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date: 28 May 2020

The Italian Economy Before Unification, 1300–1861

Summary and Keywords

Italy played a central role in the Euro-Mediterranean economy during Antiquity, the late Middle Ages, and the Renaissance. Until the end of the 16th century, the Italian economy was relatively advanced compared with those of the Western European and Mediterranean countries. From the 17th century until the end of the 19th, GDP rose as the population increased. Yet per capita income slowly diminished together with real wages, urbanization, and living standards. Italy lost its central position in the Euro-Mediterranean world and, until the end of the 19th century, was a relatively backward area on the periphery of the most dynamic countries in the north and center of Europe. The Italian premodern economy represents a classic example of extensive growth or GDP growth without improvement in per capita income and living standards.

Keywords: Italy, premodern Italy, premodern growth, extensive growth, Renaissance economy, European divergence, economic decline

The Center and the Periphery

Why did Italy, a core country from a social, cultural, political, and economic viewpoint in Antiquity, the late Middle Ages, and the Renaissance, begin to play a marginal role in the Western European context from the early modern age? This question was already being put forward around the end of the 17th century and the beginning of the 18th (Verga, 2002). Traditional answers to the problem have long pointed to political, institutional, cultural, and social developments (Maturi, 1950, p. 246; Quazza, 1971). Economic determinants have played a marginal role in the different pictures of Italian history. Only from the middle of the 20th century did economic factors begin to appear as main variables in the context of the Italian decline and subsequent recovery. Since then, the rich quantitative information on the economy has begun to be exploited and now we have data series on population, urbanization, prices, incomes, and wealth distribution from 1300 on. Such rich and varied statistical information is available for few other European countries. A reexamination of the Italian case can contribute to the debate on divergence in early modern Europe (Fouquet & Broadberry, 2015). The Italian premodern economy represents a remarkable case study in this debate.

The following reconstruction deals with the Italian economy from the 14th century until the start of modern growth in the last two decades of the 19th century. It begins with a period—the late Middle Ages—when Italy still played a central role in the Euro-Mediterranean world and finishes with an epoch when the glorious past was over. The present reconstruction will follow a neoclassical production function, where Product is a function of the production factors Labor and Capital. Capital comprises Natural Capital (that is, natural resources) together with Produced Capital (plants, equipment, infrastructure, etc.). Main determinants such as Productivity and Efficiency will be analyzed at the end.

Until Unification in 1861, Italy comprised several states with borders that changed over time. The five main Italian states in 1820 were, from the south, the Kingdom of the Two Sicilies (which included southern Italy plus Sicily), the Papal State, the Grand Duchy of Tuscany, the Lombard–Venetian Kingdom, and the Kingdom of Sardinia (encompassing, with Sardinia, Piedmont and Liguria). Despite the wealth of statistical information on Italy in the long period 1300–1861, the south and the islands are less enlightened by archival materials and the literature than the north. As regards the disparities in the level of income among Italian areas, they were not so deep or did not exist at all before Unification. A remarkable north–south disparity in per capita GDP was born from the start of modern growth and not earlier (Daniele, 2019; Daniele & Malanima, 2011).

Product

Level and Trend

A very long-term perspective on Italian economic history from 1300 until 2017 can be achieved by combining the available annual series of Italian GDP for the center and north of Italy from the late Middle Ages until 1861 with the national series after 1861 (Figure 1).

From Unification until 2005 (and then before the turnaround of the 2008 crisis), per capita GDP increased from 2,000–2,100 constant 2010 euros in 1861 to 27,000 and then 13 times. Modern growth started in Italy from the 1880s (Fenoaltea, 2002, 2006). The five to six centuries before 1880 seem to have been characterized by long-term stability when compared with the following era. Actually per capita income was not stagnant in these centuries. Its variation was limited, however, to a relatively narrow range, mainly between 2,000 and 2,500 constant 2010 euros.

The Italian Economy Before Unification, 1300–1861

Figure 1. Per capita GDP in central-northern Italy 1310–1861 and Italy 1861–2017 ($ 2010 PPP).

Sources: Center-north 1310–1861: Malanima (2011); Italy 1861–2013: Baffigi (2015); Italy 2013–2017: ISTAT data.

Note: Data before 1861 refers to northern and central Italy and, from 1861, to Italy as a whole.

According to Kuznets, modern growth is characterized by the concurrent increase of population and per capita income and by a steady rise of product (Kuznets, 1957, pp. 34–85). Following this definition, growth started in Italy in the last decades of the 19th century. Premodern Italian growth could be defined as an example of pre-modern extensive growth. As in any pre-modern economy, whenever GDP grew in response to demographic increase, average income fell. Between the trend of population and per capita GDP, the relation was the inverse. Furthermore, again as in any premodern agricultural economy, where agricultural product was the main component of GDP and trade in commodities was limited, volatility was quite high: a year of plenty could be followed by a year of famine. Volatility was high in the late Middle Ages, but diminished over time.

