The Italian Economy Of The ’80s And The Legend Of A Lost Paradise

The hard truth is that, although the economy was bloating, Italians were living above any conceivable means.

Italian Economy 1980s

The hard truth is that, although the Italian economy was bloating, people were living above their conceivable means.

There is an incorrect urban legend that Italy was a bonanza in the ’80s. In a country currently with a high average age (46.3) and over 14 million elderly (over 65), it is easy to believe that twaddle. After all, the GDP back then was ballooning from almost $500 billion in 1980 to over $1 trillion in 1990. And older people recall those times with nostalgia when it was easier to get a job and lead an independent life.

Since Italians are getting the wrong end of the stick, many parties are using that widespread nostalgia for electoral purposes. For example, Matteo Salvini, leader of the far-right and populist The League, blows things out of proportion (again). In fact, during a political talk show on the channel La7, he claimed that the ’80s were a thriving period. In his opinion, the former Italian currency (lira) was leading the country to flourishing times, as “not only Italy was outstripping Germany, but companies were successful, people were squirreling away money and buying houses.”

Dewy-eyed people may look wistfully at the ’80s. But is it true that 40 years ago Italians were all bazillionaires? Or is that only an “OK Boomer” crock?

Probably it is nothing more than a cock-and-bull story. Let’s find out why.

A drugged economy

Although the Italian GDP indeed was spiking, people should not overlook the staggering upturn of public debt in the ’80s. According to data from Italy’s central bank, the ratio of government debt to GDP snowballed from 56% in 1981 to 94% in 1991. In 10 years, that rate had roughly doubled. Nowadays, that percentage reached 134.8%. It is intolerable since a large amount of debt (€2.4 trillion before the coronavirus outbreak) hobbles investments and holds the future down.

For instance, many civil servants used to retire after 20 years of service, due to the baby pension system. As a consequence, 500,000 people under 40 years old have retired and are still making big bucks without any  financial contribution. It’s a sin worth €150 billion.

Due to the parallel growth of GDP and debt, it is unquestionable that the economic system was high from the injection of public money. Although revenues have been exceeding expenses 26 times in the last 30 years, the Italian government pays €65 billion of interest on its debt annually. And those interests arose specifically in the ’80s.

Italy is still above water, thanks to the Euro

Matteo Salvini claimed that the former Italian lira was boosting the economy, letting Italy take fifth place in the world economically in 1987, and even outmatching Germany. That’s another fairy tale. Firstly, although it is true that in 1987 the Minister of Economy Giovanni Goria triumphantly declared the “overtaking” of the United Kingdom’s GDP, it should be put in the context that Italy ranked fifth in the world, following the US, Japan, (West) Germany and France. Germany was still ahead.

Secondly, lending credence to the lira as a magic bullet is a blatant lie. The inflation index in the ’80s peaked at 19.55%, due to the currency devaluation of 20% put forward by governments. Whereas in the last year, thanks to the Euro, that index was only 0.39%. Devaluation wears away savings and purchasing power, owing to skyrocketing prices. It is worth considering that at that time, Germany was exporting more and their commodities were 15% cheaper than the equivalent Italian products.

Comparing German and Italian incomes

There is another lie of the land in the bargain. According to the League’s leader, the pro capita income was higher in Italy than in Germany. With enough statistics, his argument completely falls apart. Data shows that the average German income was higher in 1980 ($8,457 against $12,138). Besides, that difference was even thinner in 1990 ($22,304 versus $20,826), due to public money coming down the pipeline. After ten years of massive debt, people were high off of the soaring economy.

The League’s leader has no ideas in view

In the end, Salvini’s statement is nothing than a song and dance. Moreover, he shows that he has two sides when it comes to European affairs. After years of anti-European narratives, he became pro-European in February only to flip-flop his ideas a few days ago. His discombobulated viewpoint depicts a party that relies entirely on wishy-washy catch phrases. And electoral polls show that Italians are increasingly tired of listening to his petty nonsense about the Italian economy.

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