ABSTRACT
Lower productivity and inclusiveness testify to the maladaptation of Britain and Italy to the postwar environment. Labelled the sick men of Europe in the 1970s, they proved unable to adjust to a deteriorating international economy, at least not without currency devaluation and exploding inflation. This was due to distributional battles, and in the UK to a dramatic balance-of-payment crisis. In the postwar British governance, despite the Westminster model’s decision capacity, dithering prevailed. The ‘Keynesian compromise’ did not tutor rigid industrial relations and hampered producers’ ability to restructure, while policymaking remained influenced by London’s financial industry and empire, both focussed on an overvalued pound limiting growth. The Thatcher reset increased growth but only thanks to higher labour inputs – more employees working more hours – and rising inequality. In Italy, it rapidly modernised until the 1960s via autonomous agencies like the Banca d’Italia and a relatively stable governing coalition that liberalised trade. But the postwar constitution left a debilitated executive, increasingly unable to overrule societal vetoes. Italy’s local manufacturers and the UK’s financial services leveraged the Common Market to pull their economies, but the former hit a domestic institutional glass ceiling, while the latter skewed the country towards debt-fuelled consumerism rather than productivism.
