Economy of Italy, Essay Example

Prior to World War II the Italian economy was based on agriculture. Following the close of the war, the Italian economy has developed into an industrial state (Migone 135).  The development into an industrial country was a boon for Italy because, although it started out in agricultural, it was found that the land proved unsuitable for farming. Thus, Italy was and is a food exporter (Heritage Foundation 113). However, demands for Italian labor combined with a talent for technology has helped Italy expand into the manufacture of hard goods. As of 2009 it was ranked at the eighth largest market economy in the world (World Bank 19). Even though Italy is now a major exporter of the world’s needs, it is generally barren of natural resources. Coal, iron, and oil are at bare minimum in Italy, as are the raw materials necessary for production (World Bank 24). These manufacturing necessities, imported from other countries, are then converted to the many products commonly associated with Italian production. Among these items are automobiles and rubber tires, electrical and household appliances, firearms, defense needs, and clothing and fashion (Migone 152).

From 2010 to the present Italy has continued to deal with high public debts and budget deficits. As part of the membership requirements of the European Monetary Union (1998), Italy agreed to keep its budget deficit below a 3% ceiling (International Monetary Fund 62). This requirement has been very difficult to keep, especially in light of the worsening worldwide economy. Budget deficits work in strict correlation to increases/ decreases in debt. In 2009 the deficit was at 5.4%, while 2010 experienced a minimal decrease to 4.5% (World Bank, Appendix B 113). Suggestions have been made by the world’s leading economists that tax increases combine with spending cuts may have an impact on reducing the debt ceiling back to the 3% acceptable level.

The world economy has been depressed for almost a decade (International Monetary Fund 38). Although these are topics for a different document, some of the reasons include a lack of retraining and retooling industries to meet changes in production, shortages of natural resources—either because money has not been spent in development or because other nations have hoarded what they have produced, thus driving prices to levels that are unaffordable, or because of lack of orders businesses simply close creating even more unemployment. As a result of these worldwide difficulties, from the turn of the century to the present Italy has experienced an economic growth of only .8% (International Monetary Fund, 61). The closest trade ties to Italy are also members of the European Union: Germany, France, Spain, and the United Kingdom (World Bank 53). Regardless of whether products are valued as high or low, Italy continues to have problems with globalization. This is especially noticeable when comparing Italy to countries like China. Not counting other members of the European Union, Italy sells 31% of its products globally with the greatest number of that, 23%, to the United States. China has an 83% global impact with 64% of their production coming to the United States (Migone 212).

Unemployment has hit Italian workers and Italy’s economy hard. In 2012, unemployment was 11.5%, greater than any other country in the European Union (Heritage Foundation 152). Economists believe that this number will increase in 2013 (Heritage Foundation). Part of this high unemployment comes from workers who, having been so discouraged from consistent inability to secure employment, have simply given up trying any further to secure employment. It is surprising that although Italy remains the world’s ninth largest exporter of hard goods, unemployment remains so high. However, one must remember that although the technological base is present in well qualified workers the country is low on natural resources and must depend upon other nations to ship the raw materials necessary for Italy’s production. Thus, the Italian economy is, in part, governed by the relations it hold with other industrialized nations as well as with those nations which provide natural resources.

Works Cited

Heritage Foundation. (2011, July 23). Index for Economic Freedom. New York: Author. International

Monetary Fund. (2012, April). World Economic Outlook. Washington, DC: Author.

International Monetary Fund. (2010, April). 2009 GDP for the World and the European Union.

Migone, M. (2008). Italy Today: Facing the Challenges of the new Millennium. New York: Lang Publishing. World Outlook Economic database. Washington, DC: Author.

World Bank (2012, October 23). Doing Business in Italy. Washington, DC: Author.