We see in Figure 2 that total product slowly increased over a period of five and a half centuries as a consequence of the growth of population, which increased by 0.24% per year from 1410 until 1860, and by 0.10 from 1310 until 1860, or respectively three times or by 76% on the whole. Per capita GDP was, instead, characterized by a long-term slow decline: -0.02% per year in 1310–1860 and -0.04 in 1410–1860. Although the range of uncertainty of these percentages is wide, it is certain that, in the long period 1350–1600, average incomes reached a peak, in relative terms, around 1450, followed by a decline. The Renaissance period (and particularly the 15th century) stands out as an age of relative well-being in comparison with both other epochs of Italian history and other countries (Malanima, 2018). Against the background of a wide literature on the periodization of the Italian economy since the late Middle Ages, we may distinguish two main epochs: the first from 1300 until about 1600, and the second from 1600 to the 1880s, when modern growth actually began (Fenoaltea, 2005; Zamagni, 2003).

The Italian Economy Before Unification, 1300–1861

Figure 2. GDP and per capita GDP in central-northern Italy 1310–1861 (1420–1439 = 1).

Source: Malanima (2011) (Odrick–Prescott filter for the trend).

The first epoch of our periodization is an age of fall and recovery in aggregate terms and relative plenty in per capita terms. It is the age when Italy, and particularly central and northern Italy, was a core area of trade, finance, and industry. Its merchants and industrial products (mainly textiles) were well known everywhere in Europe and also in the Middle East and North Africa. This favorable period describes a complete phase of rise (1348–1450) and then decline (1450–1600). It ends with a true demographic and economic crisis (Alfani, 2007, 2010).

The second age is characterized by aggregate growth, driven by the rise of population from the second half of the 17th century, together with a low level of per capita income (although with up and down cycles about four to five decades long). Per capita GDP was especially low from the middle of the 18th century until Unification, as confirmed, in the last part, by anthropometric evidence, that is, the decline in physical stature: the height of soldiers fell by 4 centimeters between 1750 and 1800 and then remained stable at 164–165 cm from 1800 until 1861 (A’Hearn, 2003).

In the past, this periodization has been explained by the growth and later decline in industry, trade, and finance. Italy’s was a core economy when the Mediterranean Sea was central, and it became peripheral when the Mediterranean lost its central position in World’s trades. Italian industries and trades declined. More recent literature stresses the continuity or relatively smaller decline in industrial, commercial, maritime, and financial activity, together with a relative (and not absolute) decline in the European context (Rapp, 1976; Sella, 1997).

Taking GDP per capita as our landmark, if a comparison is done in 1990 US dollars (purchasing power parity, PPP), Italy’s per capita GDP was always higher than that of Spain (between 680 and 950 in the late medieval and early modern ages) (Alvarez-Nogal & Prados de la Escosura, 2013; Casado Alonso & Ruiz, ) and Portugal (between 1,160 and 975 in 1500–1850) (Reis, Pereira, & Martins, 2012). Yet after the Renaissance, Italy lost ground relative to northern European countries (Bolt & Van Zanden, 2014). Its role as a leading economy is confirmed during the first of our two periods (Figure 3). Italy lost its primacy in early modern times. Holland, in fact, overtook Italy in the 16th century and England at the end of the 17th. The Swedish per capita GDP was lower than that of Italy until the end of the 19th century. France and Germany overtook Italy around 1850 (Bolt, Timmer, & Van Zanden, 2014, p. 67).

The Italian Economy Before Unification, 1300–1861

Figure 3. Per capita GDP in central-northern Italy, Holland, England, Sweden (Geary-Khamis 1990 $ PPP).

Sources: Italy (Centre-North): Malanima, 2011; England: Broadberry,Campbell, Klein, Overton, van Leeuwen, 2015; Holland: van Zanden, van Leeuwen, 2012; Sweden: Schön, Krantz, 2012.

GDP Structure

Until about the 1880s the character of the Italian economy was traditional; therefore, the quantitative information on its sectoral structure, available for 1861, 1871, and 1881, is a good starting point for highlighting the previous centuries as well (Table 1). In the first decades after Unification, almost half of all product came from agriculture, about 30% from services, and the rest from industry.

Table 1. Structural Composition of GDP in 1861, 1871, and 1881 Italy (%)

GDP Percentage Per Sector

I

II

III

1861

48.6

23.4

28.0

1871

47.1

23.1

29.7

1881

46.6

21.6

31.8

Source: Baffigi (2015) (based on the series in current prices); see also Fenoaltea (2005) (estimates in 1911 constant prices).

These magnitudes of the structural composition of GDP seem to be confirmed for the five and a half centuries with which we are concerned, although with relatively small oscillations over time (Malanima, 2011). Long-term changes in non-agricultural GDP can be suggested by an important proxy such as urbanization (although not all non-agricultural activity was performed in the cities, nor all agricultural activity in the countryside). Italy was in 1300 the most urbanized wide area of Europe (Map). Looking, first of all, at the center and north, this area featured about 100 cities (centers with 5,000 inhabitants or more). Four cities—Florence, Venice, Milan, and Genoa—approached or exceeded 100,000 inhabitants (Ginatempo & Sandri, 1990).

