Abstract

In this essay we analyze the evolution of the Italian economy, starting from the end of its «economic miracle», and discuss the role of economic policy in all of its forms (fiscal, monetary, exchange rate management) in determining the long term parable of the Italian economy from growth to stagnation. We argue that the years of high growth were those when policies targeted full employment, while the later period of slowdown was mainly caused by the failed attempt to address the conflicts in income distribution by tying one's hands to foreign constraints.