive greatest attention; 1971-84, i.e., the post-'heavy industry' and 
recession years. The first phase  was marked, as well as by the creation of the Cassa, by the 
land reform laws of 1950: Legge Sila in May, Legge Stralcio in October and Legge Siciliana in 
December. Many factors contributed to setting up of a special organ for promoting the 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
10
development of the region. There was, on the one hand, the important work the SVIMEZ 
(Associazione per lo Sviluppo dell'Industria nel Mezzogiorno) has been carrying on already 
since 1946 by presenting for the first time the problems of the South in quantintative terms. 
On the other hand, the idea of the special organ wich operate on behalf of the South was 
ispired by negotiations with the World Bank wich was prepared to finance additional 
import needs arising from public investment programmes. Thus the establishment of the 
Cassa  was also the result "of the search for an instrument suitable for obtaining international loans" 
(Saraceno 1983). Other considerations which influenced the decision to undertaken a 
special effort for the southern development and to create an appropriate organ for this 
purpose were largely of the national character. 
In the original 1950 legislation , the Cassa was given a period of operation of ten years 
and a budget of £ 666 milion of liras. Already in 1952, however the life of the Cassa was 
extended to 1962 and total finance to £ 853 milion of liras. In 1957 the funds were incresed 
to £ 1369 milion and the agency extend again to 1965, and further increase in finance to £ 
1385, took place in 1959 more than 24,000 bilions of 1992-Liras (Martinelli,1998). 
Istitutionally the Cassa was linked to the ordinary public administration throught a political 
organ (the Ministerial of Committee for the South) whose task it was to formulate 
objectives for all types of extraordianary intervention.  
The type of intervention for the Cassa was intented as a special agency excuting projects 
of an "extraordinary" infrastructural nature (acqueduct ansd sewer constrution) and in 
connection with the land reform (building of the farmhouse and service villages). Table 1 
summarize the achievements of the Cassa in this fields during its first 15 years of the 
operation. Almost all the activity of the Cassa was concerned with projects in support of 
agricultural development. Infact 77 per cent of the budget was spent on projects directly 
connected with agriculture, the rest being allocated to acqueductus and sewerage (11 per 
cent), trasport and comunication (9 per cent), and tourism (3 per cent) (Dunford, 1980). 
Although the amount distribued by the Cassa in agriculture during the first decade was 
enourmous compared to previous governements spending in the Mezzogiorno. Apart from 
infrastructure, the way that the Cassa has helped the agriculture is via the consorzi di bonifica, 
group of private farmers and landowners united for the purpose of land improvement and 
irrigation. 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
11
 
Table 1 Activities of the Cassa del Mezzoggiorno 1950-65 
Reclamation and improvement of mountain areas 37,3 
Land reform 21,9 
Improvement of land tenure 10,2 
Ordianary roads 9,0 
Railway work 5,9 
Aqueduts and drainage 13,8 
Tourist projects 1,9 
Total 100,0 
Source: relazione al Parlamento presentata dal Presidente del Comitato dei Ministri per il Mezzogiorno, Roma 1960 
 
Table 2: Activities of the Cassa del Mezzoggiorno 1950-65 in Agriculture 
Area affected by erosion 300,000 HA 
Afforestation 200,000 ha
Preservation and improvement of woodland 70,000 ha 
Area irrigated by Cassa financed projects 250,000 ha 
Reservoirs 2,000,000,000 cu m
Irrigation canals 18,000 km 
Drainage channels 3,000 km 
New roads 7,000 km 
Source : SVIMEZ 
 