The Italian Economy Before Unification, 1300–1861

Map. Italian centers with at least 15,000 inhabitants in 1300.

Source: Malanima (2005) (and Urban Population (1300–1861) (2005; revision 2015. A Database of the Italian Cities 1300-1861, in www.paolomalanima.it).

Urbanization fell in the 15th century, as the frequent plague epidemics hit the cities harder than the countryside and demand for Italian manufactured goods in distant urban markets fell dramatically given the deep decline in the population all over Europe. At the same time, the non-agricultural share of GDP fell from about 50% in 1300 to 43% in 1400 (Malanima, 2011). However, in the early 16th century, the late medieval rate of urbanization was attained again (Table 2). As widely demonstrated in the literature, urbanization slowly declined from the 17th century until the last decades of the 19th century (Bellettini, 1973, p. 517; Malanima, 2005; Vries de, 1984). The apparently contrasting evidence for southern Italy depends on the wide presence of peasant families in the large southern agglomerations (and especially in Sicily), actually more similar to agro-towns than to true cities. The population of these large agglomerations rose particularly from the 16th century on.

Table 2. Population, Number of Cities, Inhabitants, Urbanization Rate in the Center-North (CN), Rate of Agglomeration in the South Islands (SI), and Rate of Urbanization in Europe (Centers with at Least 5,000 Inhabitants)

5,000

Population CN

Number of Cities

Urban Inhabitants CN

Urbanization

Agglomeration

Europe

(000)

CN

(000)

CN %

SI %

1300

7,750

96

1,657

21.4

23.8

1400

4,720

59

829

17.6

9.3

1500

5,310

71

1,117

21.0

25.7

1600

7,828

86

1,438

18.4

31.1

1700

8,051

84

1,363

16.9

28.2

11.4

1800

10,212

102

1,788

17.5

36.5

12.4

1861

15,950

138

2,590

16.2

42.6

19.7

Source: Malanima (2005) (and the Urban Population (1300–1861) (2005; revision 2015. A Database of the Italian Cities 1300-1861, in www.paolomalanima.it). Data on Europe are from Malanima (2010).

Note: If we define cities as agglomerations where the majority of the population is involved in industry and services, in the case of south and islands (SI), for the reasons recalled in the text, it is preferable to use the term agglomeration rate rather than urbanization rate.

When we compare central and northern Italian urbanization with that of England and Europe on the whole, we see that the Italian rate was far higher in the late Middle Ages in comparison with that of both England and Europe as a whole (Table 3). Italy lost ground in early modern times: it was overtaken by England around 1700 (such as in per capita GDP) and by the European average between 1800 and 1870.

Table 3. Central and Northern Italian (CN), English and European Urbanization 1300–1870 (Cities with 10,000 Inhabitants and More)

Italy CN

England

Europe

1300

18.0

4.0

5.3

1400

12.4

2.5

4.3

1500

16.4

2.3

5.6

1600

14.4

6.0

7.4

1700

13.0

13.2

7.7

1750

13.6

16.4

8.0

1800

14.2

22.3

9.0

1870

13.4

43.0

15.2

Sources: Malanima (2009, pp. 245–246).

Wealth and Income Distribution

We know relatively well the trend of real estate (land and buildings) distribution, which represented a large share of family wealth in premodern economies (Alfani, 2017, 2019; Alfani & Ryckbosch, 2016). The curve drawn for Italy as a whole, and based on several samples relative to both the south and the north (Alfani, 2015), shows a significant similarity with that of demographic growth. The correlation between population and land distribution (based, however, only on few data, relating to any half-century between 1300 and 1800) is high (0.84). Real estate was distributed in a more egalitarian way after the Black Death, in comparison with 1300–1350. As in other European countries, the rising population from about 1450 onward implied a loss of land by the rural population (although this loss of land slowed down in the 17th century, when the demographic rise slowed down as well). While rich and noble families found institutional ways to keep their real estate ownership united (through the maggiorasco and fideicommissum), the landed property of most rural families was shared, generation after generation, among more and more members, and became less and less able to support the mere survival of new families. This was the reason for the sale of land and also buildings by the peasants to local rich landowners in hard times. Inequality in real estate ownership rose especially when demographic growth intensified, that is, from the late 17th century on. This land redistribution to the disadvantage of the peasants implied an increasing supply of landless labor on the market and a worsening of agrarian contracts at the expense of agricultural workers from the late Middle Ages onward (Giorgetti, 1974).

It is much harder to determine whether inequality in income distribution increased as well. On this question the evidence is mixed. What can be done, on the basis of data on GDP, is to draw an Inequality Extraction Ratio (IER), following, with some changes, the method proposed by Milanovic, Lindert, and Williamson (2010). IER can be defined as “the maxima allowed by each society’s surplus above subsistence” (Milanovic et al., 2010, p. 256). Needless to say, this methodology does not represent real income inequality, but the top inequality level assuming that 90% of the population is close to subsistence and the richest 10% holds the part of GDP exceeding subsistence. This is a plausible assumption for premodern times. Nobility represented at the end of the 17th century 1% of the Italian population (Spagnoletti, 1996, p. 48). Other non-noble but rich families did not exceed 10% of the inhabitants. The rest of the population comprised poor people (around 85%) and beggars (around 5%). We can hypothesize that the actual inequality did not overcome the potential level and hovered more or less close to it. Although the real estate and income distribution curves are equal around 1300, the following values of the IER for Italy do not match the trend we find in land distribution (Figure 4).

