The major regional division in Italy is between the prosperous, industrialized North Italy and the poor, rural South Italy and the islands of Sardinia and Sicily. The origins of the problem of these regional differences goes back centuries but the differences were increased as a result of policy choices made at the time of the unification of Italy in the 1860's.
The North dominated the politics and economy of the new Italy and the industrializing north wanted protection from competition from outside Italy. A system of high tariffs was imposed. There was a high tariff imposed upon imported wheat, one of the products of the South. The northern promoters of the tariff undoubtably felt that their tariffs were protecting the economy of the South as well as that of the North. The higher wheat prices did benefit the farms of the South, but those farms had also been producing products that were sold in France. If France could not sell its products in Italy then France could not buy the crops of the farmers of the South in Italy. Thus the already difficult problem of the South was made more severe by the economic policies promoted by the North. Luzzatto says, the living conditions in the South became unberarable only after 1887 when the high tariff policy was imposed.
The consequence was a migration out of the South. The migration often took place in stages; first a migration from the rural areas of the South to the urban areas of the South, then a migration from the urban areas of the South to the urban areas of the North or to the Americas. The migration from other areas of Italy was primarily (70%) to other areas Europe. Despite the net loss of population in the South, it remained poor compared to the North.
After World War II there was political agreement that something needed to be done to promote economic development in the South but a reluctance to do anything that might constrain business growth in the North. There was land reform and the distribution of confiscated lands but this was not carried out on the basis of economic criteria. As a result often the parcels distributed were too small to make economically viable farms.
An agency, called "Cassa," was created in 1950 to carried out special public works projects over a ten year period in the Mezzogiorno, an area that included all of the South and some parts of central Italy. The special programs of Cassa were allocated $1.6 billion in grants and loans. A similar program with lower funding ($0.33 billion) was created for depressed areas of central and northern Italy.
Cassa was allowed to provide funding to lending agencies were financing small and medium-sized industrial enterprises in the southern Italy and Sicily and Sardinia.
By the late 1950's it was generally clear that the measures directed to helping the South were not effective and new plan, called the Vanoni Plan, was proposed. The Vanoni Plan called for an allocation of 60 percent of of new investment by public and semipublic enterprises to the Mezzogiorno. In addition the Plan called for the investment in infrastructure to promoted industrial development and tourism it also called for the funding of vocational school to train the labor force of the Mezzogiorno.
The national economic plans, which started in late 1960's, called for active promotion of the development of the South by the Italian Government. Cassa received funding of $2.8 billion for the 1965-1970 period. All public agencies were to allocate 40 percent of their investment in the South and 30 percent of their contracts for goods and services were to go enterprises in the South. Despite this resolve the problems of the South continued.
Efforts continued in subsequent national economic plans to redress the problems of the South. But again there was disappointment with the results.