The reasons for the emphasis of Cassa intervetion on agriculture and infrastructures 
might be found in a combination of factors: the existing structure of the Mezzogiorno 
economy, the idea then prevaling on the appropiate phasing of the development process 
and influence exeterd by nothern pressures and interests (Saraceno, 1983). Thus, since 
agriculture was the main sector in the Mezzogiorno, accounting as it for 34 per cent of gross 
domestic product and absorbing 57 per cent of its total employment. The major solution 
was seen in rasing agricultural productivity and incomes and improving conditions of life in 
rural areas (Graziani 1989).  
The land reform based on three laws in 1950: the Sila Law, the Stralcio Law, and the 
Sicilian Law, was not specifically designed for the  Mezzogiorno (Dunford 1988, Martinelli 
1998). These laws were aimed at reducing the power and the size of the estates of the large 
absentee landowners (latifondisti). Part of their land was expropriated and sub-divided into 
small plots of land which were assigned to landless labourers or petty land owners. The 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
12
farming plots thus created had the short-term effect of reducing the chronic unemployment 
and under-employment of the area and easing social tensions, as well as stealing the 
thunder of the Communist Party, which had backed the Southern peasants' agitations of 
the 1940s and received growing political support from them in return. The policy of 
favouring the peasant farm model, however, was not economically viable and when Italy 
joined the European Community the backward state of Southern agriculture became even 
more evident. Emigration to the North at the time of the country's economic miracle also 
drained human resources from the Southern countryside and resulted in the abandonment 
of many of the newly created family farms.  
The land reform led to creation of new farm covering a total surface of 635,000 ha of 
wich were located in the Mezzogiorno (Graziani,1989). In order to ease planning and 
distribution of projects, SVIMEZ has divided the region into three main zones of the 
operation. Bonifica Integrale (zones of integral development) include all those sections where 
there is an unused potential of natural resources and where the population density is small. 
These zones require reclamation and irrigation projects and development of electric power. 
Bonifica Parziale (special areas) included section sections where industry and commerce exist 
but are underdeveloped. These zone required small projects of land development to help 
encourage agriculture and expand industrial and commercial activity. Zone di Sistemazione 
(relief areas) include sections characterized by insufficient natural resources, in which 
industrial or commercial activity is non existent and for which no industrialization can be 
foreseen in the near future. It soon turned out, that the progress it was hoped to attain 
from pre-industrialization policies did not materialize. The Cassa's programme, has only 
been successful where the trend it seek to encourage were already in existence, and in the 
economically and enviromentally most favoured areas. 
The governemental policy initiated in the 1950’s costituted the fist attempt to make the 
country homogeneous, at least as regards endowmwnt of public works and services on 
wich economic expansion is dependent. Professor Giuseppe di Nardi (1960), in a article in 
the Montly Review of the Banca Nazionale del Lavoro, mentioned two important obstacles 
wich impeded the Cassa its drive to implement its plans and to start the projects working. 
First, there was a resistence on the part the organizations for whom the works are designed 
to take them over when they are completed. Secondly, there was a difficulties wich arise 
from a complex burecratic apparatus, combined with a natural resistance to change. Every 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
13
decision for change in original plans must be first approved in Rome, causing many delays 
and waste resources (Cafiero, S. 1994). 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
14
 