The Italian Economy Before Unification, 1300–1861

Figure 4. Land distribution (black curve) and Inequality Extraction Ratio (IER) (grey curve) in Italy 1300–1850 (percentages of real estate ownership by the wealthiest 10% and income accruing to the wealthiest 10%).

Sources: Real estate distribution (percent of real estate ownership by the richest 10%): Alfani (2017, p. 340); personal calculations of IER according to the method presented in Malanima (2018, p. 17) (percentage of income accruing to the richest 10% of population, decadal averages).

Note: Milanovic et al. (2010) draw the IER through the Gini index. The values of the income accruing to the richest 10% and the Gini index are highly correlated. The calculation by means of the World Bank series (World Development Indicators, 2017) in 2008–2012 shows a correlation of 0.98 between the indices. The equation linking both series is: y = 0.81+0.77x, where x is the income held by the top 10% and y the value of Gini index. This equation can be used to convert inequality based on the top 10% into the values of the Gini index. For 1427 the Gini index computed by Milanovic et al. (2010, p. 261) is 46 (mine is 48), and that by Vecchi (2017, Table 8.A1) for 1861–1871 is 50 and 45 respectively (that in the diagram is 44).

These values on income distribution are supported by what we know about income inequality in the 15th century and at the end of our series, that is, in 1427 Florence-Tuscany (Herlihy & Klapisch-Zuber, 1978; Milanovic et al., 2010) and in 1861 Italy (Vecchi, 2017, p. 314). The Gini index of the IER is around 0.48 in 1300 and 0.44 in 1850. As hypothesized by Milanovic (2018), income inequality was higher when income per capita was higher and lower when income per capita diminished. Assuming that the inequality in real estate was representative of income inequality, in 1800 the inequality would reach a too high value (0.60 Gini index), far higher than that estimated for Italy since 1861.

Production Factors

Labor

The Italian population was 12–13 million at the start of the 14th century, or a little more than 10% of the European population (within the borders of the continent) (Malanima, 2009, chap. 1). Deeply affected by the Black Death and by frequent epidemics in the period 1348–1450, the population fell dramatically: in 1450 it reached 7.5 million, or around 60% of the 1300 level. Recovery was slow as epidemics became less frequent from 1450 to 1600, reaching around 13 million (Del Panta, 1980). After a pause as a result of the last plagues in 1629–1630 (in the center-north) and in 1656–1657 (in the south) (Fusco, 2009), the Italian population began its modern rise: it reached 13 million again in 1700 (the same level as in 1600), 18 million in 1800, and 26 million in 1861 (Figure 5), when it was a little less than 10% of the European population.

The increase in population, either from 1310 or 1410 until 1861, was higher than that of GDP: respectively 0.12% and 0.10% per year taking 1310 as our starting point, and 0.29% and 0.24% taking 1410 as the start.

The Italian Economy Before Unification, 1300–1861

Figure 5. Population in Italy, the center-north (CN) and south islands (SI), 1310–1860 (decadal figures in thousands).

Sources: Del Panta, Livi Bacci, Pinto, and Sonnino (1996) (with my own interpolation of data per decade); data for central-northern (CN) and southern Italy with islands (SI) are from Malanima (2002, app. 1) and Fusco (2013). Still useful is the remarkable work by Beloch (1937–1961).

In the period with which we are concerned, the Italian population was characterized by demographic features typical of any population before the demographic transition: high crude birth and death rates, both around 30–35 per thousand; life expectancy at birth in the range 30–35 years; and high sensitivity of both deaths and births to ups and downs of income (Del Panta & Livi Bacci, 1977; Fernihough, 2013; Galloway, 1994; for a different view, see Pedersen, Riani, & Sharp, 2019).

What share of the population did actually work? What was the structure of the labor force in the three main sectors of the economy? Was there any improvement in human capital? To answer these questions we can exploit, as a starting point, statistical information from the first national censuses, held in 1861, 1871, and 1881 (Table 4).

Table 4. Composition of the Labor Force Per Sector and Participation Rate in 1861, 1871, and 1881 Italy (%)

Participation

Labor Percentage Per Sector

%

I

II

III

1861

58.5

60

23

17

1871

53.4

61

22

16

1881

55.6

58

26

16

Sources: Maic (1866, 1876, 1884).

Note: As always, since earnings in services were higher than in the primary and secondary sectors, then in terms of GDP the weight of services was higher than that of industry.

With regard to the participation rate, it hovered at around 60% of the population in 1861. Since we know that the inhabitants between 10 and 60 years of age (a plausible range of the total potential workforce in a premodern economy) represented about 70% of the population (Istat, 1958, p. 40), a wide share of people able to work actually worked. The difference between females and males, in the labor force, was, at the time, negligible. Spinning was a female job, while weaving was a male job; in domestic services females prevailed, while in construction males dominated. In agricultural jobs, males and females were employed in the center and the north, while in the south fewer females were employed and in Sicily and Sardinia they were almost totally absent (Daniele & Malanima, 2017).

