The political economy of financing local production in Italy, 1950-1990s

Francesca Carnevali’s work stressed the key role of politics and institutions in determining a country’s banking structure, which in turn shapes its industrial structure. Segmented banking systems in France, Germany and Italy allowed different types of banks to specialize in different market segments, ensuring the fulfilment of smaller firms’ financial requirements. In Britain, local banks did not survive the wave of amalgamation of the 1960s. This void left small- and medium-sized enterprises (SMEs) and banks facing high transaction costs on the credit market due to little – or even an absence of – knowledge of the local business environment. Focusing on the Italian case this paper discusses how major parties in the political spectrum, as well as economic institutions such as the Bank of Italy, agreed to foster SMEs after the Second World War. This led to the establishment of a segmented banking system, in which local banks were preserved to serve the financial needs of SMEs clustered in local production systems. Then the paper moves on to explore the establishment of the medium-credit institutes (the Mediocrediti and the Artisan Bank) and their provision of additional financial support to SMEs and to artisan firms.