1957 - 1974 THE INDUSTRIALISATION PERIOD 
 
The shift in regional policy from promoting agriculture to promoting industrial 
development was thus inevitable. What kind of industries should be promoted became a 
key issue. An important objective of regional development was to encourage the formation 
of small and medium-sized firms and the emergence of indigeneous entrepreneurship. 
As was mentioned before, more than half of the Cassa's investements have been 
diverted in agriculture. But, investements not directly connected with the agricultural sector 
were of equal importance. These include monies set aside for (a) improving and extending 
roads and railways; (b) projects concerned with development of tourism, (c) handicraft, (d) 
fisheries, (e) industries. Based on SVIMEZ studies, the Interministerial Committee for the 
Mezzogiorno decided on July 30, 1959 (Law 634/57) that the concept of "industrial zone" 
should be changed to permit a broader concept of "area of industrial development". Under 
Law 634/57, state controlled companies are required to make at least 40 per cent of their 
annual in the Mezzogiorno.  
In reality, however, the Italian State had to rely on the public sector, mainly the two 
giant State holding companies IRI, Istituto di Ricostruzione Industriale (Agency for Industrial 
Recostruction), and ENI, Ente Nazionale Idrocarburi (National Acency for Carburants), to 
make investments in the South, with the consequence that many industrial plants set up in 
the Southern regions were in the capital-intensive, 'heavy' industrial sector, whose success 
turned out to be deeply conditioned by external events (Dunford, 1988; Graziani, 1973). 
The innovation of Law 634/57 were: (a) the adoption of a growth centre policy through 
the designation of growth area for the location of industrial activities; (b) the provision of 
new or the widening of existing industrial incentives such as tax concession; (c) directives to 
the state holding sector to locate a prescribed (Saraceno, P. 1983) Proportion of their total 
and new investements in the Mezzogiorno (Martinelli 1998). 
A major innovation of the Law 634/57 which further developed in Law 555/59 and 
Law 1462/62 was the concession of capital grants to SME (Small and Medium 
Enterprises). Capital grants could be obtained by enterprises of all sizes, if located in areas 
of industrial development. 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
15
In 1965 when the Cassa's life was prolonged more money was made available and the 
aim of industrial development was given priority. A new factor that had to be taken into 
account was requirement to co-ordinate work in the Mezzogiorno with the new National 
Plan. This involved the Ministerial Committee for the South being absorbed into a new 
national planning body which lays down policies and plans for the Cassa to carry out. The 
change of emphasis if favour of industrialisation is shows clearly in the divisions of 
expenditure for 1950-65 and 1966-69 (see Table 3). It will be seen that from a bare 7 per 
cent of total funds in the earlier period, industry took 36 per cent in the later one and the 
amount to be spent on industry in four years was almost eleven times the amount spent on 
it over the previous fifteen years. Further agriculture suffered not only a relative decline but 
also an absolute one; its total funds were reduced (Allen, K and MacLennan, M.C. 1970, p. 
55). 
The measures that have been taken since about 1960 to industrialise to Mezzogiorno fall 
into three related parts: inducement, stimulation, and concentration. The first heading 
covers a wide range of incentives that were devised to offset those disabilities of the South 
that deterred the arrival of the new industry. Under the Law 634/1957 local authorities in 
designate development zones were each encouraged to form a consortium to develop basic 
infrastructure works such as road and rail links, water and power supplies, to expropriate 
suitable land, to improve environmental conditions for industry, and to offer varying 
inducements. The measures for stimulating new industry to move to the Mezzogiorno hinged 
upon the government-controlled firms operated by IRI. Also in the field of the investment 
finance, several special financial institutions (ISAP, INSUD, FINSARDA, SOFIS) were 
create during the period whose task intended to be the collection of funds on domestics 
and external financial markets and the provision of risk of the capital for the new, mainly 
industrial ventures, on the one hand, and of technical assistance and stimulation of 
entrepreneurial activities, an the other (Graziani, 1973).  
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
16
 
Table 3: Division of the Cassa  expenditure by sectors, 1950-65 and 1966-69 
 1950-65                 1966-69 
SECTOR VALUE  
THOUSAND 
MILLION LIRE 
PERCENTAGE 
PER SECTOR 
VALUE  
THOUSAND 
MILLION LIRE 
PERCENTAGE PER 
SECTOR 
INDUSTRY 10.1 6.9 110.7 36.0 
AGRICULTURE 82.9 56.1 76.2 24.7
TOURISM 6.2 4.2 24.8 8.1 
GENERAL 
INFRASTRUCTURE 
33.1 22.4 60.3 19.6
OTHERS∗ 15.3 10.4 35.8 11.6 
TOTAL 147.6 100.00 307.8 100.00 
 
∗Technical assistance, management, training 
Source :Allen, K and MacLennan, M.C. (1970) . 54-60 
 
