I responded to this question recently, but uncertain as to how to imbed the link:

I would suggest Ruth Ben-Ghiat's Facist Modernisms and Claudio Fogu's The Historical Imaginary. Both critics touch on precisely this issue. PM if you're interested in more sources.

Long story short, despite the actual resources they had at hand (not the reason for their fall), they performed terribly due the failure of Italian unification and internal corruption. Mussolini drew on Roman history to support a reconfiguration of the modern Italian as embarking on a spiritual transformation through fascism that would lead to the rebirth of the nation (and not merely a political or religious transformation). Most of the Italian soldiers where from various parts of Italy, predominately the South (a place that continues to be economically suppressed). Southern Italians were asked to fight for a country that during WWII was still not unified as a whole and had historically overlooked or oppressed southerners (See Gramsci's theory of Hegemony and the Italian "southern question"). For centuries, southerners were considered "African" and treated as sub-human. Moreover, the Mussolini regime enlisted "Italian" expats living in Argentina and elsewhere (largely Southerners who had left Italy in search of economic opportunity) by suggesting that they were still Italian citizens and we required to fight for an army in a country many no longer remembered living in. Would you have poured your heart into fighting for a country that blatantly didn't care about you for centuries? Lastly, of all of the European armies, Italy's had always been one of the weakest as many high ranking military officials had gained their position through favor and not expertise (corruption is endemic in Italy and has a long, complicated history). The soldiers were not highly trained and most of them didn't speak Italian so they could hardly communicate with one another. All the regions of Italy have different dialects. Italian began the linguistic standard only after WWII with the advent of TV and the wide spread disimination of the national standard (See Gundle, Forgacs, and David Kerzer).

When Mussolini was sent to Salo' and set up there in a puppet government by the Third Reich, the king of Italy left. Italy was left divided, ravaged, and left without real leadership. In the months following the abdication of the King, a rebel underground army was assembled nearing 2 million in participation. They began as an off shoot of the illegal Communist party at the time (Italian Communists also, for decades until the 70s, highlighted their participation in bringing "liberty" to Italy. In fact, the Americans and Russians were more responsible for their liberation than the Italians themselves). Italians later painted themselves as a "brava gente" (good people) who were victimized at the hands of the Nazis and Americans. Italy did not perform poorly during WWII purely because of firearms and a lack in resources as this thread has thus far painted the situation.

Mussolini did not crush the Sicilian Mafia or improve the economy. And his abolishment of the multi-party system didn't last as the nation voted a multi=party system into control in 1948. His lasting contribution to Italy were some of his bonifica projects (See Ben-Ghiat). In Italian, bonifica roughly translates to "clean up project". He helped reclaim land in the south that had previously been infested by malaria. FYI, the mafia is alive and well in Italy and has multinational connections. They've outsourced some of their grunt work, however, to others (i.e. the Russians, etc.). Largely, however, history has not been kind to Mussolini and most Italians (with the exception of right wing fundamentalists in neo-fascist parties like the Lega Nord) do not remember him fondly. Ben-Ghiat and Fogu speak to how Mussolini did not, in fact, "make the trains run on time." (As prior, Italy's infrastructure was highly disorganized, and in many respects, still is).

Mussolini wanted to show that Italy, due to its imperial past, was just as "important" and "white" as Germany, France, and the rest of the First World. For centuries, the Italian peninsula was ravaged by foreign invaders (Spain, France, Germany, the Moors, etc.). Much of the population was seen as "black" from the perspective of other European nations. Dante and Boccaccio and Petrarca all speak to this sense of violence in their poetry. Italy was often portrayed as a poor, raped woman covered in wounds. Prior to Italian unification in 1861, the peninsula was a collection of city-states. Italy would remain unified, despite being legally "united" under one flag, until today. The question of Italian unity is still being asked under economic and immigration pressures (and the rise of neo-fascist powers). Nationalism did not develop the same way in Italy as it had in Germany or France. For centuries, Italy was seen (along with Spain) as the "inferior" step-sister to First-World Europe. It was only with the help of the Marshall Plan during the 50s, that Italy finally advanced economically and established itself alongside the West by rejecting the Communist party (that had helped play a role in the liberation of the peninsula from Nazism during WWII).

He had a tendency to talk a big talk and not be able to deliver. When he was assassinated, many of his projects were left up in the air.