P. Kennedy, The Rise and Fall of the Great Powers, London 1988, pp. 291-297:
(bear in mind that he is writing from the point of view, that only democracy and free market will prevail)
"...Because of Allied investments, industrialization had proceeded apace from 1915 to 1918, at least in those heavy industries related to arms production. Under Mussolini, the state committed itself to an ambitious modernization program, which ranged from draining the Pontine marshes, [...] to the improvement of the railway system.
[...], and the Italian aeronautical industry seemed to be the most innovative in the world, its aircraft gaining a whole series of speed and altitude records.
Military power, too seemed to give good indications of Italy's rising status.
[...] Both in Abyssinia and, even more, in Spain, the Italians demonstrated the uses of air power and convinced themselves - and many foreign observers - that they possessed the most advanced air force in the world. All this boded well for the creation of a second Roman Empire.
Alas for such dreams, Fascist Italy was, in power-political terms, spectaculary weak. It was a semi-developed country. Thanks to a continued flow of emigrants, Italy's population in the interwar years increased by only 1% per year. At the root of Italy's weakness was continued reliance upon small-scale agriculture which in 1920 accounted for 40% of Gross National Product and absorbed 50% of the total working population. It was a further sign of this economic backwardness that even as late as 1938 over half a family's expenditure went on food. Far from reducing these proportions, fascism, with its heavy emphasis upon the virtues of rural live, endeavoured to support agriculture by a battery of measures, including protective tariffs, widespread land reclamations, and, finally, complete control of the wheat market. [...]and the strong wish to prevent a further drift of peasants into the towns, where they would boost unemployment totals and add to the social problem.
Given the almost irremediable weakness which afflicted the Italian economy under fascism, it would be rash to suggest that it could ever have won a war against another proper Great Power...
[...] The extended Abyssinian campaign, overlapped by the intervention in Spain, led to greatly increased expenditures between 1935 and 1937, which were devoted to current operations, and not to the build-up of the services or the armaments industry. On the contrary, the Abyssinian and Spanish adventures gravely weakened Italy not only because of the losses in the field, but also because the longer it fought, the more it needed to import - and pay for - vital strategic raw materials, causing the Bank of Italy's reserves to shrink to almost nothing by 1940. Unable to afford the machine tools and other equipment needed to modernize the air force and the army, the country was probably getting weaker in the two years prior to 1940."