Important feature of this phase of industrialisation policies which was further 
developed subsequently, was the creation of a number of organs for the technical assistance 
and training of labour and management as well as for social and educational activities. First, 
the setting up in 1961 of IASM (Istituto Assistenza allo Sviluppo del Mezzogiorno, Institute 
for the assistance to the development of the south) by the Cassa in conjunction with the 
three special credit institutions. Its official tasks were to supply to entrepreneurs in industry, 
commerce and tourism. FORMEZ (Centro di Formazione e Studi per il Mezzogiorno, 
Training and study centre for the South) had been set up in 1961 and its activities were 
financed by the Cassa and consisted of the improvement of the managerial and public 
administration qualifications and the promotion and development of social and educational 
activities. (Cafiero, S. 1994). 
Another important step in the effort to move towards a more coherent and co-
ordinated approach and methods of southern policies took connected forms: the search 
for a more organic co-ordination of all public action in the South and the insertion of the 
southern development in the framework of the national economic planning in recognition 
of the interdependence between balanced regional development and the progress of the 
whole economy. A first initiative in this sense was the presentation in 1954 of the "Vanoni 
Plan" for the period 1955-64. This plan maintained its interest as the first official planning 
document presented on employment and income objectives of the whole economy and 
the elimination of the imbalance between the backward and advanced regions in Italy. Full 
employment was to be achieved through the creation of the 4 million new jobs over 
period. Productivity of those already employed had to increase at a certain rate to meet 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
17
the requirements of European integration and Italy's insertion into the international 
economy. In this period Italy's increasing integration into the international economy was 
reflected in a rise in the rise in the ratio of imports of Gross National Product from 7,4 
per cent in 1951-52 to 14,3 per cent in 1961-62 and in the export ratio from 6,2 to 14,5 
per cent in the same period. The First National Economic Programme was established by 
Law 717/1965 and its objectives were:  
(a) Full employment of the labour force; 
(b) Elimination of the gap between the South and the rest of the Italy;  
(c) A progressive equalisation of labour income in agriculture and non agricultural activities;  
(d) A redistribution of resources in favour of the collective needs.  
The overall annual growth rate was to be attained was at 5 per cent. The target for 
narrowing the gap between value added per man in the South and the country as whole 
from 22 to 15-16 per cent.  
In reality the gap increased to 24 per cent. The most conspicuous failure was the 
decline of employment by 172,000 units compared to a planned increased of 800,000 and 
the short fall of public social investments.  The Law 717/65 prolonged the life of the 
Cassa up to 1980 and increased its funds for the five year period 1965-69 to 1,640 billion 
of lire compared to an allocation of2,216 billion for the fifteen year period 1950-65. 
Additional 560 billion lire were allocated for 1969 as the Cassa had spend or committed 
almost all funds available for industrial development in 1968 (Dunford, 1978). The Law 
717/1965 provided for a much greater concentration of the Cassa activities.  
The final phase of this period started with Law 853/1971. Modification to existing 
legislative framework of extraordinary intervention turned out to have become necessary 
since the persistence of unfavourable underlying conditions rented the results 
disappointing despite successive improvements and straightening of institutions and 
instruments. Thus, although income per head in the Mezzogiorno had increased sharply 
since the initiation of special action, the gap between the South and the North had not 
been reduced; the share of net imports in total available resources had risen rapidly; the 
increase in industrial and tertiary employment had not been sufficient to absorb the 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
18
outflow of labour from agriculture and total employment had declined while emigration 
had accelerated.  
Another important point was the deficiencies of the past called for a change in 
institutions and policies of the Intervento Straordinario: co-ordination between ordinary and 
extraordinary public action continued to be lacking and Cassa effort remained substitutive 
rather than additive to ordinary expenditure. This difficulty reinforced by the growing 
financial problems of the local authorities. Secondly, while industrial incentives had been 
effective in stimulating investments in large capital-intensive enterprise, they turned out to 
be insufficient to create new and more diversified industries. Thirdly, the lack of a clear 
design for co-ordinated national industrial policy had led to support being given to 
industries in other regions. The 1971 legislation aimed to remedy some of these and other 
defects of the Intervento Straordinario (Cafiero, S. 1994). In the first place the functions of 
the Committee of the Ministers for extraordinary intervention in the South were 
transferred to the Comitato Inteministeriale della Programmazione Economica (CIPE), 
Interministerial Committee for Economic Planning (Martinelli, 1998).  
A major step of this direction was the formulation of many years of the co-ordination 
plans, which were to govern all interventions by the public administrations operation in the 
Mezzogiorno, to provide the link with National Economic Programme. When the co-
ordination plans were first introduced, the National Economic Programme was not set yet 
in operation; when it had become operative with enormous delay, its results fell short of 
most targets for the economy (increasing income and employment). The formulation of 
the Law was not clear and even contradictory in some respects at the outset while its 
effectiveness depended on whether it was applied in a stringent manner.  
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
19
 
