Abstract: The World Bank and the Reconstruction of Italy, 1947-1955

Michele Alacevich

Abstract

The early loans of the World Bank were aimed at helping European countries in their reconstruction efforts after the war. Italy, a defeated country whose southern regions were the largest underdeveloped area in Europe, began negotiations with the Bank as early as 1947. When the United States launched a massive bilateral aid program—the so-called Marshall Plan—the Bank shifted to its second mission: development. Yet, it continued the work in Italy, and in 1951 it granted the first of a series of eight loans that would make Italy the largest European borrower from the Bank. Early Bank-Italy relations are particularly interesting because they show that the Bank was testing development policies that were new for the organization. Initially, the Bank focused on the macroeconomic aspects of development assistance, including supporting Italy's balance of payments. The Bank treated reconstruction and development as two interconnected phases. Southern Italy thus become a laboratory for Bank policies to be applied elsewhere in the developing world. However, this phase came to an end when the Bank abandoned its initial macroeconomic approach and narrowed its focus to specific infrastructural projects.