It is much harder to specify both the working time of this 60% of the population and the share of the labor force per sector. In traditional and mostly agricultural economies, the actual labor time is, unfortunately, unknown. In agriculture, labor intensity was not the same year round. It increased in sowing and harvesting months and decreased in winter and spring. In non-agricultural jobs, such as building, the working time was 10 hours per day, but we cannot say definitively how many days in a year a worker actually worked (scholars often assume 240 days, but this is only a hypothesis) (Daniele & Malanima, 2017). What we know is that when labor earnings per family diminished, labor intensity rose in order to meet the elementary needs for survival (as shown for England by Allen & Weisdorf, 2011). Since income slowly diminished from the 15th century, labor intensity in Italy rose in the following centuries and particularly in the 18th and 19th centuries. More family members began to work—especially females and children—and everybody worked more hours per year. The spread of proto-industry in the countryside from the 17th century certainly contributed to labor intensification (Belfanti, 1996).

An estimate of the labor force per sector, that is in agriculture, industry, and services, is difficult to determine in any agricultural society, where different jobs were performed by the same workers, and especially women, and the time devoted to several kinds of work varied from a few hours per day to full time. In 1861–1881, the wide majority, around 60% of the total labor force, was employed in agriculture, 23–26% in the secondary sector, and the remaining 16–17% in services (Ciocca, 2007, p. 121). Since GDP structure and workforce structure are highly correlated, we can hypothesize that the percentages employed in non-agricultural jobs diminished in the 15th century, recovered in the 16th century, and remained around 60% later.

Was there any change in human capital over the centuries? The degree of literacy is the proxy we often exploit to quantify human capital. In 1861, 1871, and 1881, the share of the population in Italy that was illiterate was 75%, 69%, and 62%, respectively—among the highest in Europe (Cipolla, 1969, chaps. 4–5; Daniele, 2019, p. 62). In the countryside almost nobody was able to read and write. In the cities it was different. Since the 13th century, in relation to the development of trades and industries and the need for accountants in firms, banks, and public offices, schools of arithmetic spread both in large and small centers such as Siena, San Gimignano, Arezzo, Lucca, Pistoia, Pisa, Prato, Volterra, Colle Valdelsa, Fucecchio, Verona, Brescia, Milano, Carmagnola, Chieri, Genova, Savona, Ferrara, Modena, Bologna, Perugia, Città di Castello, Roma, Naples, L’Aquila, and Palermo (Ulivi, 2016). Mathematical culture, from L. Fibonacci until G. Galilei, was particularly advanced in Italy compared with other European countries (Black, 2007). It is difficult to say whether urban schools in the 17th, 18th, and 19th centuries became more numerous and the population more literate in comparison with the late medieval past and Renaissance. We can only hypothesize about stability in the cities. The stagnant or declining urbanization rate would suggest that, on the whole, literacy did not progress, given the slow spread of schools in the countryside. At the time of Unification literacy was higher in the center and north than in the south: in 1862, in the south only 66 schools existed for every 100,000 inhabitants, while in Lombardy there were 228 and in Liguria and Piedmont 239 per 100,000 (Daniele, 2019, p. 63).

Natural and Produced Capital

Among the stylized facts of the contemporary world economy, Kaldor mentioned in 1961 the stability in time of the ratio of capital to GDP (Kaldor, 1961). In modern countries, this ratio mostly stays in the range of 3–5 to 1, according to the different ways of calculating and different economies. This stability has been confirmed by economists and statisticians for modern countries. In Italy as well the evidence would support a similarly stable ratio of 3–4 to 1 between 1861 and 1973 (Goldsmith & Zecchini, 1999). By accepting this stability in a historical perspective, the problem of establishing the size of capital in premodern economies would be straightforward: a multiplication of GDP by 3, 4, or 5 would give us plausible magnitudes for capital.

In neoclassical models of development, however, natural resources are excluded. Yet, especially when we deal with a premodern economy, we cannot forget that a great deal of capital was represented by non-reproducible assets, that is, natural resources or natural capital. In 1861, they represented in Italy about half of the total wealth (actually 47%). Excluding “dwellings,” natural resources (“land”) represented 42% of total wealth.

Since natural resources are often assumed as fixed, whenever GDP rises, as happened in premodern Italy, the natural resources to GDP ratio would have to diminish. The value of natural resources, however, depends on the level of technology. The big change in the last part of the period with which we are concerned was the increase in the value of natural resources in countries rich in coal or peat. Their wealth in capital assets rose, while that of other countries without coal or peat remained stable, Italy is among these latter countries. Cipolla (1996, p. XV) notes that while Italy is rich in marble, an important raw material for Renaissance architecture and statues, it is poor of the raw materials on which modern economies are built, that is, energy sources and metals.