1974 - 1984: THE TRANSITION DECADE 
 
The economic problematic suffered in the Mezzogiorno , together with the impact of the 
oil crisis, initiated in the first half of the 1974 brought Italy and specially the South to most 
severe recession experience.  
The rate of expansion slowed down again sharply in 1974 and in 1975 there was the 
first absolute decline of the GDP in the post war period. The fall of the internal demand 
concided with recessions in other western countries and export expansion slowed down to 
an modest rate. Employment declined in spite of the number of safeguard mechanism such 
as the "Cassa Integrazione Guadagni"" and there was increase in unemployment and 
underdevelopment (Graziani, 1989, D'Antonio,1985). Moreover, recession affected labour 
market conditions in the Mezzogiorno in a particular way since it was the main emigration 
area of agricultural labour. It is evident that the recession in 1974-1975 accentuated existing 
problems and delayed necessary adjustments. As can be seen in Table 4 the rate of decline 
of the gross product both total and per capita, internal consumption, value added in 
industry and investment was quite a bit lower than in the Centre North. In addiction , 1975 
was a favourable agricultural year in the Mezzogiorno wich also rendered possible a more 
rapid expansion of agricultural export than from the rest of the world (SVIMEZ, 1975). It 
must also noted that the total supply of the resources was more affected than domestic 
product because of a sharp contraction of net import due, in part, to decline in emigrants 
remittances and to contraction of exeternal investments on wich in the Mezzogiorno greatly 
depended. Futhermore the defence mechanism against inflation was weaker because of the 
smaller share of dependent employment in industry wich was proctedted against price 
increase by automatic cost of living adjustamnt by the Cassa Integrazione Guadagni. Other 
factors aftecting the Mezzogiorno were that inflation reduced ther real effect of the public 
finance assistance granted to new projects (Saraceno, 1983). 
The programming capacity of the Cassa after 1975 diminished significantly. The average 
total annual engagements of the Cassa falls to 14,339 billion 1992-Liras in the period 1976-
80, compared to 16,332 in the first part of the 1970s. The expenditures had a less negative 
trend (also because of the time lag between carrying out a project and settling the payment): 
The " Intervento Straordinario", its successor policies and the Political Economy of regional development in the Mezzogiorno: an 
anatomy of failure 
by Leonardo Piccinetti 
 
    
Leonardo Piccinetti 
Candidate Number 98102002  Thursday, September 14, 2000 
20
the average annual spending actually increases to 9,753 billion 1992-Liras in the 1976-80 
period (68% of engagements in that same period) 
Table 4  Indicators of the recession 1974-1975 
INDICATORS SOUTH CENTRE- NORTH ITALY 
Gross product at market prices - 1,0 - 4,6 - 3,7 
Total resources - 4,7 - 7,1 - 6,4 
Final domestic consumption - 0,1 - 1,9 - 1,4 
Gross Investment - 19,8 - 25,8 - 24,0 
Per capita product -1,7 - 5,2 - 4,3 
Source: SVIMEZ, Rapporto sul Mezzogiorno 1975 
But these better performances are mostly due to the completion of large infrastructure 
projects, whereas industrial incentives, after the peak of 1975, start declining, either in real 
terms or as a percentage of total expenditures. In the 1976-80 period the average annual 
expenditures in industrial incentives is 2,550 billion Liras and accounts for only 26% of 
total expenditures (compared to 34% in the 1971-75 period). In 1976 the Law 163/1976 
refinanced the Cassa per il Mezzogiorno for another five years. Among the new features were: 
a) further fiscal exemptions for industrial firms investing in the South; b) a new (quite 
important, but made ineffective by the crisis) form of incentive to industrial investment, i.e. 
a ten-year total State subsidisation of social security payments for any new industrial job 
created; c) a further focus on "Special Projects"; d) the explicit possibility of the Cassa to 
provide technical assistance and consulting to those Regional Government that request it. 
Also important to notice here is the fact that after 25 years of opposition to the Cassa, also 
the PCI (Partito Comunista Italiano, Italian Communist Party) and the unions endorses the 
industrialisation policy of the Intervento Straordinario. By the late 1970's the management of 
the state-controlled enterprises had progressively shifted from strategic to political and 
private objective. In fact they were increasingly used to private ends by managers and 
politicians (D'Antonio, M. 1985)  
A series of laws were passed in the 1970's to set up the regional system. The 1972 
decrees followed the 1970 regional elections granting the regions limited powers. Law 382 
of 1975 gave the regions wide-ranging powers within the scope of the Constitution (no