I hope that I misread you here, but when I'm reading this post, I get the impression that your attitude is: "They're idiots because they have a cash economy, so it's their own fault that this is happening to them." I sincerely hope that this was not your attitude.

One problem with us Scandinavians (are you a Scandinavian?) is that we're often so puffed up about our own "magnificent" corner of the world that we often become very judgemental of other cultures. I saw this frequently when I was working in Russia a few years ago, which also has a huge cash economy, and heard Scandinavians talk about "being an example to the Russians on how to have a higher standard and live according to the rule of law."

Southern Italy is a part of the world where, like in Russia, there is widespread corruption, and the mafia is very strong. If you're doing everything "by the book" in such a region, you will end up being squeezed by both the mafia, and possibly also by corrupt policemen and/or goverment officials. Generally speaking, in order to survive in corrupt and mafia-controlled areas, you will need to have some form of a black economy. So, most regular people living in that part of Italy may not have had much of a choice in adopting a black, cash economy. And many of these people have now become bereft of their income, and some of them are starving ... now.