We could hypothesize that, in Italy, the value of natural capital was more or less stagnant in the centuries we deal with. This is the ordinary, extreme, assumption of classical economists. Thus, natural capital intensity, or capital per worker, diminished from the late Middle Ages onward with the rise of population and the number of workers. Although the trend is hard to quantify, we can make use of a proxy, that is, the density of population (Table 5). From the late Middle Ages onward, population density has always been higher in the center-north than in the south and islands, while for Italy as a whole it has always been very high in comparison with other European countries. Italian demographic density in 1300, at 40 inhabitants per square kilometer, was the second highest in Europe (after Belgium). If we take only the center and north of Italy, it was the highest (it was hardly lower than 50)—five times higher than the European average. It diminished later in comparative terms, although it rose three times from 1400 until 1870. If we assume the Italian natural resources as stable, then a worker could exploit, in 1861, a third of the natural resources exploited by his ancestors in the Renaissance.

Table 5. Population Density in the Center-North and the South Islands and in Italy, Europe and Europe Without Russia 1300–1870 (per sq km)

Italy CN

Italy SI

Italy

EUROPE

EUROPE

(Without Russia)

sq km (000)

161

149

310

10,383

4,983

1300

48.1

31.9

40.3

9.0

15.8

1400

29.3

22.0

25.8

6.5

11.4

1500

33.0

24.8

29.0

8.2

14.0

1600

48.6

36.5

42.8

10.3

18.3

1700

56.1

30.6

43.9

11.1

20.4

1800

70.9

46.3

59.0

18.2

30.8

1870

103.4

73.4

89.0

29.9

49.6

Source: Malanima (2009, p. 16).

We may wonder, however, if the other share of capital—that is, produced capital—could compensate in time for the per capita loss of natural resources before Unification. For some items it is reasonable to assume per capita stability, such as in the case of dwellings (which rose with population). Ships rose less than population (and in comparison with other countries their tonnage fell) (Malanima, 2002, pp. 184–185). Public works, industrial engines, and livestock did not increase more than proportionally to demographic growth. The financial basis could be “optimistically” considered stable as a ratio to GDP (Felloni & Laura, 2004).

If we try a simulation from 1410 until 1860, assuming that the labor force was equal to 60% of the inhabitants, that natural capital was the same in 1861 in real terms, and that produced capital was equal to three times GDP, and rose proportionally to GDP, the result is that capital per worker diminished from 1 to 0.40 between 1410 and 1860. It diminished from 1 to 0.65 if the comparison is done between 1310 and 1860. A comparison between wealth per capita in Tuscany in 1427 and in 1861 confirms the extent of the decline (calculation based on Goldsmith, 1987; Goldsmith & Zecchini, 1999; Malanima, 2011). Taking into account that the percentage of workers increased over time and that the exploitation of natural resources, such as deforestation, worsened the quality of the environment, as 18th and 19th centuries writers often noticed (Vecchio, 1974), the fall of capital per worker would increase.

Productivity and Efficiency

Land and Labor Productivity

A typical strategy when population increases while natural resources remain stable is to raise the productivity of the available natural capital. Ordinarily this strategy is pursued by devoting more labor to any resource unit. This process is often referred to as land and labor intensification (Boserup, 1965). It is primarily aimed to increase the yield of land (that is, product per hectare) and is often associated with the introduction of new crops, deforestation, or land reclamation. It could be defined as land-increasing (through a rising investment of labor). Ordinarily it is a weapon of defense: whenever the subsistence of the family is in danger, the members of that family work longer hours in order to enhance harvests per unit of land. While labor productivity ordinarily drops, land productivity rises.

Attempts to intensify land productivity developed in Italy with diverse results. Deforestation and widening of cereal cultivation spread with the increase of population, since the product of grains on the same hectare is ordinarily more valuable than the product of forest (primarily firewood), although the exploitation of cultivable fields requires longer hours of work than forests. Deforestation and land reclamation occurred in Italy as well from the late Middle Ages onward and particularly when population pressure on the land intensified, in the 18th and 19th centuries (Vecchio, 1974). Maize progressed in the north and especially in the Po Valley (less in the center and not at all in the south) from the end of the 16th century (De Bernardi, 1984). In this case, in terms of calories, the agricultural product rose, since the yield of maize per unit of land was almost twice that of wheat or minor crops. Yet, since the price of maize was lower, the value of the product of a hectare cultivated with maize was lower than that cultivated with wheat. In the middle of the 19th century, much more maize than wheat was cultivated in the Po Valley (Cazzola, 1996, pp. 58–59). Potato played a minor role in the period we deal with and spread in the north in the 19th century. The cultivation of mulberry trees for the feeding of silkworms spread from the south (and particularly Calabria) in center-north Italy from the 15th century onward. This was a successful innovation. The north, especially the region at the feet of the Alps, became the main producer of silk threads in Europe. The production of raw silk in Italy was 400 tons in 1500 and reached 4,170 tons in 1850. In the first half of the 19th century the value of silk produced in Italy was 3.5–4% of GDP (Battistini, 2007, p. 314). In the last decades of the century, one-third of Italian exports by value was made up of silk threads (Federico & Wolf, 2011, App. Table A2b). In this case not only land productivity but also labor productivity rose. This is more apparent when we refer to the mechanization of silk throwing through waterwheels, which spread in the north from the late Middle Ages and particularly from the 17th century onward (Poni, 2009).

