Reforming Without Investing: Explaining Non–Social Investment Strategies in Italy

This chapter investigates the political dynamics that hinder social investment reform in Southern Europe. It does that by providing an in-depth analysis of the Italian case. Between 2013 and 2018, a window of opportunity for social investment opened up in Italy, when center-left governments sought to garner support among upper-middle classes. However, the final reform output was a mix of non–social investment strategies: market liberalism (labor market deregulation) and social protectionism (compensatory cash transfers took priority over policies to enhance human capital or work–family reconciliation). The turn away from a social investment strategy was driven by two political supply-side factors: EU pressures for internal devaluation and national party competition favoring compensatory measures for lower-middle classes in the presence of a divided center-left and rising challenger parties. After the 2018 elections, the League and the Five Star Movement formed a government that promoted full-blown social protectionism.