Several analysts have explained the end of the postwar political system in Italy as an effect of the end of the Cold War. Deprived of the anti-communist glue, Italians were, so the story goes, finally free to replace the corrupted regime. The present article argues instead that the recent changes should be seen as the effect of transnational and societal dynamics on modern welfare states that have upset the consociational/clientelistic bargain on which Italy's domestic political economy rested. The success of the judiciary campaign mani pulite ('clean hands') has been triggered by the concomitant financial crisis of the state, its parties and principal Italian industries which undermined the major actors' ability to uphold their clientelistic systems. Such a thesis presupposes a methodological shift away from simple 'outside-in' explanations. It focuses instead on the interaction between different transnational and/or societal self-sustaining networks whose borders need not necessarily coincide with state borders. In the present context of rampant globalization, the inner development and linkage between the party system, the welfare state, organized crime and the Italian version of capitalism are analysed as the main articulations of the overt/covert order upon which the Italian postwar social contract rested. As long as the basic problems of this contract remain unsolved, as for instance the insufficient distinction between the political and economic sphere or the systematic application of double standards, it seems premature to talk about a Second Italian Republic.