The WWI did not go well for Italy as the soldiers were often badly equipped and supplied. In addition to this, military leadership was lousy and this led to the death of over 600,000 men as well as severe wounding of 500,000 soldiers and the permanent disability of about 450,000 men.
In November 1917, the Italians suffered a terrible defeat at the battle of Caporetto- this led to the death of over 40,000 Italian soldiers and a further 300,000 were taken as prisoners.
The Italian economy was greatly affected by the turnout of the WW1. The Liberal government had borrowed money from U.S.A and Britain in order to cover the cost of the country's involvement in the war and this caused a rise in national debt from 16 billion to 85 billion lire. More banknotes were printed when loans were insufficient causing inflation as prices skyrocketed by over 400 percent between 1915-1918.
The inflation consequently shrunk the incomes of many small-scale workers such as landowners, damaged much of the savings of the middle classes and increased unemployment rate as the result of war industries being closed down and 2.5 million soldiers being demobilized.
Economic rift between the north and south of Italy also deepened significantly. Major industries such as Pirelli (tires), Fiat (motor manufacturer), rubber, woolen and chemical, and also banking firms were flourishing as they had been guaranteed huge state contracts.
Most companies had made huge profits and continued to expand but the defeat Italy suffered at the war meant the loss of important state contracts as the government reduced expenditure to deal with the piling debts.
In the south where agriculture was predominant, the large conscription of farm labourers and peasants during the war badly affected farming and economic development.
The government promised land reformation program in an effort to discourage any attraction of socialism and Bolshevism in the area.
After the war, Italy also face disappointment as most of the rewards promised them before the war were not attained. Britain and the U.S refused to give Fiume and Northern Dalmatia as they were granted to the new state Yugoslavia. Italy did not gain any territory in Africa.
Italian nationalists especially the war veterans were angered by the outcomes. They believed that their sacrifices in an attempt to expand and strengthen Italy had been thwarted by the Liberal gov't.