The Economic Miracle and Its Effects
Italy’sstunning economic performance contrasted with and counterbalanced the negative politics of imperfect bipolarism. The industrial base constructed during the Fascist period and a large labor reserve, which meant low wages for workers, allowed the Italians to take advantage of the high degree of international economic cooperation that produced a boom of unprecedented proportions after World War II, primarily in the vital industrial sector. This "economic miracle" and its benefits fostered the view at home and abroad that, in contrast to the Communists, Christian Democratic leadership guaranteed democracy, participation in Western multilateral organizations, and continued economic development. Italians complained about the government’s imperviousness to reform but the economic miracle kept the DC in power.
The end of hostilities allowed the first postwar governments to tackle the problem of reconstruction. The presence of Communist and Socialist representatives in those early cabinets had little influence on postwar economic policy, but their exclusion after May 1947 guaranteed resolution of the most pressing questions through classic economics. As previously mentioned, Luigi Einaudi, budget minister in the fourth De Gasperi cabinet, was primarily responsible for this policy.
Among the many urgent economic problems, inflation predominated. To fight the war, the Fascist government had frozen prices and wages in June 1940, but prices doubled by late 1942 anyway. After Mussolini’s overthrow in 1943, German economic demands on the Salò Republic, the infusion by the Allies of "amlire" in the South to pay for their needs, and wartime hoarding caused inflation to explode. The price index ( 1938 = 100) rose from 273 in 1943 to 1215 in 1944 and 2392 in 1945, and real wages dropped 75 percent. In the North, the efficient German repressive apparatus controlled inflation better, but by war’s end real wages had still fallen 50 percent from their 1938 level. In 1945-1946,