The Interruption of industrialization in southern Europe. A center-periphery perspective

The current European crisis has been interpreted as the “financial and sovereign debts crisis”. The paper argues that this is to miss its deeper-lying causes. The financial crisis has exposed the unsustainability of the old core-periphery model, which was required to tackle the broader context of change in technology and demand within a faulty institutional and macroeconomic framework. It is argued that the arrest of industrialization processes in the periphery, which began in the mid-sixties in Italy and in the mid-seventies in all the countries of Southern Europe, must be attributed to the raising of the bar in the quality of performance standards required to compete, associated with the market saturation for the main durable consumption goods. Just when the State should have taken up new tasks to strengthen the quality of the productive structure, ‘early liberalization’ policies prevented public investment guidance in the peripheries: industrial policies were redefined as policies for the guarantee of competition, thus hindering policies addressed to sustain diversification and upgrading. The outbreak of the crisis coincided with the deployment of a new phase in the paradigm of international production and technology, with new emerging countries entering the scene. The paper sets out to explain why, as in the seventies and eighties, the core country has found itself in a favorable position to tackle the crisis.