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expandlng production ln response to the resldual expansive stlmull derlvlng froa* the effects of a- relatively high, although decllnlng ln lts trend, publlc expendlture; therefore they tended to respond ln teras of hlgher prlces, contributlng thus to aalntaln a relatiyely high ratę of Inflation, or, anyway, reslstlng to the pressure for curblng lt. On the other hand the stagnatlon or the reductlon of productive capaclty contrlbuted to create ęonditions of rlgldlty for the aggregate supply of commodities; thls, ln tum, created the condltlons for a dynamie' shortage of supply ln face of expanslve spells, and thus for inflatlonary pressures.

Both these effects fed-back . upon the attltudea of governaents, relnforcing thelr tendencles towards restrictlve pollcles. The overall restrictlve attltudes had further negatlye conseąuences. Many of the prevlously practlced publlc aacro and alcro pollcles had been . concelved* and practlced (therefore produclng a learnlng process) ln an expansive envlron»ent. Many of thea, thus, had to be changed ■ or substltuted, others becaie ineffectlve, others, eventually, becaae contradictory.

Ali thls contrlbuted to ralse the turbulence of the system and the degree of uncertalnty about the futurę, relnforcing thus negatlve expectatlons and produclng an overall cllmate of mlstrust about the abllity of the State to undertake effective measures and to regulate the system. The above descrlbed phenomena added up to a long run tendency to a growing lneffect1yeness and lnefflclency of State actlvltles, about the causes of which we deyoted some attentlon in our 1985 Report. Our arguments can be summarlzed as foliowa.

Most social pollcles were deylsed durlng a period ln which there exlsted a relatlye homogenelty of people who constltuted the main cllentele of social pollcles. The transformations of soclety and lts Increased affluence were accompanled by a process of articulation and differentiation of social demands, asplrations and needs. Unfortunatelythe tools of social pollcles failed to be updated ln order to take into account such transforaations. The flows of expenditures contlnued but thelr effectiyeness decreased, and left people increasingly unsatlsfled.

The second reason ls the vlclous clrcle of the procedurę* upon which the formatlon of the publlc budget is based. The major problem of those who are responslble for each linę of expendlture ls to maintaln the ratlo, or at least the level, of thelr flnanclal resourcea through tlme. Thls, together with the concentration of the pplitician8^, attentlon to the flnanclal flows, contrlbuted to the . obi iteratlon of attentlon to the substance of the actions and the concrete effect1yeness of the strategles wlth respect to which the flnanclal resources should be only a permlsslye factor.

Flnally, spontaneous trends and the very same phenomena that we are descrlblng conjured ln fragmenting the political