Were these changes able to compensate for the fall in capital per worker? The answer is that they were only able to mitigate the decline of labor productivity due to diminishing capital per worker, but certainly did not invert the trend (Federico & Malanima, 2004). Both GDP per capita and wages diminished in the long run.

In Figure 6 the relationship is drawn between per capita GDP (on the vertical axis) and density of population in 1350–1630 (as the independent variable). GDP per worker (assuming a stable participation rate of 60% of the population) naturally follows the same declining trend. We see that the recovery of population after the plagues occurred mainly in 1348–1450 and resulted in a continuous fall in labor productivity. Having attained a low level of product per worker and per inhabitant, after 1630 the inverse relationship of density per capita GDP weakened, although it did not disappear.

The Italian Economy Before Unification, 1300–1861

Figure 6. Relationship between GDP per capita per decade 1350–1630 and density of Tuscan population per decade (constant 1420–1439 Florentine lire; decadal data).

Source: Malanima (2018).

A long view on productivity is provided by the long-term trend of daily real wages in construction from 1310 until 1861 (Figure 7). Although this series refers to the building sector, it is well representative of trends in labor productivity as a whole. A comparison with real wages in southern England is useful (Malanima, 2013a). We see the golden age of workers after the 14th–15th-century plagues in both countries and the low level reached by Italy especially from the 18th century—that is, when pressure on natural capital rose with demographic growth. England outperformed Italy from the late 17th century on (such as in per capita GDP and urbanization).

The Italian Economy Before Unification, 1300–1861

Figure 7. Real wages of building laborers in southern England and northern Italy 1300–1850 (baskets bought by a daily wage).

Source: Malanima (2013a, p. 61).

The same decline after 1750 impacted both the north and the south, more or less with the same intensity, as is apparent in the cities of Vercelli and Naples (Figure 8).

The Italian Economy Before Unification, 1300–1861

Figure 8. Real wages of building laborers in Naples and Vercelli 1700–1850 (baskets bought by a daily wage).

Source: Malanima (2013a, p. 70).

Note: The trends are similar to that of Fig. 7, although the level is higher. The basket used to deflate the series is the same, although the prices for both baskets are in local currency.

Even though the start of modern growth coincided with a slow recovery of real wages after Unification, they were still the lowest in 1905–1913 when compared with those of Belgium, Britain, France, Germany, and the United States (Table 6).

Table 6. Industrial Wages (Purchasing Parity Power) in a Sample of Countries in 1905 and 1913 (Great Britain = 100)

1905

1913

Belgium

67–70

65–68

France

64–69

60–64

Germany

64–70

68–75

Italy

38–41

45–49

Sweden

73–81

82–92

Great Britain

100

100

USA

117–125

126–134

Source: Zamagni (1989, p. 119).

Efficiency

By efficiency we mean the effectiveness of the combination of production factors and technology. The combination depends on the role, positive or negative, of the institutional structure, or the set of rules influencing the working of the economy.

The emphasis on the positive role of institutions in the rise of Italy in the late medieval period and their negative impact in the following centuries is not a recent development of applied institutionalist economics. It has long been the most widely shared explanation of Italian decline. Using a newer language, we could say that many historians found and continue to find that “inclusive institutions,” that is, institutions able to encourage economic activity, developed earlier in Italy than elsewhere, that is, from the 11th–12th centuries. After the Renaissance, these institutions turned themselves into “extractive institutions” that hampered the economy and society for a long time (Acemoglu & Robinson, 2012 and the right critical remarks by Vries, 2013). The Italian decline depended primarily on the worsening of the institutional setting. The domination of the Spanish empire in Italy (in the Kingdom of Naples and Duchy of Milan from the middle of the 16th century until the early 18th century) could have enhanced the presence of institutional constraints that heavily weighed on the public finances of both Naples and Milan.

An institutionalist opinion was proposed by Cipolla in one of the first reconstructions of early modern Italian economic decay (Cipolla, 1952). In his view, guilds initially played a positive role when they arose in the late Middle Ages, but became obstacles to further development from the 17th century. Their tough behavior was the main reason for Italian industrial and economic decline from then onward. According to Romano, “feudal” relationships were an original feature of Italian society, politics, and economy and were for 15 centuries an obstacle on the path to its development (Romano, 1971, 1994). This feudal character was mitigated in the 12th and 13th centuries. From the crisis of the 14th century onward, and even more so from the 17th century crisis, a re-feudalization distinguished the deep structure of Italian history. According to Aymard, more advanced institutions and relations of production developed earlier in medieval Italy, in comparison with the rest of Europe. The failure of the Italian model depended on the later recovery of the past relationships “in politics, society, religion, culture” (Aymard, 1978, p. 1170; Aymard, 1991). Galasso (1967) as well stresses the alliance between the crown and the dominating classes as the main constraint experienced by the south of Italy from the 16th century and the main cause of the 17th crisis. Epstein maintains that “Italian city-states were highly efficient modes of economic organization in societies with highly fragmented jurisdictions, but were less effective than monarchies in coordinating markets over larger and politically more complex territories; their smaller scale may also have made it easier for vested economic interests to capture the political agenda” (2000, p. 171). In the view of Van Bavel, institutions favorable to the development of the economy took form in Italy earlier than elsewhere, and these institutions favored the spread of a market for labor, land, and capital. “From the thirteenth–fourteenth century onward, however, a more delicate situation emerged, largely because of the growing influence of urban elites, who exerted a negative influence on rights to land, particularly in the well-developed city-states” (Van Bavel, 2011, p. 507). The ensuing high transaction costs hampered the further development of the Italian economy: “urban elites were strong and counterbalances missing or weakened, elites could exploit factor markets to their own ends, thereby negatively affecting the economy as a whole” (Van Bavel, 2011, p. 531).

It is difficult to verify this institutional approach to Italian history. Against the backdrop of the previously recalled economic developments, social and political transformations may have played a role. In particular, the existence of regional states in competition and often at war may have hampered the formation of an internal market and higher efficiency. However, despite the existence of several states and the ensuing high transaction costs, an internal market took form even before Unification. Integration, despite the high transaction costs, may in fact have favored or “whetted the appetite for a fuller integration and thus enhanced the support for political Unification among the small ruling élites, at least in the North” (Federico, 2007, p. 312). In other words, economic developments could also be seen as effects rather than determinants of Italian premodern growth.

From Decline to Modern Growth

To the question put forward by generations of scholars about the absolute or relative decline of the Italian economy over a long period, an answer can be found by focusing on the factors of growth, on productivity, and on efficiency. Let us now schematically recall the main highlighted changes taking place in Italy prior to the 1880s:

  • - total product (Y) rose;

  • - labor (L) and population rose more than product;

  • - capital (K)—produced plus natural—rose less than the labor force. As a consequence, capital per worker diminished;

  • - the productivity of the system slowly rose, while efficiency seems to have represented a constraint rather than an advantage. On the whole, however, total factor productivity (the residual A in standard neoclassical models of growth) was not able to compensate for the fall in capital per worker.

The consequence was a decline in labor productivity, as is shown by the fall in daily real wages, in urbanization, in per capita GDP, and by the worsening of standards of living. A new phase of intensive growth (demographic growth, but higher GDP growth) occurred only from the 1880s. The new model of growth was favored by the new institutional setting, that is, the unitary state. As in other countries, however, the main explanatory variable was represented by the new technical system in progress during the Second Industrial Revolution. It was based on the increase in the capacity to do work due to the introduction of new sources of energy, primarily, in the case of Italy, imported coal and hydroelectricity (Malanima, 2013b, 2016; Wrigley, 1988, 2016). In Italy as well, changes in the paradigm of energy exploitation represented, from the 1880s, a turnaround in the economy after centuries of apparent stability or slow decline. Only then did capital per worker begin to increase rapidly and, with it, productivity and per capita GDP (Ciocca, 2007, p. 23).

Further Reading

Aymard, M. (1978). La transizione dal feudalesimo al capitalismo. In R. Romano & C. Vivanti (Eds.), Storia d’Italia, Annali I. Dal feudalesimo al capitalismo (pp. 1133–1157). Turin: Einaudi.Find this resource:

Beloch, K. J. (1937–1961). Bevölkerungsgeschichte Italiens. Berlin: De Gruyter.Find this resource:

Ciocca, P. (2007). Ricchi per sempre? Una storia economica d’Italia (1796–2005). Turin: Bollati-Boringhieri.Find this resource:

Cipolla, C. M. (1952). The decline of Italy: The case of a fully matured economy. Economic History Review, 2(5), 178–187.Find this resource:

Del Panta, L., Livi Bacci, M., Pinto, G., & Sonnino, E. (1996). La popolazione italiana dal Medioevo a oggi. Rome: Laterza.Find this resource:

Fernihough, A. (2013). Malthusian dynamics in a diverging Europe: Northern Italy 1650–1881. Demography, 50, 311–332.Find this resource:

Galloway, P. (1994). A reconstruction of the population of North Italy from 1650 to 1881 using annual inverse projection with comparisons to England, France and Sweden. European Journal of Population, 10, 223–274.Find this resource:

Herlihy, D., & Klapisch-Zuber, C. (1978). Les Toscans et leurs familles. Une étude du catasto florentin de 1427. Paris: Presses de la Fondation nationale de Sciences Politiques.Find this resource:

Malanima, P. (2002). L’economia italiana. Dalla crescita medievale alla crescita contemporanea. Bologna: Il Mulino.Find this resource:

Rapp, R. T. (1976). Industry and economic decline in seventeenth-century Venice. Cambridge, U.K.: Cambridge University Press.Find this resource:

Romano, R. (1971). Tra due crisi. L’Italia del Rinascimento. Turin: Einaudi.Find this resource:

Sella, D. (1997). Italy in the seventeenth century. Harlow, U.K.: Longman.Find this resource:

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